Broke telcos doing everything they can - Qwest exec
A senior Qwest executive this week provided a grim picture of the telecommunications industry, saying all is still not well in the sector despite some recent optimistic chatter about IT spending coming back in a significant way.
"The telecommunications market goes through cycles like everything else," said Wesley Kaplow, the CTO of Qwest's government services business at the IEEE International Symposium on Cluster Computing and the Grid held here. "Unfortunately, because the market is not what it should be or could be many companies are going away."
Gloomy forecasts for the telecommunications market at certainly not new. The sector has been punished by a massive decline in spending as companies such as Lucent and MCI (WorldCom) appear only as shadows of their former selves.
Over the past six months, however, gains seen in other sectors such as hardware, processors and software seemed to point to a solid rise in overall IT infrastructure spending. In addition, a surge in mobile device and mobile services sales opened a nice area of growth for telcos and equipment makers.
But the most recent fiscal results from the sector largely quashed any hopes of a flash near-term recovery.
Lucent posted a profit for the third straight quarter but did so on the back of cost-cutting measures. Sales of wireless and landline equipment fell. Similarly, AT&T Wireless lost 367,000 subscribers in the first quarter, and Nokia warned that sales of its handsets had dropped off.
There are signs of hope, but overall, telecommunications companies appear set for single digit growth at best, according to analysts.
A big problem for the infrastructure providers is that no company is willing to spend on next-generation technology, Kaplow said.
"We are trying to maximize every megabit out of our systems without spending because we're broke," he said. "We're broke."
"The industry itself is still in quite a flux, and nobody knows exactly what will happen. Whether we will be acquired or acquire is hard to say."
This uncertainty coupled with still high costs for equipment has telecommunications companies locked in what Kaplow described as "stage two" development. The telcos are pushing equipment makers to lower the cost of their gear so that more bandwidth can be pulled out of current systems. Until costs come down, companies will be reluctant to move to "stage three" where vendors try out "revolutionary ideas" for networks.
For its part, Qwest plans to make a major infrastructure buy in the near future.
"It will be the largest network buy in the next two to three years," Kaplow said without providing more detail.
Qwest is in the process of releasing proposals for the purchase to suppliers. ®