In October, The New York Times reported FCC Chairman Michael Powell was urging telecommunications companies to spend more on new equipment to ensure the survival of big suppliers like Lucent, Nortel and Cisco. The carriers' own recovery, he reportedly said, depended on the ability of those and smaller equipment makers to remain solvent enough to continue developing new technology.
Wow. I haven't heard such bad advice since my mother told me knee socks were cool.
To be fair, Powell's idea sounds like a good one at first blush. It would be really great for all of us, in the short term, if telcos ratcheted up their equipment purchases. But wait, isn't the creation of false demand one of the things that got us into this economic freefall to begin with? Real industries like telecommunications, data communications and video communications are sustained by real demand by customers, whether those customers are residential consumers, businesses or the service providers themselves.
Not that I think there's any chance of it actually happening, but if service providers were to invest in equipment just to prop up ailing vendors, it could further weaken the service providers themselves and only lengthen the industry's suffering.
What services providers need to do is exactly what they've been doing. That is, first, figure out ways to lower operating expenses, and next, look at how to drive new revenue at the lowest possible cost. Market forces themselves must be the impetus for this new investment. Vendors -- old or new -- that help them do this will be the survivors.
At a Voice on the Net show I attended early this year, Sean Dalton of Highland Capital Partners pointed out "all of the great companies," which he defined as including Cisco, Cascade, StrataCom and Wellfleet, were founded when communications investment was out of favor.
The next round of "great companies" could be newcomers or legacy vendors that reinvent themselves. The onus is on those companies to convince the service providers to loosen their purse strings.
Until next time,
Paula Bernier
Editor in Chief
