Market Analysis – 83112401 – High speed circuit switched dial up services

Executive Summary

The market for High-Speed Circuit-Switched Dial-Up Services (UNSPSC 83112401) is in terminal decline, with a global market size estimated at less than $50 million and contracting rapidly. The projected 3-year compound annual growth rate (CAGR) is approximately -25% as broadband, fiber, and 5G/LTE alternatives become ubiquitous. The single greatest threat is complete service discontinuation by incumbent carriers who are actively decommissioning the underlying copper Public Switched Telephone Network (PSTN). The primary opportunity lies not in growth, but in a strategic, managed exit to mitigate risks of service interruption for legacy machine-to-machine (M2M) applications and to capture final-stage cost efficiencies.

Market Size & Growth

The global Total Addressable Market (TAM) for dial-up services is exceptionally small and shrinking. It is primarily composed of residual consumer accounts in underserved regions and niche M2M/industrial applications. Growth is negative, driven by aggressive broadband rollouts and carrier-led decommissioning of copper infrastructure. The largest remaining markets are not major economies, but rather specific rural or developing regions with poor terrestrial broadband access.

The three largest "markets" are best understood as use-cases rather than geographies: 1. Rural/Underserved Regions: Pockets of North America, Africa, and South America with limited infrastructure. 2. Legacy M2M: Out-of-band server management, alarm systems, and industrial controls. 3. Point-of-Sale (POS): Older credit card terminals in small businesses, though this is rapidly migrating to IP/cellular.

Key Drivers & Constraints

1. Constraint: Technology Obsolescence. The fundamental driver is the near-universal adoption of superior technologies like fiber, cable, DSL, 5G, and satellite internet (e.g., Starlink), which offer orders of magnitude greater speed and reliability.
2. Constraint: Infrastructure Decommissioning. Incumbent carriers (e.g., AT&T, Verizon) are aggressively retiring their copper PSTN networks to reduce maintenance costs and recover copper assets. This is the primary supply-side constraint, leading to forced migrations. [FCC Filings - Ongoing]
3. Driver: Lack of Alternatives. In very specific, isolated areas, dial-up persists as the only available method of connectivity, however tenuous. This demand is inelastic but shrinking daily as satellite and fixed wireless options expand.
4. Driver: Legacy Equipment Dependency. The cost and complexity of upgrading embedded systems (e.g., utility meters, HVAC controls, security alarms) that were designed for dial-up modem communication create a small, persistent demand base. This is a temporary driver, as hardware eventually reaches end-of-life.
5. Constraint: Rising Maintenance Costs. The per-line cost of maintaining the aging copper network is increasing as the subscriber base collapses, creating upward price pressure for the few remaining customers.

Competitive Landscape

The landscape is composed of legacy incumbents, not new entrants. Barriers to entry are absolute, as no entity would invest capital to build a new circuit-switched network. The primary barrier is ownership of the existing, albeit decaying, PSTN infrastructure.

⮕ Tier 1 Leaders * AT&T: Incumbent carrier with the largest remaining copper footprint in the US; actively migrating customers to fiber and wireless. * Verizon: Major incumbent in the US Northeast, aggressively replacing copper lines with fiber optics (Fios) and fixed wireless access. * Lumen Technologies (CenturyLink): Significant copper network presence in rural and suburban US markets; focused on enterprise fiber but still services legacy accounts. * Deutsche Telekom (Europe): Former state monopoly in Germany, pursuing an all-IP strategy and phasing out analog lines.

⮕ Emerging/Niche Players * NetZero / Juno (United Online): Legacy ISP brands that still offer low-cost dial-up plans, primarily targeting budget-conscious consumers. * Local Rural ISPs: Small, independent providers in underserved areas who may still offer dial-up as a service of last resort. * M2M Service Providers: Specialized firms that manage connectivity for legacy industrial devices, sometimes using dial-up as a fallback.

Pricing Mechanics

Pricing for dial-up service is typically simple, reflecting its commodity nature. Models usually consist of a flat monthly fee for a block of hours (e.g., 10 hours/month) or "unlimited" usage, which is still subject to tying up a phone line. Per-minute pricing is less common now but may apply for overages. For M2M applications, pricing is often a low, flat per-line, per-month fee. The price is not built on complex inputs but rather on the legacy cost structure of the PSTN.

The underlying cost structure is becoming more volatile as the service sunsets. The most volatile elements are not inputs for growth, but factors related to managed decline: 1. PSTN Maintenance Overhead: As subscribers leave, the fixed costs of maintaining the copper network are spread across fewer users. Est. per-line cost increase: +10-15% annually. 2. Regulatory Fees (USF): Universal Service Fund and other telecom taxes can fluctuate, though they are a small portion of the total price. Recent change: +/- 2% annually. 3. Specialized Labor: The cost of technicians qualified to service the aging PSTN and central office switching equipment is rising due to a shrinking talent pool. Est. labor cost increase: +5-8% annually.

Recent Trends & Innovation

The concept of "innovation" in this market is defined by decommissioning and replacement technologies. * Accelerated Copper Retirement (2022-Present): Major US carriers like AT&T have received regulatory approval in multiple states to cease maintaining traditional copper phone lines, forcing the last remaining dial-up and DSL users to migrate to alternatives. * Rise of Low-Cost Satellite (2021-Present): The commercial scaling of SpaceX's Starlink has provided a viable, high-speed alternative for the most remote and underserved customers, effectively eliminating the "last resort" argument for dial-up in many areas. * M2M Migration to Cellular IoT (2022-Present): The maturation and low cost of LTE-M and NB-IoT cellular technologies provide a clear, power-efficient migration path for legacy M2M devices that previously relied on dial-up for low-bandwidth data transfer. * "Forced" Upgrades: Carriers are no longer passively waiting for customers to switch. They are actively offering incentives, free hardware, and eventual shut-off dates to compel migration to fiber or wireless services.

Supplier Landscape

Regional Focus: North Carolina (USA)

Demand for dial-up services in North Carolina is negligible and rapidly approaching zero. The state, through initiatives like the Growing Rural Economies with Access to Technology (GREAT) grant program, is investing hundreds of millions of dollars to achieve universal broadband coverage. Incumbent carriers, primarily AT&T and Lumen (CenturyLink), are legally and financially incentivized to deploy fiber and fixed wireless, not maintain their deteriorating copper lines. Local capacity is not a constraint; rather, the economic and regulatory environment actively discourages the continuation of dial-up service. Any corporate footprint in NC relying on dial-up faces a high and imminent risk of service termination.

Risk Outlook

Actionable Sourcing Recommendations

1. Conduct a comprehensive audit of all telecom invoices and IT network diagrams to identify all remaining dial-up services, particularly in legacy M2M applications (e.g., alarm systems, HVAC controls). Develop a 12-month migration plan for each identified line to a modern IP-based or cellular (LTE-M/NB-IoT) alternative, prioritizing by business criticality and ease of replacement. This action will mitigate the high risk of sudden service discontinuation by carriers.

2. For any services that cannot be migrated within 12 months due to hardware constraints, consolidate all remaining lines under a single national provider (e.g., AT&T, Verizon) to maximize negotiating leverage. Seek a fixed-rate, multi-year contract to hedge against supplier-initiated price increases as the service is sunset, targeting a 15-20% cost reduction versus current out-of-contract rates and securing a committed service window.