NY Times: Broadband Companies Cheer Ruling
By SIMON ROMERO and MATT RICHTEL
The decision by the Federal Communications Commission last week to retain many of the rules that govern local telecommunications markets but to exempt high-speed Internet services has given some Silicon Valley companies reason to cheer.
Under the ruling last Thursday, states will still have the right to order the regional Bell telephone companies to provide network access to their local competitors at relatively low wholesale prices. But because high-speed Internet, or broadband, services are exempt from those forced-access rules, some makers of broadband equipment — like Cisco Systems and Juniper Networks — look forward to a new wave of buying as competitors in broadband services arm themselves for battle.
And the semiconductor giant Intel, which had lobbied the F.C.C. heavily on the issue, also expects new opportunities — not only in selling chips used for broadband network equipment but also in chips for more powerful PC's, if more consumers are enticed to sign up for new and improved broadband services.
"If we increase broadband, we get more people online," Bill Calder, an Intel spokesman, said. "That's good for the industry, but it's good for us as the microprocessor supplier."
Big equipment suppliers to the local telephone industry, particularly Lucent Technologies and Nortel Networks, whose gear is used primarily for conventional network services rather than broadband, may have little reason to think the F.C.C.'s action would help end their long slump. And some analysts who track the telecomunications equipment market are not especially optimistic about the prospects for the Bells to significantly increase their spending even on broadband technology.
That is because the telephone industry's main approach is to make broadband service available over digital subscriber lines, or D.S.L., which has not yet emerged as a consistently profitable business and has a lower market share than the main alternative, cable television modems.
"Any hope for meaningful capital spending incremental to a recovery have been dashed," Gabriel Lowy, an analyst at Crédit Lyonnais Securities, said.
Compared with the telecommunications boom, when the carriers' investments in network technology grew an average of 17.7 percent a year from 1996 to 2000, Mr. Lowy said he now expected capital spending to remain contained — even below the 7.5 percent average annual growth rate of the 30 years before the surge in the late 1990's.
Little wonder that shares of Lucent and Nortel, which fell on Thursday after the F.C.C. announced its order, drifted further downward on Friday, with Lucent closing down 7.9 percent, at $1.52, and Nortel declining 3.1 percent, to close at $2.18.
Asked on Friday about the impact of the F.C.C. decision on Lucent, Henry B. Schacht, who retired last week as the company's chairman, said simply, "It is too early to speculate."
Yet some analysts, including Nikos Theodosopoulos of UBS Warburg, predict that any additional equipment spending by the Bells would probably emphasize broadband over conventional voice services.
If that happens, he said, the beneficiaries could be businesses that specialize in making gear that enhances D.S.L. systems, like Alcatel, of France, and Advanced Fibre Communications, of Petaluma, Calif.
For such investments to occur, the Bell companies would have to make a serious commitment not only to D.S.L. but also perhaps to technology that allows high-quality video services over the fast Internet links. Such a change, however, would run counter to strategies the Bells have been considering — like SBC Communication's recent expression of interest in acquiring the DirecTV satellite television operations from General Motors.
The broadband enthusiasts in Silicon Valley, though, are thinking not only about the Bells' potential spending but about the prospects for a generally more vibrant broadband market, with higher spending by telephone and cable companies alike. In fact, various trade associations representing the computer, software and consumer electronics industries had banded together as the High Tech Broadband Coalition, which heavily lobbied the F.C.C. and was generally happy with the outcome of last week's decision.
"We will benefit," said Christine Heckart, who oversees marketing at Juniper Networks, a company in Sunnyvale, Calif., that is a major provider of equipment to broadband companies. "I would think there are few companies with more to gain from this," Ms. Heckart said of Juniper's response to the F.C.C.'s decision.
Another member of the broadband coalition is Next Level Communications, in Rohnert Park, Calif., north of San Francisco. Next Level is predicting increased demand for its technology, which allows telephone companies to use their existing voice lines to also offer broadband services, like interactive entertainment and Internet access, said Geoff Burke, its director of marketing.
Mr. Burke said the F.C.C.'s decision gave the telephone companies the incentive to invest in services that compete with the cable companies, now that the telephone companies know they will not have to lease their broadband capacities to competitors. "This evens the playing field," he said. "It lets the phone companies compete head-to-head with cable."
This decision will accelerate the spread of broadband to homes, Mr. Burke said. "What you'll see is more processing power, more interactive entertainment and more networking equipment," he said. "That's what drives the Valley." |
