Study Says Telephone Industry Revenues Increasing

Communications Today, Nov 7, 2001

Telephone industry revenues grew to $41 billion during the first half of the year 2000, a 5 percent increase from about $39 billion the sector reported for the first half of 1999, according to the Federal-State Joint Board on universal service.

The board released its latest monitoring report on the telephone industry and the sector's contributions to the universal service fund yesterday to the Federal Communications Commission. The fund is a pool of money provided by carriers that subsidizes phone and Internet services for rural Americans and the poor.

In its latest report, the board said carriers contributed $4.5 billion to the fund in 2000. Total demand for the support services provided by the fund increased to 26 percent in the first half of 2001, requiring an increase in the amount that carriers contribute from 6 percent of their interstate and international revenues to about 7 percent.

Other study tidbits include:

* The percentage of households subscribing to telephone service reached an all-time high average of 91.4 percent in 2000, the study said. High-cost support amounted

* Overall telephone rates decreased 2.3 percent in 2000 (compared to the general rate of inflation of 3.4 percent for all goods and services).

* Total telephone usage continues to grow. In 1999, there were more than 4.4 trillion minutes of use, an increase of 12 percent from the previous year. Local calls grew by 13 percent in 1999, compared to a 7 percent increase in intrastate toll calls and a 6 percent increase in interstate toll calls.

* For the larger local exchange carriers, percentage of net income that is attributable to interstate (39 percent on average in 2000) was greater than the interstate shares of revenues (28 percent) or expenses (26 percent).

The FCC requires telecom carriers to contribute 6.9 percent of their interstate and international revenue to subsidize phone and Internet service for schools, libraries and rural communities. The companies are allowed to decide how much of the added costs to pass on to their consumers -- typically a percentage of each customer's total long-distance charges.

--Rodney L. Pringle, rpringle@pbimedia.com >TK Time Warner Telecom [TWTC]: AOL Time Warner [AOL]: