Wired Telecommunications Carriers

Industry Overview

In the US, about 5,000 companies provide wired telecommunication services, with total annual revenue over $200 billion. Large companies include AT&T, Verizon, and Qwest. The industry is highly concentrated: the 50 largest companies hold 90 percent of the market.

The industry includes local service carriers (annual revenues about $130 billion); long distance carriers (about $70 billion); pay phone operators; pre-paid card providers; and telecom resellers.

Competitive Landscape

Demand is driven by new services and growth in business activity. The profitability of individual companies depends on efficient operations and effective marketing. Large companies have economies of scale in providing a highly automated service to large numbers of customers, and the financial resources required to build and maintain a large network. Smaller companies can compete effectively in small markets or by providing specialty services. Because of the large degree of automation, average revenue per employee is about $200,000.

Products, Operations & Technology

Major services are local calling, network access services, long-distance calling, calling features such as caller ID and voice mail, and broadband services. Local calling accounts for about 40 percent of industry revenue, network access 25 percent, long distance 20 percent, calling features and Internet connectivity less than 10 percent each. Other services include data transmission, private networks, installation, and equipment sales. Network access charges are levied against other carriers, mainly long-distance and wireless service providers, that need access to local wired phone systems.

Telephone systems consist of wires, connections, and switches. From a demarc (demarcation) box located at a customer's address, wires are strung on poles or underground to a local facility called a central office. Here, the wires are connected to a main distribution frame (MDF) that in turn is connected to a class 5 switch, basically a large computer. The entire collection of equipment and wires leading up to a central office is called the outside plant.

Local central offices are connected with each other in what is called the public switched telephone network (PSTN). Companies may own and operate different pieces of this network, either local connections or regional and national "backbone" systems. The common technical language that allows all switches in the network to communicate with each other is called signaling system 7 (SS7). Companies use customized operational and business support systems (B/OSS) to manage their parts of the network and to supply services.

To provide data and Internet services, phone companies may use existing wires or may string special cables such as fiber optic cable to a customer's location. Connections among central offices and between cities are usually sent over fiber optic cable.

Most companies are replacing older equipment that dedicated an entire path for a single phone call with equipment that allows many digital signals to use a path at the same time, through a method called Internet protocol (IP).

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