Phone market bending as technology shifts, exec says

The former monopoly telephone company and the monopoly cable television company are the main contestants battling for Southern Nevada consumer telephone customers. But the array of adversaries may multiply over the next few years, a senior telephone company executive said.

Embarq Corp., the dominant wire line phone company in Las Vegas, and cable television company Cox Communications also may be fighting over residential phone customers with Google, Yahoo and Microsoft Corp. in a few years, said Thomas McEvoy, president of business markets for Embarq.

"You cannot think that anybody is not thinking about this part of the (phone) business," McEvoy said during a visit to Las Vegas on Wednesday.

Wireless networking technology such as Wi-Fi and Wi-Max may be advanced so phones can tap into wireless signals from an area or even a whole city, rather than using cellular technology or wire lines, McEvoy said. Those innovations could change the competitive positions of telecommunications companies.

Las Vegas phone companies already are competing with cellular phone services. Some customers, particularly young adults, rely entirely on cell phones for communications and don't have wire line phones.

McEvoy was visiting Las Vegas to celebrate Embarq's anniversary Thursday as an independent spin-off from Sprint Nextel Corp.

Las Vegas and central Florida, including Orlando, are its biggest markets.

McEvoy has much to celebrate. Embarq earned $160 million in the first quarter, down 25 percent from $214 million a year ago, but the drop was attributed to one-time costs and investments in its new wireless phone service. Revenue grew by 1.8 percent to $1.59 billion.

Embarq's share price has surged by $20 over the last year to $64.39. (Shares gained 67 cents, or 1.04 percent, in Thursday trading on the New York Stock Exchange.)

Embarq also won the J.D. Power and Associates top prize for telephone service to large businesses. And the Nevada Senate is considering a bill that would deregulate the basic telephone business, allowing Embarq to set prices without regulatory constraints by 2012.

State consumer advocate Eric Witkoski said he is concerned that competition may not develop by 2012. But Witkoski said lawmakers could modify the deregulation bill in 2009 or 2011 if competition fails to emerge.

Critics also worry that mergers will continue in the wire line business. McEvoy suggested that future buyout candidates will not be telecommunications giants but rather the hundreds of wire line businesses that are smaller than Embarq.

Competitive local exchange carriers, who simply bought Embarq's phone service and sold it under a different name, are gone from the consumer market, McEvoy said.

The local exchange carriers that remain in business typically own their own switch and rely on Embarq only for lines to reach their customers.

"The (competitors) who are facilities-based have seen some erosion in price," McEvoy said.