From the Desk of������.. John Barker - Column

The Telecom War Is Over

Opinion By John Barker, European Correspondent

As beleaguered telco executives climb from their bunkers, shell-shocked and bleary-eyed, they survey a new and unfamiliar landscape. All around them are scenes of desolation. In the distance are the first green shoots of recovery.

The first thing to note is that all bets are off. It used to be said that if you put 12 economists in a room you would get 13 opinions. Nowadays you would be lucky to get any. The economists have been struck dumb because they have no yardsticks to measure with. All the data is contradictory. Consumer confidence and service industry employment is saying one thing, manufacturing industry and telecom shares are shouting something completely different.

Over the last year I have tried in my articles to give a historical perspective to the collapse of the telecom industry. Avarice and extreme myopia are diseases of the capitalist system, diseases which it seems are not curable. The collapse of railway stocks in the last century is an instructive example. Eager investors paid inflated prices for rail shares that subsequently became worthless. But the end result was a massive railway network infrastructure that was both irreplaceable and affordable.

The phenomenon that engulfs us is as old as the hills. The weak go to the wall and the strong eat them. The forest fires that sweep California are a necessary part of the ecology because they allow rebirth and renewal. That phenomenon has hit Silicon Valley and it has extracted a cruel price. Niki Panourgias of Netimperative made the point last week:

"Like a forest fire moving to unburned parts of the forest leaving the smouldering remains of the already burned parts behind, the Internet element of the technology slump has moved into new and previously relatively unaffected parts of the landscape. The fire might have first struck the content providers and then gone on to the incubators, Web developers and the advertisers, but over the last couple of weeks it has started to engulf hosting and e-finance."

In a week that saw Marconi [MONI] in its death throes, it may seem perverse to talk about the green shoots of recovery. But they are there if you search for them. Global Switch, a carrier-neutral co-location provider with facilities in London, Paris, Frankfurt, Amsterdam and Milan, is reportedly poised to hit the acquisition trail, buying out competitors weakened by the tide of negative sentiment sweeping the sector following the collapse of rival CityReach. Project Telecom, an independent wireless voice and data services provider, has posted trend-defying half-year results announcing a half-yearly profit up 71 percent on the previous year. Turnover also increased year-on-year by 42 percent for the six months ended June 30, at which point the company had a cash position of over $10 million that puts it "in a strong position to pursue its strategic objectives".

Thus the strong emerge bleary-eyed from their bunkers into the sunlight. They survey a new and unfamiliar landscape--one where many of the natural predators have been removed and where for the first time they can see their enemies because the undergrowth has been burned away. It is a message of hope to the guys in the bunkers. Bandwidth prices, like the cost of PCs, are in freefall. That's the bad news, but it is also the good news. The communications revolution is only just beginning. Cheap communication, like cheap rail or air travel, is the trigger for an explosion in demand.

Survival of the fittest may be painful, but the fittest survive. And prosper.

John Barker can be reached at john@dvdeye.net >TK Royal KPN [KPN]:

COPYRIGHT 2001 PBI Media, LLC
COPYRIGHT 2001 Gale Group