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On occasion, we will share with our friends throughout the industry our views on major events and issues in the telecom industry.
We will use TeleSparks as the primary vehicle for sharing these (usually highly opinionated) views and we welcome your feedback.

TeleSparks is authored by Danny Briere, TeleChoice Chief ExecutiveOfficer, with input from others throughout the TeleChoice organization.

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TeleSparks Archive

TeleChoice TeleSparks: 2002 Mid-Term Exam 

The News 
In 2001, everyone was confident that 2002 would be the year for 
a telecom industry recovery. Today, halfway through the year, there’s 
a wide range of predictions for when that recovery will actually occur. 

The TeleChoice Take
We’re often asked if we see "the light at the end of the 
tunnel." However, the reality is that, instead of one bright spot, we 
see a "thousand points of light." (OK, maybe not a thousand, but 
we’re pretty happy with a dozen or so...) 

Bottom line -- we don’t expect the industry to make a broad 
recovery anytime soon. This week's news out of Jackson, MS 
certainly underscored the continued "darkness" at even the 
largest companies in the industry. In fact, with the possible exception 
of Cisco, all of the industry’s major players still have significant pain 
in front of them. Some (probably not WorldCom) may see stock 
price recovery, but only because they have been over-discounted. 
No major players are on the verge of tremendous performance. 

However, this industry has never been "led" by the huge 
players. Instead, it is the small, innovative, nimble players who will 
set the direction and the pace of the industry. It was the rapid failure 
of many smaller players that "led" the industry into its current 
downturn, and we are very encouraged by the emerging points of 
light in the smaller corners of the industry, which we hope will lead 
to broad industry recovery. But keep in mind that this industry is a 
big fleet dominated by big ships, and big ships and big fleets 
turn slowly... 

Current Situation 

Obviously, the industry is in tremendous pain. A quick review of 
news since the beginning of the year uncovers Chairman-, CEO-, 
or President-level turnover at WorldCom, Verizon, Qwest, Lucent, 
AOL, Microsoft, Sun, Tyco, MFN, Yipes, Adelphia, McLeod, and 
many others. The list of bankruptcies is too depressing to repeat. 
We could discuss the underlying drivers for this pain, but we’d 
rather focus on the positive factors that will (eventually) drag 
the industry into recovery. 

The Good News 

Some undeniable truths create a positive future for the 

- People and companies are more dependent than ever 
on communications and technology. 

- The amount of traffic sent over networks continues to 
increase dramatically -- anywhere from around 40% to 
200% (tripling) growth every year. 

- This means carriers need to dramatically increase the amount 
of capacity in their networks. Even if you are in the camp that 
believes there’s an overcapacity situation today, a doubling or tripling 
of traffic will rapidly consume any overcapacity. 

The fundamental challenge for the industry is how to handle 
this increasing demand -- specifically how to translate this 
increasing demand into increasing revenues or to handle this 
increasing demand without increasing the cost of carrying that 

In the last TeleSparks, we dealt with the financial challenges this 
creates for service providers and the actions the industry needs to 
take to deal with these challenges. However, this also points to the 
near-term opportunities for the technology companies that 
serve carriers: 

- Carriers and service providers need to increase the capacity of 
their networks. This translates into purchase orders for 
transport equipment and data networking equipment (switches, 
routers, etc.). 

- As carriers and service providers make these purchase decisions, 
they must find ways to meet this increased demand at a decreasing 
cost per bit. This translates into opportunity for vendors to displace 
the incumbent technology vendor. 

- This need to drive efficiency also creates opportunities for 
vendors that can squeeze efficiency out of the network (e.g., 
traffic engineering and network optimization vendors) or 
drive incremental revenue from the same amount of network 
capacity (e.g., vendors that enable new, higher-margin 

These are real opportunities with real dollars. Unfortunately for the 
large technology players, these opportunities are either cannibalistic 
to existing business with current customers or a relatively 
small percentage of a really big financial problem, so we don’t 
expect these opportunities to result in rapid recovery for the 
industry’s largest players. However, these opportunities represent 
huge wins that can quickly establish younger, smaller 
technology players. We eagerly anticipate watching these bright 
points of light as they emerge over the next six-to-twelve 

Furthermore, we see new opportunities developing from 
emerging enterprise needs: 

- Enterprise customers are driving as much cost out of their 
network infrastructures as possible. This translates into opportunities 
for both service providers and technology companies in the areas 
of managed services, integrated access/convergence, 
traffic compression, and network optimization. 

- Obviously, there’s also tremendous new interest and 
concern surrounding network security and disaster recovery. 
Vendors and service providers have a unique opportunity to 
participate in the education of enterprise decision-makers as they 
face these issues for the first time, even as they have to rapidly 
deploy security and disaster recovery solutions. 

