This explains the strength in telcom equipment stocks in
November/December despite the weak forward guidance.
ADTN and TLAB have both publically stated that they
though regulatory relief was what was required to
get the carriers back on track. This in addition
to the attempts to raise rates in specific market
maybe signalling the carriers are willing to
loosen their purse strings again. Considering that
many were rumored to be spending below maintenance
levels, we may see a re-bound in chip equipment stocks.
ADTN pre-announcemnt of better results indicates
carriers are investing in newer equipment which
has better gross margins for ADTN. In addition it
indicates the Baby Bells are spending.
It still all centers around T1 line growth. Closer
into the core away for where ADTN plays, the RBOC's
use a lot of TLAB switches. Given that it has about
$1 bill in cash, it could be considered a value play.
A little more risky is TXCC which sells chips into the T1 local access space. ADCT also makes the list as they
sell to RBOC's and cable companies.
****************
Reuters
FCC to Drop Key Phone Competition Rule-WSJ
Monday January 6, 1:40 am ET
NEW YORK (Reuters) - U.S. regulators are preparing to stop making local phone companies rent their networks to rivals at cheap rates, a move that could reduce competition and price-cutting in the local phone market, the Wall Street Journal reported on Monday.
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The expected change by the Federal Communications Commission would be a huge win for the four regional Bell companies, which are trying to continue their domination of the profitable local market, the report said.
It could be a significant setback for their biggest competitors, the two already beaten-down long-distance giants, AT&T Corp. (NYSE:T - News) and WorldCom Inc. (Other OTC:WCOEQ.PK - News), which have struggled to make inroads into local phone service.
The revisions to the rules would be the most drastic change to the nation's telecommunications laws since Congress passed the Telecommunications Act of 1996, which was predicated on allowing the Bells and the long-distance companies to enter each other's markets.
The move would essentially undo the FCC's key rules intended to make it easier for new providers of local service, including long-distance companies, to compete with the Bells: Verizon Communications (NYSE:VZ - News), BellSouth Corp. (NYSE:BLS - News), SBC Communications Inc. (NYSE:SBC - News), and Qwest Communications International Inc. (NYSE:Q - News).
Instead, the plan would force them to pay higher prices to rent network access or buy more of their own equipment, the article said.
The plan, now a draft, could be voted on by the FCC commissioners early next month, the Journal said, citing people familiar with the plan. It would then have to overcome likely legal challenges from the long-distance companies and state regulators, who have been trying to foster competition and win lower rates in local phone service. In its current form, the plan would take two years to be phased in. |
