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The Honolulu Advertiser

Posted on: Tuesday, December 17, 2002

TELECOM
Telecom enters '03, angst intact

By Brian Bergstein
Associated Press

A warning sign greets visitors to Global Crossing headquarters in Beverly Hills, Calif. The telecom industry generated a good deal of drama in 2002, including scandals at Worldcom, Global Crossing and Qwest.

Associated Press

NEW YORK — To most people, the telecommunications industry is a tangle of wires, acronyms, sagging stocks and confusing phone bills, not a source of flash and pathos like Hollywood or Wall Street.

But telecom generated a remarkable amount of drama in 2002.

As the industry's business problems — too many players chasing too few dollars — came into sharper focus, so too did a cast of characters who used questionable or downright rascally means to try to mask their companies' falling fortunes.

There was the spectacular collapse of WorldCom Inc. and founder Bernard Ebbers, and the $9 billion accounting fraud that sparked criminal charges against five of Ebbers' underlings. And there were lesser scandals at former high-fliers such as Global Crossing Ltd., and Qwest Communications International Inc.

The Yankee Group, a technology analyst firm, even borrowed a movie title to describe what has hit telecom: "The Perfect Storm."

Although the destructive waters have yet to completely recede, the damage already is visible. An estimated 500,000 jobs have been lost. More than two dozen publicly held telecom service providers filed for bankruptcy in 2002, down from 34 the previous year, according to BankruptcyData.com.

There's too much network capacity in downtown areas of big cities. Forget that 1990s prediction that homes would soon get all their communications services through one "fat pipe" — the industry still hasn't solved the "last mile" problem of hooking nearly everyone to fast Internet connections.

Even where people can get broadband, many show no interest.

Don't expect telecom's angst to subside quickly. All those bankruptcies — including WorldCom's, the largest in U.S. history — figure to keep assets cheap and prices low for a while. Telecom badly needs a marked improvement in the economy and in spending by big businesses.

For other clues about what lies ahead in 2003, look deeper into the telecom turmoil — and notice that it hasn't caused a crisis for consumers.

Competition is keeping prices down for cellular and long-distance services. Even with the broadband mess, analysts estimate 18 million American homes and small businesses have it, up more than 50 percent from last year. Clever wireless technologies are expanding the ways we can stay connected to the Internet and each other.

Each of those trends is worth watching in 2003.

Some consolidation is expected among the six national mobile phone providers, which could bring a lull in the price war consumers are enjoying. The likeliest scenario involves Cingular Wireless LLC (a joint venture between SBC Communications Inc. and BellSouth Corp.) acquiring either AT&T Wireless Services Inc. or T-Mobile USA Inc., a unit of Deutsche Telekom.

Also in 2003, look for big developments involving the short-range networking system known as WiFi, which lets people surf the Internet wirelessly. Many big telecom companies have eyed the technology cautiously because it takes some control out of their hands.

Thousands of hotels, airports, coffee houses and bookstores have set up WiFi "hot spots," and a new company called Cometa Networks, backed by AT&T and technology giants Intel Corp. and IBM Corp., plans to roll out thousands more.

Even further behind the scenes, other wireless companies are making progress in speeding data to mobile devices over great distances.

Flarion Technologies Inc. has invented what it believes is an efficient way of transmitting desktop-quality broadband Internet access to laptops and hand-held devices, even when the user is traveling 200 mph.

Even more mundane aspects of communications are getting upgrades.

Consumers should see even more options for making phone calls — through cable TV lines, inexpensive "dial-around" long-distance companies and other services that use an improving technology that converts conversations into data and inexpensively routes them over the Internet.

And in November, consumers should finally get the right to bring a phone number with them when they sign up with a new wireless provider.

On the Web:
Consumer Federation telecom page: www.consumerfed.org/backpage/telecom.cfm
WiFi organization: www.wi-fi.org