- Increasing reliance on networks has created tremendous 
concern among enterprise customers over the re-monopolizing of 
the local loop. This concern is countered by emerging competitive 
local service options including optical Ethernet, wireless 
Ethernet (802.11), and broadband wireless solutions. This 
also translates into tremendous opportunities for technology vendors 
in these areas, as well as other access technologies including 
Passive Optical Networking (PON). 

As with carrier technologies, these are real opportunities with 
real dollars being spent this year. We eagerly anticipate a number 
of bright points of light emerging as smaller and younger players 
in these spaces begin to see tremendous success later this year and 
into 2003. 

The Bad News 

Unfortunately, we don’t believe these dozens of points of light 
will translate into a broad industry recovery in 2002 and maybe 
not even in 2003. However, we continue to be encouraged by 
this building momentum. As eternal optimists, we rejoice with 
each major win and join with our industry friends as you celebrate 
your individual successes. 

We also recognize the hard realities facing these potential bright 
points of light: 

- The surviving service providers, for the most part, are moving 
more cautiously and operating with smaller staffs, less capable 
of evaluating new technologies and new vendors. It’s as hard as 
ever and slower than we would all like for a better solution to 
displace the current one. 

- Although enterprise customers look to reduce their costs, 
they similarly have to do so with reduced network 
staffing. Straightforward one-time exercises, such as grooming 
no-longer needed circuits out of the network, are relatively 
easy decisions. Complex technology solutions will be a much 
harder sell -- especially in the face of another painful reality -- 
the abundance of cheap bandwidth that can be thrown at many 
other problems.
What's Next?
What Can You Do? 

We strongly encourage you to stop and consider the implications of 
this situation on your business. Specifically, consider these key issues: 

- If you’re a carrier or service provider, are you seriously 
considering the ways to profitably carry increasing amounts of 
traffic? No decision may be the easiest decision today, but failing 
to uncover new technologies from new vendors that can 
dramatically reduce your cost per bit carried or that can 
drive incremental revenue opportunities is short-sighted at 

- If you’re a technology vendor focused on carriers, are you 
positioning your products effectively to displace the incumbent 
vendors? Have you made the compelling and clear case to your 
service provider customers of the short- and medium-term 
financial benefits of switching from their current network approach 
to your products? From our work in the industry, we know that 
virtually every vendor has developed some form of ROI tool; 
however, we’ve seen many come up short in actual use. How robust 
and credible is your tool? How well does it stand up to the questions 
and challenges thrown at it by your potential customers? If 
an overworked, overwhelmed customer can find any reason 
to say, "those numbers don’t fit my operation" or "I have no reason 
to believe that analysis," then you might as well move on to the 
next customer -- the door has slammed shut. 

- A greater challenge, if you’re in this camp, is making sure 
your solution is relevant within the total context of your target 
customer. Your solution may represent a 1,000-fold improvement 
in how a service provider performs one part of its operations. 
That’s great! But if that one part is only 1% of the total problem, 
then the pain is insignificant and you won’t even get past an 
initial discussion (if you’re lucky enough to even get that). Make 
sure you’ve put your solution in total context -- both in your 
messaging and in your impact analysis. If that doesn’t position you 
well, then maybe you’re targeting the wrong customers, or maybe 
you don’t really have a solution that will be a "point of light" in 
the current environment. 

- For both carriers and technology vendors, are you effectively 
pursuing the opportunities represented by the new 
enterprise requirements? Have you launched products and services 
that meet their needs for network efficiency, cost reduction, 
network security, and disaster recovery? Is your solution simple 
enough to be evaluated and implemented by 
overextended, understaffed networking groups? 

- If you’re in the specific group targeting enterprise security 
and disaster recovery solutions, are you leveraging today’s 
unique opportunity to educate/indoctrinate a target customer 
market hungry for answers in how to safely operate 
mission-critical networks in the face of uncovered risks and 

The ability to cut through the confusion and fear in the marketplace, 
to clearly communicate the value of your solution, and to position 
your products and services effectively in the minds of your 
customers has never been more critical. Let us know if we can help. 
Need Some Help? 
TeleChoice helps companies everyday better position their firms 
and products for success, whether re-examining fundamental 
business strategy or clearly communicating unique position and value 
in today’s tough marketplace. Contact us at +=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+ 
About TeleSparks: On occasion, we share with our industry friends 
our views on major events and issues in telecom. We use TeleSparks 
as the primary vehicle for sharing these (usually highly 
opinionated) views, and we welcome your feedback. Feel free 
to forward these on to others, but please copy us on the messages 
so we have a sense of the extent of distribution of our 
views. TeleSparks is generally authored by Russ McGuire, 
TeleChoice Chief Strategy Officer, with input from others throughout 
the TeleChoice organization. You may contact Russ
 ( or your favorite TeleChoice contact 
to share your thoughts on these matters. 



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