Telecom
Transitions
Telecom
survives a brutal war, and leaves us breathless and
waiting.
by
Rohit
Shukla, Larta CEO
When
the Telecommunications Act of 1996 was passed, the
air was thick with anticipation. The federal government
reversed established policy of 50 years, deregulating
an industry that had been built on federally-sanctioned
monopolies.
The marketplace was quickly awash in new technologies
designed to handle an expected explosion of data as
the Internet's spread and adoption grew exponentially.
And wireless auctions brought in huge amounts to governments
across the world, and they in turn were able to justify
the sale of "spectrum" on the grounds that
the public would be served by competition in the marketplace.
The
credo was that choice would trump the ancient regime
of regulated pricing, indifferent service, lack of
substantial choice in Internet and data services and
the liberation of the consumer from the repression
of franchise-based telephony.
We
came to believe the passionate rhetoric of the times:
a revolution was upon us. And like in any revolution,
heads would roll, new players would emerge, small
companies would innovate rapidly to match unprecedented
demand, and the ringing cry of choice would emanate
throughout the world.
Over
the next few years, newly-emboldened corporations
(themselves often a product of rapid consolidation
that occurred in the ensuing two years), consumer
groups, business lobbyists and governments at different
levels brawled and screamed and aligned and realigned
their respective interests through a confusing panoply
of regulations, jurisdictional pressures and court
cases. The period was marked by a lack of precedent,
and slowly the Act was exposed for what it really
was: a checkerboard of push-me pull-you clauses that
ultimately satisfied no one, but didn't do any real
damage to any entrenched interests.
The
air is now acrid. As the smoke clears on the battlefield
of the new franchise-busting regime, several factors
have led to an enduring recession in the telecom industry
itself. For many people, this brutal downturn presaged
the recession in the general economy. For one thing,
consumer demand was vastly overestimated, so anticipated
revenue streams evaporated. For another, new entrants
had neither the endless resources nor the staying
power of the incumbents, who adapted quickly by consolidating,
providing a range of services over large geographies
with relatively intact workforces. And by the time
corporate shenanigans were exposed, as with Worldcom,
Qwest and Global Crossing, the revolution was already
stillborn. Lucent Technologies, a star spin-off from
AT&T, has seen its revenues decline from over
$30 billion in the late 1990's to just over $10 billion,
its share price down to 68 cents, and its workforce
shrink by 88,000 jobs. Nortel is in worse shape.
So
now Michael Powell, chairman of the Federal Communications
Commission, wants communications companies to spend
more on new equipment so that some semblance of order
may be restored to a battered marketplace. Don't look
for that to happen anytime soon. The carriers like
AT&T, Verizon and SBC are not anxious to
spend precious resources on uncertain outcomes, given
the reality of the marketplace.
While
it may be a betrayal of the spirit of the Telecommunications
Act that incumbent carriers have survived, this masks
the very real changes they have undergone as part
of their own survival strategy. And arguably, they
are better carriers, more responsive to customer demand,
more sensitive to technological changes, and, despite
the loss of so many venture capital-backed startups,
more inclined to innovation.
Both
Verizon and SBC are the product of sweeping consolidation,
which wiped away the old franchise brands, and have
become stronger companies for it. Both are battling
each other in their own franchise areas (out of franchise
competition is a byproduct of deregulation, and one
that actually does provide choice, with as much stability
as consumers have come to expect over the long years
of mollycoddling they enjoyed under deregulation).
Verizon
has been aggressively capitalizing on its own considerable
investment in plant and equipment (and a history of
working with small innovators in various parts of
its erstwhile franchise) to push a realistic vision
of convergence, that hallowed word which has become
so abused and so thoroughly incorporated as to have
become somewhat meaningless in so many contexts.
But
convergence, as Verizon sees it, is a reality brought
about by the exquisite efficiencies of pipe and equipment.
It is driven by the need felt by all businesses, large
and small, to integrate their legacy systems into
new efficient networks, to "converge" their
voice, video and data onto a single network that will
result in cost savings and a more "intelligent"
network.
"When
times are tough, what do you do? What's always worked
historically," says Tom Dalrymple, the Director
of Voice Switching for Verizon's Enterprise Solutions
Group. Dalrymple says that Verizon's managed services
has been successful with corporate customers, as companies
seek out not just technology which improves efficiency,
but also provides risk reduction. "We're surrounded
with management then tends to de-risk the decision
for our customers. This makes going into technology
a lot easier for the end user when you've got a pretty
broadened service to offer."
The
capabilities wrought by the decade-long love affair
with communications technologies are impressive, and,
yes, unprecedented. And, now with the smoke clearing,
its possible to enjoy the fruits of this messy war.
Meanwhile,
customers, used to indifferent service, convoluted
pricing tariffs, and the like (and in some cases battling
these same woes with a much-maligned cable industry),
now face multiple choices, more responsive customer
service agents, and by and large better experiences
with the telecom carriers left standing after the
battle. Verizon recently received high marks for its
service - which has been widely seen to have drastically
improved since the consolidation, which wiped out
the old GTE.
Like
in any revolution, we may have eaten our young in
this one. And we may even be suffering from gross
indigestion as a result of that experience. But the
antacids are more powerful, and In this lull, we should
be truly grateful.
