| Qwest Communications yesterday took issue with the characterization of unused fiber capacity as a "glut," because, of all things, companies won't spend the money to light that fiber unless it is economical to do so.
It costs one to two times as much to light the fiber and make it available for service than it does to lay it in the ground, the company said in an SEC filing. In other words, Qwest faces increased competition only if someone decides to actually use that fiber. THE FAILURE OF COMPETITIVE ENTRY INTO FIXED-LINE ::
See CRTC, Regulatory Framework for Voice Communications Services Using Internet Protocol, Telecom Public Notice CRTC 2004-2, 2004. Back
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Furthermore, the recent economic downturn and the shakeout in the In part II, we summarize the various kinds of state barriers to public power entry
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That may be good news for Qwest, but someone paid billions for all that fiber and has nothing to show for it. That's not a criticism of Qwest or any other next-generation service provider, but the reality of how technological innovation has worked in this country, whether the technology was the telegraph, railroads, autos, the radio, or the personal computer. They all inspired an initial rush of excitement and overinvestment, followed by a painful shakeout. That's called progress. "Telcos Can't Afford to Stand Still"::
May 9, 2005 A shakeout is coming in the telecommunications industry, stemming in part from two pending mergers of giants -- Verizon Communications (VZ
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The Three Faces of European Deregulation::
British Telecom, for example, enjoyed monopoly status in the United Kingdom . Deregulation will result in a shakeout, and a consolidation at home leading
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The telecom sector has been going through a period of colossal upheaval, and it's not just about next-generation fiber optic networks. Long-distance carriers like AT&T and WorldCom have been clobbered by the entry of the Baby Bells into the important long-distance markets of Texas and New York. At the same time, the broadband services that were supposed to fuel their future growth have been plummeting in price. The result is that AT&T, for decades the ultimate widows and orphans stock because of its dependability and stability, is expected to see earnings fall 87% this year. The stock trades at 101 times this year's estimates, a staggering valuation. WorldCom, a leader throughout the 1980s and 1990s, has been rumored to be an acquisition target of BellSouth.
And debt problems haven't been limited to next-generation service providers. European carriers like Deutsche Telecom and British Telecom are struggling under the weight of $125 billion spent for advanced wireless spectrum during a time when it seemed that growth would have no end.
The resulting drop in telecom equipment spending has crushed venerable old companies like Nortel, Lucent (Bell Labs) and Ericsson. What the shakeout will do to telecom debt holders, such as GE Capital, remains to be seen.
It is breathtaking to watch, but no fun if you're an investor in these stocks.
We've said before that the Baby Bells are the best bet to emerge from the shakeout as the dominant telecom companies. SBC, Verizon and BellSouth are probably the new widows and orphans stocks, with very dependable earnings. Qwest's acquisition of US West was in retrospect as brilliant a move as AOL's merger with Time Warner, providing diversification during a difficult economic environment.
Qwest is expected to earn 53 cents this year, down just pennies from last year. Broadwing, the remade Cincinnati Bell, is expected to lose 66 cents this year and 21 cents next year. That compares to losses of $3 a share or greater for companies like Global Crossing and Level 3. Having a Baby Bell in your corner does a lot to smooth over the rough spots for next-generation networks. It doesn't guarantee that Qwest and Broadwing will triumph, but it sure seems to give them an edge in the battle for survival.
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