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Don't Panic

Opinion By John Barker, European Correspondent

'Don't panic' they said. Then Marconi shares halved overnight. They panicked, and with good reason. Because Marconi had sold off the family silver, its defense and medical systems arms, to focus on telecommunications. In the same stupid way the crippling price paid by British Telecom for its 3G license forced it to sell off its land and buildings. And Nortel Networks might make the history books with its $19 billion quarterly loss. Oh dear, it looks like a case of mass lunacy.

All those legions of smart advisers, yet none of them saw it coming. How come around $100 billion was invested to build 39 million miles of fiber without someone noticing that less than 5 percent of it was lit? CS First Boston estimates less than one percent of the fiber in the ground is actually used. To add insult to injury, Bell Labs' scientists have discovered that a single strand of optical fiber could transmit ten times more information than previously thought. They found that it is theoretically possible to send about 100 terabits of information - that's roughly 20 billion one-page emails - simultaneously per strand of fiber, ten times more than previously thought.

Thus the world is sinking in a sea of bandwidth that will take a decade or more to absorb. It will come as no great surprise if 90 percent of telecom equipment manufacturers are bankrupted or absorbed. The dot-com meltdown is trivial in comparison to the bursting of the telecom bubble. The sadness is that it happens over and over, century after century. The present situation has parallels with the railway revolution and before that, in Britain at least, the canal revolution. The people who lose their shirts are the innocent investors and the workers. The fat cats that engineer the successive disasters seem to escape with gold-lined boots.

But that's the price we pay for capitalism. The good news is that we still have our railways and our canals, and we still have the fiber in the ground when the pioneers have bit the dust. That infrastructure is of incalculable value. In Britain, despite all the negative publicity, railway traffic has doubled in recent years. Imagine those millions of passengers forced to use the roads. Imagine the cost of building a railway network today, straight into the heart of all the big cities. That is the lesson we need to remember while surveying the ashes of the telecom industry.

Hundreds of thousands of highly skilled telecom workers will be displaced. But they will be gobbled up by the industries of the future. Some of those industries have not even been dreamed of yet. But what we can be sure of is that they will employ digital technology and require masses and masses of bandwidth. Well, for sure, that's something the West will have plenty of.

But what of the rest of the world where most of the people live? That's the really good news. That is where the telcos must look - to the developing countries. I leave you with a heartening if slightly unbelievable snippet from the Jakarta Post quoting an official in the Indonesian economics ministry, envisaging an increase in the number of Internet cafes in Indonesia - from 2,500 at present to half a million by 2004. It seems that Japan had offered $15 billion to help Asian countries, including Indonesia, boost IT. "Indonesia, with its more than 200 million population, is considered a captive market" for Japanese IT products, he said.

Think about that. Half a million cybercafes serving 200 million people. Now that's a lot of bandwidth. Don't panic.

John Barker can be reached at tossa@pobox.com >TK Sprint [FON]: AT&T [T]: WorldCom [WCOM]:

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