A decade after deregulation shook the world's telephone companies, and three years into the worst downturn the telecom industry has ever seen, the tumult is far from letting up. From Seattle to Singapore, the big telephone companies that once dominated the business are battling new competitors, sharply declining prices for conventional voice calls, and a relentless movement toward wireless calling. Just as bad, young people are drifting to other forms of communication, such as e-mail, online chat, and mobile-phone messaging instead of the good old phone.

There's no doubt the old order is crumbling. Although the total number of fixed phone lines in the world is still creeping up, wireless is growing six times as fast.

Wireless carriers now take home nearly half of global voice revenues, up from 9% a decade ago. In Finland, an estimated 25% of households are now mobile-only. Even worse for fixed-line operators, the amount of money they take in from each line has fallen by one-third since 1997. As a result, global revenues for fixed-line voice services are expected to fall by 2.2% this year

Turmoil, however, doesn't mean termination. Fixed-line phone companies will still pull in $455 billion in revenues this year from voice services. And the Telco's remain veritable cash factories: The world's leading carriers will spin out $131 billion in free cash flow this year. The fixed-line carriers have an ace in the hole: their wireless networks.

Outside the U.S., however, DSL outpaces cable modem installations by nearly 2 to 1. By pushing DSL -- and eventually hawking all manner of snazzy services that run on top of it, from digital voice calls to films -- carriers may be able to stave off the decline of traditional voice service

Thanks to deregulation, established carriers are losing market share to competing local service providers. Most fixed-line European Telco's, for instance, still own and operate 90% to 100% of the phone lines in their home markets, but, rivals are still walking off with 30% to 50% of the minutes spent talking over those lines, as customers can now choose alternative carriers for calls.

Many telecom giants own both wireless and wired networks, so they're not staring at the abyss. Indeed, to boost their stake in wireless, some have bought into cellular operations in developing countries to keep growing.

Today's turmoil will someday produce a new telecom system, with voice calls sent through the air and wired broadband available in much of the world. And the old wire line telecom firms will still be there -- battered, transformed, but mostly intact.

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