Telcos, as sick as railroads?

The Wall Street Journal has a page one story (subscription required) on the trials faced by the big local phone companies, which are seeing their core business lost to Internet voice services, cell phones, and other rivals. The big local phone companies have lost 18 percent of their lines to rivals since the end of 2000, the article says.

Nor is technology such as DSL necessarily their salvation. The reporters cite the post-World War II railroad business, which threw money at new tracks and trains, only to see its passenger traffic evaporate in favor of airlines and automobiles.

It's true that the old voice business is being cannibalized by Internet-based companies. Cable networks, AT&T, and start-ups like Vonage are all benefiting. But if AT&T thinks it's only a $2 billion business for Ma Bell, (as CEO Dave Dorman told us the other day), there's some more head-scratching to be done.

The Bells are consistently written off when it comes to technology upheavals. I've always been loathe to do this. Yes, they're slow. They're not innovators by nature. But they're not dumb, either. They'll offer VoIP eventually, when it becomes clear that their traditional voice business is disappearing. It's important to remember that they own one of the two networks that can offer today's broadband, as well as faster speeds using technology like ADSL2+ and VDSL, once they make the investments.

Verizon is also investing in fiber-based broadband, and SBC is too, to a much lesser extent. They have infrastructure, and while this didn't help save the railroads, I think it's very misguided to underestimate the staying power of the Bells.