Executives gather to discuss the future of the telecom industry
Though the stock market has shown signs of life in the first quarter of 2002, the telecommunications industry is still in a state of flux.
Or is it?
That’s what attendees at this year’s Fifth Annual Midwestern Telecommunications Conference on May 10 are bound to find out. The conference, coordinated by Milwaukee law firm Whyte Hirschboeck Dudek, brings together leaders of the industry from wireless to cable to regulatory agencies.
The overall picture for the wireless and wireline industries is still one of struggle, according to Whyte Hirschboeck Dudek attorney Andrew Schlidt III. Schlidt, who works with both the wireline and wireless industries, is the co-chairman of the conference.
The main concern for wireline providers is still regulatory. Wireline companies, or those companies that have telephone lines in the ground, are regulated in Wisconsin by the Public Service Commission (PSC), and it is the PSC’s responsibility "to create a competitive landscape in the state to encourage other telephone providers/competitors to enter into this marketplace and offer service," Schlidt said. That mandate was handed down through the passage of the Federal Telecommunications Act of 1996.
Competitors are given the right to use the incumbent — here, it’s SBC Ameritech — wireline providers’ lines to provide service. One of the problems with the current mandate is that it was written when the economy was growing in double digits.
"We’ve got a regulatory framework that’s designed to promote these new market entrants and competition," Schlidt said. "But the current economic conditions don’t promote that. In fact, they promote a consolidation of the industry. You’ve got telephone companies that are going out of business; they’re going bankrupt. They can’t survive economically and their only choice is to merge or be bought, and that’s creating sort of a counter-force consolidation, as opposed to expanding the number of competitors."
Another problem facing the competitors using incumbent lines that remain in the Wisconsin market is that if there is a problem with the infrastructure, it is the incumbent’s crews fixing the lines, which can lead to service delays. The solution, Schlidt said, comes in the form of an incentive given to the incumbents by the federal government in 1996. Companies like SBC Ameritech cannot offer long-distance service, but should they comply with new competitors’ requests, iron out service issues and pass the PSC’s review, they will be able to offer long-distance service. The PSC of Wisconsin is currently reviewing SBC Ameritech, according to Schlidt.
Can you hear me now?
In the wireless industry, it’s simple.
"They’ve taken a financial pounding," Schlidt said. "These companies are essentially out of money to continue their buildout."
As most people know, in order to form a wireless network, towers and antennas are placed within a mile or two of each other, less in a dense urban area. That’s fine if you’re staying in those dense, urban areas, but gaps in coverage exist the further away one travels from them.
Wireless companies, too, are struggling in the down economy.
"They can’t find the investors who are willing to provide additional money because of current economic conditions," Schlidt said.
Not necessarily, says Dennis F. Strigl, president and CEO of Verizon Wireless based in Bedminster, N.J.
"We are the only free, cashflow-positive company in the industry, which means we cover our own internal expenses," Strigl said. "We spend a little over $4 billion a year in improving our network coverage."
Verizon is the largest wireless service provider in the country covering 49 states with an average market share of 23%, according to Strigl.
And Strigl stands by his company’s "Can you hear me now?" ads, saying that there are very few rural sectors in the US — for example, parts of Missouri and Kansas — that the company’s service does not reach. He blamed not having licenses in those areas as the biggest reason for the coverage gaps.
Strigl focuses on wireless innovations and the fact that in the 17-year period that the wireless industry has been around, 50% of the US population has some sort of wireless service.
"We’re tackling an institution that’s about 125 years old," Strigl said.
As for innovations, he points to the growth of the data-transferring capabilities of the industry for laptop computers and personal digital assistants (PDAs).
"And I think that one of the big, emerging applications that we will see is two-way, short messaging services (SMS)," he said. "We have opened up the ability to send short messaging service across wireless carriers, so if you are a customer of one of our competitors, you can send a short message to me on Verizon service or vice-versa."
As for the future of the wireless industry, Strigl sees more consolidation. (Verizon itself is the result of a merger between the wireless operations of Bell Atlantic, Vodafone Airtouch and GTE.)
"I don’t think six nation-wide competitors can survive forever in this industry," he said.
Besides landline operators, companies like Charter Communications, are also rolling out telephony packages with their cable services to compete with wireless providers, but Strigl seemed unconcerned.
"I think it’s something we need to continue to pay attention to," Strigl said, "but I don’t lose any sleep over it."
April 26, 2002 Small Business Times, Milwaukee
