EarthLink, Integra Telecom Vulnerable to Cable Competition

Sluggish employment growth and headway made by the cable companies could spell danger for U.S. telecom business revenues.

Telecom business revenues are projected to be flat or decrease in 2012 and next year, and EarthLink Inc. and Integra Telecom Inc. are among a group of companies that are vulnerable to competition from the cable industry due to their reliance on voice services revenues, Moody’s Investors Service proclaimed in a special report Monday. Other competitive carriers who face exposure include U.S. TelePacific Corp. and CCGI Holding Corp., formerly Covad Communications, according to the report entitled “Cable Companies Quash Telecom Business-Revenue Rebound.”

“Even as business spending on telecommunications services eventually begins to recover with total U.S. employment,” the credit ratings agency said, “incumbent telecom companies will see flat business-segment revenues at best in 2012-13, as cable companies take share.”

The competitive local exchange carriers aren’t the most vulnerable to the cable invasion, according to the report. Those most at risk are wireline carriers lacking strong enterprise business products, including Frontier Communications Corp., FairPoint Communications Inc. and Hawaiian Telcom Communications Inc., Moody’s said.

AT&T Inc., CenturyLink Inc. and Verizon Communications In. face less exposure, the report said.

In the cable industry, Comcast Corp. and Time Warner Cable Inc. are best suited to capture market share, according to the report. The kings of cable have been substantially growing their business services revenues, as reflected in their first-quarter results. There remains ample opportunity for growth, with Moody’s reporting that business revenues comprised $5 billion, or a modest 6 percent of the $88 billion of cable industry revenues last year. By comparison, business services revenues totaled 40 percent of wireline telecom carrier revenues, according to Moody’s.

The report also warned the competitive telecom sector could face more growing pains.

“Only tw telecom inc. … and Level 3 Communications Inc. … have had success in selling to the enterprise sector,” Moody’s wrote. “Meanwhile, niche strategies to attract smaller business customers, such as those used by EarthLink …, Integra …, U.S. TelePacific … and CCGI …, target multi-site customers that straddle multiple cable franchise territories.”

Moody’s also noted that cable operators located in adjacent franchise areas often work together to fill in gaps in their service territories under a collaborative effort that could reach the business market, further threatening competitive carriers.

Leave a comment

Your email address will not be published. Required fields are marked *


In what manner is your staffing changing this year?

View Results

Loading ... Loading ...
The ID is: 84847