A new study by the Competitive Telecommunications Association (CompTel) demonstrates that wholesale leasing is a profitable business for the Bells.
As first quarter 2003 ended, the four Bell companies were earning wholesale profits of at least $605 million a year on the unbundled network element platform (UNE-P) lines they lease to competitive carriers, according to the study entitled "Wholesale Lies: The
Truth About RBOC UNE-P Costs."
"The numbers are clear, wholesale leasing is a moneymaker for the Bells," says CompTel President H. Russell Frisby Jr. "On average, the Bells are earning more than 20 cents on the dollar every time a competitor leases a UNE-P line. That's a good business."
SBC Communications, which recently reported that it was providing some 5.78 million UNE-P lines as of March 31, was earning $275 million in annual profits on those lines, CompTel's analysis shows. Verizon Communications, which was providing more than 3.5 million UNE-P lines at quarter's end, was next with annual UNE-P profits of $149 million, according to the report.
As a group, the Bells were leasing about 11.6 million UNE-P lines to competitive local exchange carriers, up from 7.5 million nine months earlier. On average, they were earning $57.60 annually on each line with a range from $41.76 on the low end for Verizon to $104.64 for Qwest.
On a per-line basis, the study found a wide range in profitability from company to company, primarily because of disparities in the authorized wholesale rates from state to state. While SBC has the lowest monthly embedded expenses among the Bell companies at $15.97 a month per line, it also receives the least revenue at $19.94 per line. But that still enables SBC to earn nearly 20 percent profit on average on each line. At the other extreme, Qwest receives an average of $26.07 per line and its per line profit totals
nearly $105 per year. "SBC may be jealous of its Bell rivals," Frisby adds. "But what these numbers tell me isn't that SBC's
UNE-P rates are too low, but that the rates charged by the other Bells may be too high.”
