In a recent column I wrote that the incumbent local exchange carriers’ anger over unbundled network element-platform pricing was misplaced. I’ve gotten a lot of feedback, and I appreciate the time, energy and thoughtfulness that people put into their responses.
Most of the notes were some variant of “right on,” although a handful of them were passionate rebuttals. Judging from their e-mail addresses, the authors were predominantly ILEC employees – no surprise – but not from the marketing or public relations departments. These were real telecom engineers writing about their real-world experiences, and they highlighted some areas that could use further clarification.
Here’s a summary of the main issues they raised and my responses.
1) Competitive local exchange carriers (CLECs) pay artificially low rates to use networks they don’t have to pay to manage or maintain. This lets them reap the profits without making the necessary investments.
Uh, what profits? Have you noticed how many CLECs have gone broke in the past 24 months? If this argument held water, the ILECs would be falling all over each other to take advantage of the rules and resell the networks. Why isn’t Verizon selling services on SBC Communications Inc.’s network and vice versa?
The truth is that nobody’s making a killing in this market. And that’s not because UNE-P is unfair. It’s because the market value of residential services continues to drop. That puts a huge amount of pressure on the providers of these services to survive with lower margins, reduce operating costs or both – which brings us to the second point.
2) Necessary investments include big iron switches, engineers with hard hats and tool belts, vans and the like. Wrote one reader: “You need to actually have a network to invest in it and make it more efficient.” Another said: “How many hard hats and tool belts did [the CLECs] buy this year?”
Well folks, this is the crux of the matter. Regular readers will note that I try hard to distinguish between service providers and bandwidth providers. “Bandwidth” is a low-value commodity these days – and that includes residential dial tone.
Anyone who wants to be in the bandwidth business needs to figure out how to reduce operating costs – and that means using technology effectively to reduce (not increase) the number of big iron switches, vans and tool belts they purchase.
What that means in human terms is lost jobs. And here’s a heartbreaker: The people at greatest risk are the good guys, the ILEC employees who resisted the “get-rich-quick” mindset of the ’90s, stayed on the job, and took care of their families and customers.
Yes, what’s happening in the telecom industry is painful. And the pain’s not over yet. But don’t blame UNE-P. Blame senior management at the ILECs for not realizing where the market was headed and for wasting their dollars on lobbyists and lawyers instead of making the necessary investment to upgrade from bandwidth to service providers.
Johnson is president and chief research officer at Nemertes Research, a technology research firm. She can be reached at johna@nemertes.com.
