Well 2002 didn't go as well as I'd hoped. Three negative factors defined this year: Regulatory problems still plague\u00a0DSL deployment,\u00a0WorldCom\u00a0is in Chapter 11 and Verizon has\u00a0only just entered the enterprise long-distance market. Had regulatory reform happened, WorldCom not sunk, and Verizon quickly and aggressively entered the national data market, this year could have been good. Clearly it wasn't, and now these same three factors will define 2003.The regulatory problems with DSL have stifled residential broadband. Forget the naysayers who insist there's no provable demand. There's no incentive in the current market to encourage demand. Cable companies are fending off the satellite companies, and the regional Bell operating companies are getting ready to feast on interexchange carrier (IXC) market share. Who wants to take new risks? Residential broadband is an enormous opportunity in the long run and an enormous risk in the near term, which is why regulations have to be favorable.Regulations are most likely to affect the RBOCs, so we'll have to watch them. The Federal Communications Commission might decide it's safe to move more aggressively with DSL because a Republican Senate won't overturn FCC initiatives.Meanwhile, the ghost of WorldCom will haunt regulators, Wall Street and competitors in the carrier space. Here's a company that's name is practically a synonym for corporate fraud, which might wash itself clean of debt and fling itself into an already profit-squeezed market to wreak pricing havoc. It's not that WorldCom could slash prices by 10% or more, perhaps at least creating a short-term consumer benefit. More likely the carrier will drive down prices just a few percentage points in an industry where profitability for so many big players hangs on just that margin. Can WorldCom threaten the whole industry?We have reason to hope not. Even if regulators let WorldCom skate on the fraud thing and the carrier reorganizes and re-enters the market, WorldCom did what it did because it didn't have honest profits. Why should the carrier now be able to produce them? Sure, WorldCom would be washed of a lot of old debt, but can the company generate enough profit to cover operations costs? And who will lend it new money without punitive terms? WorldCom is probably a paper threat, but it could muddy the waters on the regulatory front. If WorldCom's re-entry reduces profits for IXCs and RBOCs, that makes it harder for regulators to strike a balance between advancing DSL and killing IXCs.That brings us to Verizon. The specifics on Verizon's enterprise announcement suggest that the carrier is hedging its bets in the near term. A national service drive aimed at stealing the IXCs' current enterprise accounts would commit Verizon to national voice\/data price parity with the IXCs, which can't be achieved without significant additional spending. On the other hand, Verizon's targeting of metropolitan ATM and frame relay services to current customers along the I-95 corridor could be developed with minimal additional investment in equipment.The problem is that the I-95 market probably will generate only tens of millions of dollars in revenue for Verizon against a $35 billion to $50 billion enterprise IXC market. Eventually, Verizon will have to take the big step and enter the national data market. When it does, the move it makes will be the prototype for other RBOCs entering the same market, and for overall RBOC\/IXC competition.That's where things will get interesting in 2003. If the RBOCs and IXCs duke it out in the traditional frame\/ATM\/voice arenas, the spending generated doesn't position any of the players for IP services to the broad market, including consumer broadband services. That makes it harder to jump-start these new services and expand tech spending. We need the RBOCs to jump - right over ATM and into IP\/Multi-protocol Label Switching. If they do, regulations easing the RBOCs' deployment of DSL will combine with the new RBOC long-distance networks to create a framework for consumer and small-business IP services, including content networks.If the RBOCs jump into\u00a0ATM\u00a0instead of over it, there will be a lot of gloom at the next holiday season, too.