Chief Executives Say Consolidation is Necessary

Chief executives of three telecommunications companies on Monday said industry consolidation is vital to support the health of the sector and compete more effectively with such titans as national cable operators, wireless carriers and the four regional phone companies.

Theres got to be a lot of consolidation going forward, WilTel Communications President and CEO Jeff Storey said during a CEO Roundtable. People need to not be afraid of consolidation because its the best way this industry is going to get healthy.

Competing networks must come together to compete more effectively against the regional Bells, cable companies and wireless operators, said Rolla Huff, chairman and CEO of Mpower Communications Corp.

Ron Mudry, president and CEO of Progress Telecom, says companies need to be more open with their employees about the state of a company and help them focus on growth initiatives. Still, he conceded the difficulty of discussing consolidation due to the implications of possible job cuts.

During the forum, the CEOs emphasized the importance of getting consistent regulations on the books to help solidify business models and drive investment.

I believe weve got to get good business models in place and then ask for a level playing field at state and federal regulatory agencies, Huff said, adding the state public utilities commissions are just making nutty decisions the way it looks right now.

Added Storey: We cant even get the FCC to interpret its own rules I dont think today we have a level playing field.

Over the last year, the FCC has taken a number of actions to relieve the regional phone companies from obligations to share their phone and broadband networks with competitors. The FCC is working to adopt permanent rules governing wholesale access to the networks controlled by BellSouth Corp. and other regional phone companies. Meantime, many competitive telecom providers have been moving to develop Internet-based phone systems to bypass the regional Bell networks.

Huff says the economics behind VoIP are what make the technology compelling, but he cautioned that customers are ultimately looking for value and quality — not the four-letter acronym that has the industry buzzing. I dont think everybody should fool themselves into thinking there are customers waiting in line to buy VoIP, he says.

Although VoIP presents a low-cost way to enter the voice business, Mudry says there is an X factor. Whats going to happen to the pricing? he asks.

Huff says one thing is certain: Relying on other networks to sustain a business is a bad idea. Youre on a sinking ship, he says.

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