Pennsylvania Investment Observer

Rearranging the Deck Chairs on the Titanic

by Daniel J. Nestlerode

Verizon and Qwest are fighting to take over MCI Communications (formerly Worldcom), following SBC's takeover of venerable AT&T. It looks today like Verizon has sufficiently sweetened its bid so that MCI has announced they will merge with Verizon. With this merger, the two largest long distance companies are once again folded into companies with local phone service, just like AT&T was years ago before it was broken into the seven Bell operating companies and AT&T.

In an unrelated event, I called Verizon last week and ended forty years of phone service at my residence. I cancelled both telephone lines that I have had for decades and cancelled the related long distance service, which I had through Adelphia's telephone subsidiary. I figure this move will save me between $600 and $1,000 per year in communication costs. I have replaced my Verizon lines with a Vonage internet modem connected to my Adelphia high speed internet service and pay about $25.00 a month plus taxes for unlimited local and long distance calling in the United States and Canada. Verizon offered the same service for about $44.95 a month per line. My sister dropped her Verizon phone service outside Philadelphia and has a flat rate Comcast phone service though her cable system. Next year, Vonage plans to offer associated cell phones at flat rate pricing.

From my front row seating, it appears that Verizon and other old line phone companies are merging to lower costs and prolong their survival a few more years while their customers, the wired telephone customers, are leaving as fast as an alternative is available. Many younger folks have given up on wired phones altogether and are using cell phones for their primary communications. All of this looks like the end of the wired, twisted pair, metered phone service that we all grew up with. What is taking its place is internet telephony, through Vonage and other companies using Voice over Internet Protocol (VoIP). The wired phone system is giving way to internet communications. Cisco, by the way, manufactures Vonage's telephone modems.

Soon AT&T and MCI (or Worldcom) will be fond memories. In my opinion, not far into the future, all the Bell operating companies will likewise disappear from view as WiMax (Qualcomm wireless internet service), and wired high speed internet become the standard voice communications means. I recommend that you sell your Verizon, SBC Communications, Qwest and BLS (Bell South) and buy the beneficiaries of this change. From where I sit, the beneficiaries look like Qualcomm, Comcast and other cable companies and Cisco. Hello?

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