Competition has opened the arena to multiple providers of Long and every other distance phone provider. The push in the nineties was data spurred on by the Internet. This has lead to cable companies providing data access, another competitor. Then to compete with cable, DSL service by the local Central office was provided. Wait a minute, we can use cellular for data! GSM & 3rd Generation GPRS rebuilds.
So from the consumer aspect, they used to pay an ISP $20/mo for 56KBS data rate now pay $40 for cable or $50 for DSL but at 10 times or greater data rate. To the investor this means that a Telecom company used to be able to charge $2000/mo for a T1 line (1.54MBS) then Telecom competition pushed the price down below $500/mo and now with DSL/Cable has pushed the price down to $50 or less (at least for download speed). If you have a business with a WAN, you would need symmetrical data rates - OK $150/mo per site.
I know, make it up on quantity!
Look at the Computer industry. What is the major difference between computers & telecom industries? Computers are an end product, like a blender. The computer industry growth is spurred on by improved (?) software and hardware.
Microsoft comes out with a new operating system, new or improved applications that may require new hardware (faster CPUs, bigger hard disks, more memory). Intel comes out with a faster CPU chip requiring a different motherboard, maybe a different case, different video board. ChaChing!
Well there are problems with growth in the computer world. MS Office 97 and Windows 95 still work to type this observation on a Pentium II PC. The PC is fast enough to page through the document. If I get another PC it will be because I have the want and spare money not the need. Hardware rarely fails. The economy slows down, you slow down hardware production, but design keeps going as fast as possible. Software design keeps going as fast as possible, production of CDs and books slows down.
Now look at the telecom industry. What is the product? I need a cable/DSL modem - not telecom (used to be). Phone systems are still a part of the telecom industry, but some companies just manufacture the phone equipment with no other involvement in the telecom industry. The larger piece of the pie is in service for the telecom industry.
But the tail is wagging the dog. If a customer needs higher data rates, the telecom companies need to buy equipment, do some cable swap outs, put up cell phone sites, satellite, whatever to put the infrastructure in place.
Now that the telecom company has everything in place some jerk changes the technology and the customer is not loyal. The customer is not paying for all this crap the telecom just bought!
The telecom company is worse off than the computer user.
Technology changes for the computer user doesn't necessarily mean they have to buy new equipment. If things go bad in the economy, they can stop internet/cable service and put off the new hardware/software purchase.
The telecom companies can't shutdown services when things go bad. They still have to maintain the infrastructure even if hardly anyone is using it. They need to compete, they need to buy the new widget and abandon the old.
The present telecom industry has a lot of money invested in infrastructure. The idea should be to get the customer to buy the equipment, then jerk their chain with new technology, new equipment purchases without the option of waiting.
Someone has already thought of this idea. Gilder Forbes Telecosm 99 featuring Global Crossing exec Gary Winick and others. Provide so much bandwidth (10GBS to the end user) using fiber optics and light switches with underlying LAN topology & TCP/IP, that switches and repeaters, etc are not needed. No traffic cops needed on 1000 lane highways. You could wear a blindfold and jump out into the street with very low odds of being hit. Infrastructure will be greatly reduced. Require the customer to buy the end equipment, light the dark fiber.
Well, Global Crossing was well underway to doing just that. Connecting countries with fiber optics via the oceans. Span long distances before repeaters are needed, easier to maintain, lower infrastructure costs.
How will the last telecom mile be utilized? Telephone, telecommuting, teleconference, TV programming, and internet.
BlockBuster could exist only on the internet, download your movie. They could just as easily go into the book/magazine business? There could still be movie theatres for the large screen, but they would be under pressure with HDTV coming of age. Every major device (washer, fridge) in the home could put out an SOS when trouble was imminent. The home could be wired for automatic heat adjustment (such a thing is in the works with Power companies), fire alarm, security, cameras, lights, garage door.
The problem, at present, is supply of bandwidth far exceeds demand. Nothing really new for infrastructure design. You don't build a single lane highway one week, then when everybody decides to use it, just put in a few more lanes? The compounding problem is that not just one entity is planning infrastructure for the future. Competition has several entities with the idea of getting a certain amount of the pie (customers) and it isn't divided equally, but with overlaps. So you have over build, on top of over build.
Before the AT&T breakup, infrastructure planning was of one entity. Someone wants to build their own private network to compete with AT&T is at a disadvantage. In the past they start small and grow over time. The companies that have grown and barely catching their breath maintaining their size, have had a technology shift. They have to put the new technology in place - not in a slow growth build-out mode -, but all at once - ASAP. For a time both the old and new systems may need to be maintained. The checks don't roll in ASAP from the customer to pay for the new technology.
Who is footing the bill? You might think the equipment manufacturers and banks, but also the stockholders. If the telecom company goes bankrupt the stockholder is sure to lose. Which has been the case.
Infrastructure should be a very long time investment. Maybe not suited to a company with stockholders demanding quarterly positive earnings per share. A lot of the infrastructure of the USA is owned by government entities (RR, highways, [was telephone], bridges, etc.) Should there be an entity, institution, or government backed mortgage perhaps to manage the infrastructure? What about the government taking over bankrupt telecom infrastructure, if it makes ($) sense? Were the bankruptcies the result of bad decisions in design? Who pays for bankruptcies in the end? The loss of the failed company is passed on to debt holders, whom then claim the loss on their income tax. Usually the loss in tax is not adjusted by decreasing government spending, but higher income tax. The budget gap.
The telecom industry needs to convince users of the last mile that higher bandwidth is needed. Right now telecoms are buckling under the pressure of competition while maintaining infrastructure. There is no real growth, just taking customers from a competitor for a while.
This is what the Stockholder's get in a bankrupcy: