Lessons from the telecom rise

We’re entering a different kind of age, an age where what is important to real buyers is also important to real sellers. A lot of the things we’ve talked about for the last four years, from VoIP and convergence to wireless and Linux and free telephony and universal Internet and consumer broadband, are going to happen for real in 2004.

The Nasdaq crash and bursting of the tech bubble taught us a lot about the telecom industry, including the basic truism that businesses must show a profit no matter how cool or revolutionary their technology might be. What can we learn from the recent rise in our industry’s fortunes?

It doesn’t seem like a clear victory for convergence. TDM player Tellabs has gained about 70 cents in stock price over the last year. IP player Juniper, in the same period, gained about $20. That’s a pretty clear vote in favor of IP over TDM. Cisco and 3Com both doubled their stock prices, and Avici Systems nearly quadrupled its price in that same period. But Lucent and Nortel, hardly bastions of packet commitment, also more than doubled their prices. A lot of IP start-ups went out of business.

Optical isn’t a clear winner, either. Ciena didn’t do much better than Tellabs, and JDS Uniphase lagged Cisco and 3Com. We’re not seeing a clear victory at the technology level.

So what are the business lessons here? It’s clear from the reports of enterprise players that IT spending actually is ramping up a lot faster than doomsayer surveys showed it would at the end of 2003. That includes network spending. It’s also clear that the money is going disproportionately to incumbent players that have a strong sales presence in enterprise accounts. The same thing is true in the service provider area, though it’s lagging the enterprise area by about four months. The old business adages of feet-on-the-street and account control seem to carry more weight than technology revolutions.

Or maybe we’re learning that the tech revolution isn’t revolutionary. It would be fair to say that a lot of the revolutionary furor of the bubble has been co-opted by the establishment. Tellabs and Ciena both bought IP service switch vendors. Cisco is targeting the same RBOCs it almost laughed at in 2000. IBM and Novell are competing to be the leaders in open source and Linux. DSL is becoming the RBOCs’ private reserve, and technologies such as 802.11 seem to be moving to a role of supporting incumbent carriers instead of displacing them. AT&T is championing VoIP. It’s like having all the Generation Xers become lawyers or politicians. Is it selling out or the “new maturity”?

Neither; it’s getting real. Maybe that’s a good thing or at least an inevitable thing. Remember our lesson from the fall: profits count. Just because you can invent something doesn’t mean you can commercialize it, and commercialization means more than just earning money. It means popularizing something, making it a part of our industry and culture. The lesson of the rise is that technology matters when it’s delivered into the real world.

We’re entering a different kind of age, an age where what is important to real buyers is also important to real sellers. A lot of the things we’ve talked about for the last four years, from VoIP and convergence to wireless and Linux and free telephony and universal Internet and consumer broadband, are going to happen for real in 2004. It’s not going to be a story of revolution because all the revolutionaries died off in the crash. It’s a story of assimilation. Trusted service or equipment providers will take those revolutionary bubble ideas that were good in a commercial sense and present them in a sanitized and successful form. For many it will be hard to tell if that’s exciting news or a defeat of innovation.

But what is innovation without execution? Does the product or service that changes minds and never changes lives really mean anything? We had an intellectual revolution in telecom in 2000, a purge of hope in 2001 and now a (perhaps) conventional execution of some shadows of those revolutionary ideas. It’s quite a gamut, but is it good? Is it a sellout of ideals to taste success from an establishment well?

Why not wait till the end of this year, when our industry and your own life is flush with some new (and earned) prosperity, to decide whether you like this new age better?