Deju vu or a better view?

One of the real dangers of living through the 1990s in telecom is that it can be very hard to get excited about anything.

One of the real dangers of living through the 1990s in telecom is that it can be very hard to get excited about anything.

For example, last week Verizon announced that it has built a fiber optic network all the way to 30,000 homes in Keller, Texas, and that it will spend $2 billion this year to reach a total of 1 million homes in nine states.

Pretty heady stuff for the staid old telecom industry, right?

Well, sure (yawn) assuming you don’t remember the last time that Verizon was building fiber to its customers’ homes. Let’s see, that was Paul’s Pond, no Charlie’s Creek, no wait, Tom’s River! That’s right, a cute little berg in New Jersey.

And then there was the plan to deliver video over asymmetric DSL that was tested in Virginia and (very briefly) a flirtation with wireless cable. Let’s not even get into the content production/acquisition consortium that Bell Atlantic and GTE were a part of, pre-merger.

But wait, that’s not the only example. This week, Lucent bought Telica, a softswitch company, for $295 million, promising that this acquisition is the key to more quickly delivering the next generation of IP services to businesses and consumers.

Now it’s much too easy for even the non-cynical to poke fun at Lucent for buying a start-up company for some hot technology that Lucent itself has allegedly been developing for several years. Such acquisitions were more frequent in the late 1990s than repossessed BMWs in Silicon Valley after the bubble burst.

Consider this, however: Lucent’s goal in this acquisition is to catch up to rival Nortel in the VoIP equipment market and then create such advanced services as integrated messaging, wireless-wireline integration through follow-me services, and integrated data and video services that make it unnecessary to leave the sofa for anything other than bladder relief. 

The trouble is anyone who lived through the ‘90s must remember that integrated messaging was a line on a Microsoft PowerPoint presentation (they didn’t own PowerPoint back then) in 1995, when the evil giant of software domination was trying to lure telephone companies onto its bandwagon. Follow-me is a version of the original goal of personal communications services, before that term was co-opted by Johnny-come-latelys in the wireless world.

So is there nothing new in telecom? Are these announcements just the telco industry’s version of summer re-runs?

The strong temptation is to say, yes, we’ve seen all this before, because we have.

The more realistic view is to say, maybe not, because the market is in a very different place today that it was in the 1990s. That is true primarily because there are different competitive forces at work AND more of a customer pull than a technology push in the market.

Verizon isn’t building fiber to the homes of its customers for any other reason than to try to compete with the ongoing threat of cable companies offering voice, data and video. While fiber is still a costly proposition, it offers the telephone company the opportunity to use the massive amount of bandwidth available to deliver HDTV, as it becomes more prevalent, in multiple channels into the home while also supporting higher rates of high-speed data and throwing a negligible amount of bandwidth at voice. 

The almost unlimited bandwidth of fiber offers Verizon the chance to give customers self-provisioned service options, although that is well down the road in this deployment scenario.

Having said all that, the bet here is that while Verizon continues to slowly build out fiber in new neighborhoods and some rehabbed areas, the company is going to have to get smart about using existing copper lines to also deliver multiple channels of HDTV and high-speed data. The technology exists today and is even in use by smaller independent telcos.  The fiber stuff will look sexy on Wall Street but the copper-based services will save Verizon’s existing service base.

As for Lucent, the company gets another crack at integrating hot technology to reshape its future and correct past mistakes, the largest of which is the failure to counter rival Nortel in the VoIP market. Like Verizon, Lucent sees the competitive handwriting on the wall, which is the best possible incentive to move forward.

In each company’s case, it is worthy to note that real market forces are at work here, not golly-gosh-ain’t-this-cool technology that too often spurred action in the past. And that’s certainly something we didn’t see much in the bad old days.

Copyright © 2004 IDG Communications, Inc.

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