Competitive Carriers Experience Growth Again

Signs of a Recovering…Dare we say – Responsible – Sector

The competitive carrier sector, once considered dead, is stirring again.  While mergers and acquisitions dominated the competitive carrier industry headlines in 2006—and rightfully so; there was a lot of activity—but some other key metrics showed equally well an industry returning to health.

The Return of Top-Line Revenue Growth

The period of flat revenue appears to have come to an end.  As competitive carriers have regrouped and are moving forward, revenue growth has returned—not the wild, double-digit growth of the CLEC industry’s salad days, mind you, but growth nonetheless.  2006 saw 5.2% revenue growth, and the industry can expect slow, steady 4% to 5% annual growth for the rest of the decade.

 

The Continued Upward March of Competitive Carrier Access Lines

 Sure, many competitive carriers no longer measure access lines—the ancient measure of telephone connections to a home or business dating back to the early ILECs—but they are accumulating them, both by adding new customers and by increasing their share of existing customers’ business.  A key player in this growth has been VoIP, with the transition to IP telephones providing easier access to residential customers and, more importantly, opening more enterprise customers to the possibility of changing carriers as they transition their internal networks.

 

Emerging Services and Bundling Lead to New Opportunities

Beyond IP voice, other service growth is expanding competitive carriers’ markets and driving up average revenue per customer, otherwise known as APRU (average revenue per user).  New services such as carrier Ethernet open up opportunities for competitive carriers to compete on more level footing with the ILECs; for end users, Ethernet is a new service offered via new technology, often purchased in addition to existing services, prompting customers to be willing to consider new service providers.

Beyond new services, competitive carriers are reaping the rewards of bundling, driving up the revenue received from each customer, as well as increasing customer loyalty, as customers are less prone to churn when they receive a bundle of services from a single provider.

 

Staving Off Pricing Pressure

If growth in customers and number of services provided seems to contradict the merely slow revenue growth, pricing pressure would be the culprit.  New services like carrier Ethernet face price pressure as competition increases, while bundled services typically feature bundle discounts.

In addition, while RBOC acquisitions of AT&T and MCI may open up service provider diversity contracts to the other competitive carriers, they also form more formidable RBOCs—in-region behemoths with large out-of-region networks.  In the AT&T and Verizon regions, competition for large, national contracts got stiffer in 2006.

The bottom line is that the competitive carrier industry’s darkest days are behind it, though strong challenges remain.  NPRG’s recently released Competitive Carrier Report 2007™ discusses those challenges and expected outcomes in details.

NPRG’s Competitive Carrier Report 2007™ features detailed, individual coverage of 49 facilities-based competitive carriers.  In addition, this report presents a comprehensive identification of all markets where competitive carriers are active and provides detailed breakdowns of revenues, services, and facilities.  Of course, the report also details the market drivers propelling the competitive carrier industry and the challenges it faces in the years ahead.