ncrease. In 1998, ILEC CAPEX was 30 to 33 per- cent of revenues; today it is far lower, about 14 percent. What steps have they taken to remedy the ongoing revenue shortfall? The first steps they took involved a direct attack on the FCC with a peti- tion to reenter the long-distance market, referred to by regulators as Sec- tion 271 relief. Section 271 of the 1996 Telecommunications Act allows the remaining ILECs (Qwest, Verizon, SBC, and BellSouth) to enter the long- distance market if they can prove that they have sufficiently opened up their local markets to competition. As you know from your readings in the regulatory chapter, they have aggressively pursued this course of action; so, suffice it to say that the ILECs universally fought for long-distance relief in response to local telephony entry by their competitors and have in fact been granted large entry concessions. Verizon, for example, replaced Sprint as the third largest long-distance provider in terms of customer count. The originally stated reason for long-distance entry was incremental revenue, since the cost to an ILEC for in-region entry was near zero. However, while the ILECs doubled the number of long-distance customers they serve, the revenues from the long-distance lines of busi- ness they established declined 6 percent as the bandwidth glut and the magic of declining ARPUs took effect. Clearly, ILEC entry into long dis- Downloaded from Digital Engineering Library @ McGraw-Hill (www.digitalengineeringlibrary.com) Copyright © 2004 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use as given at the website. Telecom Market Segments Telecom Market Segments tance has bought them precious little if any margin relief as they watch their local services revenues decline. So what must they do? There are a number of steps that service providers can take to shore up their falling revenue targets. They include acceleration of the circuit-to-packet migration, which facilitates conver- gence; marshalling a renewed focus on t