Navigating the telecom maze demands creative thinking
George D. Miller
Group Editorial Director
For the telecommunications industry, the business horizon is clouded by imposing vistas. Competitive mazes involving a host of players, merging infrastructure technologies, slow but steady standards building and accompanying supplier posturing, as well as slower but less steady regulatory development fill the range. It is within this environment that the future telecommunications infrastructure--the information superhighway--is being conceived, designed and built.
Defending your territory within this competitive maze is going to be difficult, and growing your business will require new levels of creative thinking. Offensives can now be mounted against you by cable-TV companies, competitive access providers and even electric utilities, separately or in combination. You must weigh the long-term benefits of fiber-rich architectures against the short-term financial attractiveness of less-fiber-rich architectures, all the while guessing at market demand and the market`s willingness to pay for the services carried over such networks. In conjunction, you must be cognizant of the status of the synchronous optical network and asynchronous transfer mode standards, and determine when to commit to which suppliers of what products that implement these standards. The promise of network management and flexibility embodied in the two standards could well represent the cornerstone of successful future telecommunications enterprises. And you must make all of these decisions in a regulatory environment that promises sustained uncertainty. To paraphrase one Washington official-You`ll sleep like a baby: You`ll awaken every two hours screaming.
Fiber optics constitutes a competitive tool in the telecommunications industry, helping to distinguish one service provider`s offerings from another`s. Hybrid fiber/coaxial-cable investments in the United States will represent in excess of $60 billion in local loop spending during the next 10 to 15 years, according to carrier announcements. So the hybrid fiber/coaxial-cable architecture is by now a sure bet, representing perhaps the quickest and cheapest way to enter the high-stakes broadband services game. Analysts foresee continued experimentation with a variety of such architectures, where both hybrid fiber/coaxial-cable and fiber-to-the-curb networks coexist. Indeed, even hybrid fiber/coaxial-cable network proponents envision a migration of fiber closer to the customer, culminating in an all-passive network requiring no amplifiers, writes Gary Kim of Probe Research.
To a great extent, however, and in contrast to the strategy of CAPs, some local exchange carriers are waiting as long as possible on their future fiber-network plans in hopes the technology will improve further and the cost of delivering advanced services will decrease. The costs associated with retrofitting the residential local loop with a hybrid fiber/coaxial- cable infrastructure, after all, are still immense, writes Fred A. Joyce of the Joyce Telecom Group. But infrastructure costs are coming down and are expected to decline to less than $900 per residential customer in 1995, from the current level of $1000 per residential customer.
On the supplier front, the diverse functions of Sonet transmission products make price comparisons difficult. However, cost-based price forecasts indicate a steady decline, amounting to a modest 32% decrease during the next eight years, writes Donald L. Dittberner of Ditt berner Associates Inc.
And on the regulatory front, expect the telecommunications reform effort to stretch out to the 1996 presidential election, writes columnist Steve Brown in the January edition of Lightwave, which accompanies this supplement. Republican strategists face a simple choice: Immediately, once and for all, resolve the telecommunications issue--or champion the cause but move it ever so slowly through their Congressional committees and toward ultimate passage in October 1996, all the while raising the needed money to bring in a bumper crop of Republican senators.
So that`s the business landscape. Here`s an industry call to action that can be drawn from this perspective:
Make your voice heard in Washington. Let policymakers and regulators know that indecision on telecommunications reform through 1996 and beyond is an unacceptable detriment to the construction of the information superhighway. Educate your customers on the significance of telecommunications reform so they won`t tolerate any linkage between telecommunications policy and electoral strategy.
Continue to track and contribute to the evolution of infrastructure technology options. We`ve come a long way from early visions of fiber to the home. Fiber-to-the-curb and hybrid fiber/coaxial-cable architectures are now merging. What`s next?
Continue to track and contribute to the development of the Sonet, ATM and other applicable standards. Understand how suppliers implement these standards in their products, and when.
Develop definitive plans for network upgrades and growth. Negotiate the best possible pricing on systems given your long-term plans.
When you get right down to it, this isn`t rocket science: Common sense can be your guide. But on the other hand it`s fraught with more uncertainty than rocket science. So proceed cautiously and stay well informed.