Although the process is gradual, four major and historic network transformations are underway at BellSouth, said Duane Ackerman, the company's president and CEO, speaking at the Goldman Sachs Communacopia XII Conference. These transformations include: narrowband-to-broadband; electrical-to-optical; circuit-to-packet; and overlay-to-shared. The major goal is to arrive at a more flexible infrastructure with quicker provisioning and rearrangement of services. BellSouth is focused on pushing fiber to the outer edge of the network. By the end of the year, fiber-to-the-curb will pass nearly one million homes in the company's territory. Since 1996, all new feeder cables have been fiber and, as a result, about 60% of DLCs are now fiber-fed. This means about 60% of BellSouth's DSL lines could support downstream rates of 5 Mbps and 80% could support 3 Mbps.
Ackerman said the FCC's recent Triennial Review Order will only prolong the legal fights and delay re-investment in facilities-based competition. The UNE-p section of the order is nothing new and BellSouth's current strategies address these challenges. BellSouth will need to run state-by-state campaigns to challenge market impairment claims by its competitors. Ackerman described fiber deployment is a long term proposition and that the FCC's current broadband policy "reduces visibility" for the foreseeable future. He hopes the fiber deployment issue will be clarified in upcoming FCC proceedings. Some other highlights of Ackerman's presentation include:
- During the first half of 2003, BellSouth lost on average 96,000 lines per month to UNE-p competitors in the consumer market and this negative trend is accelerating. For comparison, BellSouth lost an average of 37,000 consumer lines per month to UNE-p competitors in 2001 and an average of 87,000 lines in 2002. Service bundles are leading to increasing customer win-backs.
- The average monthly line loss for small business customers is now 3,000, down from 29,000 line losses per month in 2001, and 14,000 monthly line losses in 2002.
- Total LD consumer penetration across BellSouth is now at 20%.
- The company now has 1.2 million DSL subscribers, representing 50% year-over-year growth. BellSouth has launched tiered pricing models for its DSL based on access speeds. About 80% of new DSL customers choose the full-rate service
- The company's "Answers" bundles now have 2.1 million subscribers and ARPU of $62 per month.
- Service bundles reduce customer churn by 45%
- The recent agreement with DirecTV will add significant value to the BellSouth bundle
- Cingular Wireless continues to experience significant customer growth. Net additions for the first half of the year were 729,000 compared to 540,000 net adds for the second half of last year.
- BellSouth's net debt has been reduced from $15.9 billion in Q2 2002 to $11.3 billion in Q2 2003.
