The long-distance industry will see its telephone revenue from consumers and businesses fall to $39 billion in 2007 from $55 billion in 2001, according to Atlantic-ACM, a telecommunications market research firm.
Driving this steep decline are two factors, said Taher Bouzayen, a vice president with Atlantic-ACM. "Consumers are migrating to cell phones, so they don't have to worry about paying a long-distance rate. They just pay for a bucket of minutes. Also, providers are switching to carrying voice over IP (Internet Protocol), since the infrastructure and maintenance is cheaper" than traditional setups, he said.
Companies expected to benefit from this shift to wireless and VoIP (voice over IP) are the regional Baby Bells, said Blake Bath, a Lehman Brothers analyst.
"The (regional Bells) stand to win, since they are the largest players in wireless," Bath said.
Long-distance providers such as AT&T and Sprint stand to lose the most, despite their efforts to offer wireless and VoIP, analysts say.
"AT&T and others have to prove other parts of their business is growing to offset the loss on their retail circuit-switched business," Bouzayen said.