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Technology Stocks : Voice-on-the-net (VON), VoIP, Internet (IP) Telephony -- Ignore unavailable to you. Want to Upgrade?

To: Daniel G. DeBusschere who wrote (848)	6/27/1998 8:27:00 PM
From: Frank A. Coluccio	Read Replies (1) \| Respond to of 3178

Dan, >>Do the RBOCs have a future?<< Certainly. Think of trying to stop an elephant in its tracks. Inertia is on their side, and they can afford to lose some fringe business over the short term without much impact to their bottom line. Longer term, they will come to realize what it is that is eating away at their business, and they will enter that field with modern platforms at that time, and compete vigorously, if they are still in that part of the business when that realization occurs. There is always a chance that the role of the LEC (at least "some" of the RBOCs and other larger LECs in this case) will change considerably, being relegated to a wholesaler in the future, if their facilities are ever unbundled. Sprint's deployment of their ION offering comes to mind, whereby FON has already entered into agreements with several BOCs to resell their DSL-based loop facilities. This needn't be a uniform occurrence across all ILECs or BOCs, since market turbulence and chaos will ensure that some will have entered into other relationships and become embodied in larger carrier organizations over time. If legislators and regulators succeed in their meddling in LEC affairs [there is a bill before Congress now that would attempt to do the following:], some of the larger LECs of the future, in other words, may resemble the same kinds of utilities as deregulated power companies in some instances, while in others they may simply continue in new-found roles. Who knows for sure? I certainly don't, but I think I have a feel for what some of the possibilities are. >>Can the RBOCs eliminate 90% of their costs and continue to operate?<< I don't understand where the 90% comes from, but from the top of my head, I'd say no, not initially, and certainly not all at once. But over time, if they change the constitution of what they offer, and how they offer it, maybe. At some point, Moores Law must eventually catch up with even the LECs, even if only by default. >>Who gets the $150B that now gets spent on local voice services? How can these entities grow 10-15% per year in revenue and earnings?<< The "merchandise," i.e., the services that account for the $150B you cited will cost more like $60B in the future due to improved efficiencies for similar levels of services and the ensuing technology-enabled competition. It will be the add-on, value-added services such as multimedia and higher speed applications which will be responsible for surpassing the remaining $90B deficit caused by the improved techs just cited, I believe, if carriers are able to put emerging technologies to use in a timely fashion, and exploit them in a profitable way. Actually, the sky would be the limit, if they could only let go of their legacy models and their CAGRs and other expectations based on yesterday's rules. These new services, in other words, may add to their bottom lines annually by xy percentage, if they become creative and start to add real incremental value to their offerings. >>Are you long in any of these players and how comfortable are you?<< No, I'm not. Best regards, Frank C.