Yes, Telecom is Broken

Rich Tehrani : Communications and Technology Blog - Tehrani.com
Rich Tehrani
CEO
| Communications and Technology Blog - Latest news in IP communications, telecom, VoIP, call center & CRM space

Yes, Telecom is Broken

Yes Peter, telecom is broken in some areas you mention but in others it seems to be doing just fine. What scares me most about the points you mention is how our politicians and regulators don't seem to care about fairness in the markets. But this topic we will leave for another day.

You have some good and intriguing thoughts in your blog post which I excerpted from your On Rad's Radar? blog:

From an agent side of telecom, I do think it is broken. So many carriers have merged for survival that the integration was a disaster. The blunder poster child would obviously be Sprint as it wrote off $29.5B on the Nextel merger. Sprint can't get out of its own way. Qwest is looking to jump ship as an MVNO partner. As an agent, I can not get a quote out of Sprint (or Embarq) in any reasonable time frame. Sprint's Board should have hired a consumer exec, like a former C-Level at P&G or Unilever, not some bean counting Bell-head like Hesse (who basically ruined Embarq with his so-called leadership).

Paetec merged with USLEC then McLeod then Allworx. I don't even know how that worked out, but I do know that their CEO will say it is all about the people. (That's his mantra and keynote address. Ho hum). It's actually about the planning and execution done by the talent. A lesson that Level(3) learned during its integration of Broadwing, Progress Telecom, ICG, Looking Glass, and the Savvis CDN. L3 released too many people; people that had valuable knowledge about the systems that they needed to integrate. Oops!

SBC buying AT&T and BellSouth has been no picnic either. And the VZ and MCI merger still has employees and customers alike flummoxed about who to buy from (Verizon or Verizon Business).

Time Warner Telecom bought Xspedius last year. This year it is still trying to figure it out. (Try to get a quote). And TWTC has to change its name by June, since its rights to use "Time Warner" run out. Why didn't TWTC take the Xspedius name and only do the branding and printing thing Once? It seems Bell-heads can only follow what Ma Bell does. (Ma Bell spent Billions on renaming AT&T Wireless TWICE!)

Two CLEC's that did some merging are now kind of quiet. One is One Communications - the result of the merger of CTC, Choice One and Conversent. The other is Broadview Networks, which is in IPO mode after rolling up InfoHighway, ATX and Eureka. I don't know how well the integration went personally, but I don't hear a lot of screaming about it.

Then there's the gang of 5 at the FCC, led by a chairman (Kevin Martin, K-Mart for short), who can't create a level playing field for the players. That's all anyone wants. (See my post on AstroTurf coming up). Deregulate the RBOCs and let them merge, but regulate the cablecos and not only can't cable merge but neither can the DBS companies (DISH and DirecTV) or the satellite radio companies. Verizon must have a person who lives in that building because they file Forbearance petitions and ex-parte almost daily. The FCC's job isn't to make billions selling spectrum to the Fortune 500. The FCC's mandate is to improve radio, TV, and communications, which it has done a poor job of so far as competition in every arena is failing. (And wait for the DTV disaster next year!)


But Peter, regulatory issues aside -- the reason telecom is broken may have to do with the following... In the last few years, the access to capital has been so great that companies merged for the sake of market share like never before. Money flowed as easily in M&A as it did to subprime borrowers.

Just as there seemed to document-free loans for mortgages there also seemed to be logic-free loans for M&A.

Most of the companies doing the acquiring had no business merging as they ran semi-monopolies and they weren't really able to integrate other companies as well as they were able to retain share and grow slowly -- competing with other semi-monopolies. The tech and telecom industries are littered with the corpses of once-great companies acquired by other companies with egos larger than their integration teams.

Only Oracle and Cisco come to mind as companies who know how to acquire well. That is a scary track record and certainly not unique to telecom and tech.

Another major problem telecom faces is Skype. They are 100 billion minutes strong. Granted, not all this traffic was taken off carrier's networks but perhaps 25-50% of it was.

In the last few years, technological change has posed a significant challenge to the telecom and music industries.

Ironically, you might say the music business is broken as well and by the same person since Niklas Zennstrom founded Skype and Kazaa.

I am no expert on record labels but there seems to be a level of technical incompetence in that industry that I have never seen before. If it wasn't for Steve Jobs, music companies might still be searching for a digital solution.

Speaking of Steve Jobs, it is interesting to see Apple changing the way the music industry works and more recently he is starting to do the same for telecom.

I suppose the slower economy you mention may give the companies you cite the the opportunity to figure out who does what and perhaps reorganize in a manner that allows them and agents to understand who does what.

But while one side of the business is certainly experiencing pains brought on by excess consolidation, there are other parts of the industry where innovation is taking off. Consumer electronics, mobile VoIP, hosted VoIP SMB solutions, etc.

It seems to me that agents should look outside their normal areas to new parts of telecom where there may be bigger profits to be had.


Related Articles to 'Yes, Telecom is Broken'
fcc-voip-study-12-31-09.png
itexpo-east-2009-keynote.jpg
stumbleupon.jpg
girl-cell-phone.jpg

Featured Events