On a recent conference call to investors, Chairman and CEO Randall Stephenson said, "We plan to begin an aggressive transition away from legacy TDM technology."
Here's what that means in plain English: TDM is short for "time division multiplexing," the venerable phone technology we all grew up with. TDM carries calls over traditional copper phone lines that are physically switched in a public branch exchange, or PBX -- those enormous banks of analog circuits that a technician could literally step up to and repair. PBXs were the next leap in telephony technology after the age of the live operator, who connected your call by hand on a switchboard a la Lily Tomlin as the snorting, condescending telephone operator Ernestine on "Laugh In."
The next big leap in telephone technology emerged around 2004: VoIP, short for "Voice over Internet Protocol." Digital VoIP calls are made over Internet service lines, typically fiber-optic ones, which completely bypass the old copper-wire TDM/PBX system.
It was a giant leap forward, but VoIP didn't quite deliver as expected.
One advantage of VoIP over TDM was supposed to be lower cost for the system setup, but that hasn't always been the case. Another anticipated price advantage of VoIP was supposed to be that you didn't need a dedicated technician on site servicing your lines; everything would be managed over the Internet. But in practice it was discovered that such costs needs to be weighed against the fact that, with VoIP, if the power goes out, most likely so will phone service.
Which brings us to one of the primary concerns about the end of TDM.
They Don't Make 'Em Like They Used To
The old, analog phones will typically work in a power outage, because they have their own power source. Did you ever notice there's no separate power cord with an old TDM phone? You simply plug it into the jack on the wall and you're connected: Power and voice service come through the same line.
This is important if, say, you're in the middle of a hurricane and the electricity cuts out.
One of the editors here at DailyFinance recounted her own similar story. As Hurricane Sandy was barreling up the Eastern Seaboard, her old, corded, landline phone (which she otherwise kept in a closet) was the only telephone service she had. Smart thinking of her to have kept it. VoIP phones also might not seamlessly connect to 911, nor offer directory assistance.
Resistance Is Futile
So why not keep TDM around and let customers choose what they want, or even just keep a TDM line as a backup service, like our aforementioned, highly resourceful editor does? As is usually the answer in these cases: money.
In AT&T's third-quarter earnings report, the company announced it will invest $14 billion in wireless and wireline IP broadband networks, where, including managed IT services, the company expects 90% of its future revenue to come from. There's no mention of investment in TDM.
In fact, just this past September, the telecom giant petitioned the Federal Communications Commission to make each state set a final date to terminate landline services so that carriers like AT&T and Verizon (VZ) no longer have to maintain their old TDM networks.
How May I Place Your Call?
So where does this leave the average American, who might need coverage in a bad storm when their cellphones or digital VoIP phones are out? Or what about folks out in rural areas who still depend entirely on analog phones for their voice communications?
In Kurt Vonnegut's Slaughterhouse-Five the book's narrator tells a movie maker that he is writing an anti-war book. The movie maker laughs and asks, "Why don't you write an anti-glacier book instead?" The same could be asked of people resisting the end of the legacy TDM phone system. VoIP and its digital, electrical-grid-dependent brethren are coming, whether we like it or not.
Of course, if we miss our TDM phones and PBX system, there's always YouTube, where we can stream old "Laugh In" episodes and watch Ernestine sneering at her next unfortunate victim. Unless, of course, the power's out.
John Grgurich is a regular contributor to The Motley Fool. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich.