Signs of a Thaw?

Posted: 5/2003

Signs of a Thaw?

the first quarter came to a close, I sensed a returning optimism in the telecom
industry. Two successful back-to-back tradeshows may be the reasons for this
feeling. Both the Competitive Telecomm-unications Association Annual Conference
& Expo and PHONE+’s own Channel Partners Conference & Expo increased
their attendance over previous events and regained that familiar buzz (This
month’s ASCENT Conference & Exhibition could make three in a row). I don’t
want to oversell it; I’ve no illusions about the current state of telecom
affairs, but it seems that we may have hit bottom and are on the way back up.

My impressions are shared — at
least according to one poll. The March edition of the Service Provider
Confidence Index from Sage Research Inc. shows service providers’ attitudes
about current industry conditions rose sharply for the second straight period,
reaching their highest point since inception of the tracking study in January

publishes the index every other month and includes data for the six specific
areas: capital spending, spending on new product and service development,
revenue, employment, investor confidence and overall industry conditions. The
March edition included responses from 102 executives from service providers,
including incumbent carriers (ILECs, RBOCs and PTTs); long-distance carriers and
IXCs; Internet, Web hosting and other network service providers; competitive
carriers; ASPs; wireless operators; and MSOs and other cable companies.

The SPCI’s Current Conditions Index
increased from a low of 26.6 (on a 100-point scale) in November 2002 to 30.2 in
January and 36.5 in March. The Current Conditions Index continues its climb
toward "high" territory — any score above 50. Also, the Expectations
Index resumed its growth in March, climbing to 64.6 from January’s 61.8.

"With the rise in the latest
SPCI, service providers have told us that they are feeling steadily more
optimistic, though the stigma of the Current Conditions Index remaining in ‘low’
territory has not yet been lifted," notes Chris Neal, a Sage research
director. "Furthermore, almost all of the subindices, particularly Capital
Spending and Service Development, have increased, showing that telecom
professionals’ attitudes are gradually improving in most areas."

On the down side, Investor
Confidence Expectations and Industry Conditions Expectations both fell slightly
in March.

This is not surprising when one
considers that the communications industry experienced seven filings in 2002
that ranked among the largest bankruptcies in history, according to analysis by
Pricewater-house Coopers LLP. In its "Phoenix Forecast: Bankruptcy
Barometer 2003," the firm reports that last year communications was the
industry with the most Chapter 11 filings (30) with the greatest total asset
value ($210 billion), and expects the industry to be among the top five in
numbers and value of bankruptcies again this year.

Making matters worse is that even
after the long-awaited FCC ruling, there is no clear answer on the viability of
UNE-P as the battle over its resale has been moved to the states and likely will
make its way back to the courts in short order.

Of course, the overall economy —
and the impact of the war on said economy — plays a big part in how a telecom
recovery might play out. For now, we will take our small victories — a
pro-competitive regulation, a well-attended convention or two and momentum in
Wi-Fi and VoIP — as signs that telecom’s long winter is beginning to thaw.


[email protected].
Editor in Chief 


Sage Research Inc.

PricewaterhouseCoopers LLP

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