Telcordia: Let’s Split

Cut the thing in half, I say!

August 10, 2004

4 Min Read
Telcordia: Let’s Split

I had a bit of a giggle last week when I discovered that about half of the respondents to our August Research Poll have picked Burger King as the most likely acquirer of Telcordia Technologies Inc. (see Telcordia With Fries?).I half suspect that people might have seized on the opportunity to poke fun at Telcordia because it’s got a bit of an image problem. It’s widely seen as old-school and arrogant. Not to mention high cholesterol.

Having said that, another result of the August Poll gave me quite a surprise. Nearly three quarters of 70 respondents who have taken the poll to date don’t think Telcordia should be broken up and sold in parts.

Are they daft? I think there’s a strong case for Telcordia to be split into two companies, and, weather permitting, I’m going to explain why in this column.

Let’s start by going back to basics. Telcordia was originally founded as Bellcore in 1984 by the RBOCs, as a joint research division, following the breakup of the Bell Telephone monopoly. It was purchased by Science Applications International Corp. (SAIC) in 1997 and changed its name to Telcordia in 1999.

Nowadays, Telcordia effectively runs two businesses. On the one hand, it develops its own operation support system (OSS) software and has plans to expand this, via acquisitions such as the one a couple of months ago, when it acquired Granite Systems (see Telcordia Shells Out at Last, Telcordia Nearly Blew Granite Deal, and Telcordia: Buy Buy or Bye Bye). On the other hand, it’s the guardian of various service provider standards, including Osmine, the program aimed at ensuring that all RBOC equipment falls under a common network management umbrella.

Before going any further with this column, I ought to point out that Telcordia and Light Reading have had somewhat strained relations on occasions. Like Lucent Technologies Inc. (NYSE: LU), Telcordia still expects journalists to write whatever it tells them to write. When Light Reading hasn’t done this, Telcordia has withdrawn press access – not that it’s stopped us continuing to publish the straight poop about the company.

The biggest strain on relations between Light Reading and Telcordia has been over its Osmine program, which we’ve dared to call a de facto monopoly (see Telcordia's Osmine Gold Mine). In many cases, vendors have to pass Osmine compliance tests conducted by Telcordia in order to sell their hardware and software to RBOCs, which means two things...

First, Telcordia can pretty much charge what it likes for conducting these tests – and, by most acounts, it does. We’ve been conducting a poll entitled Osmine on Trial on Boardwatchover the past year. It’s been taken by nearly 200 people so far, and 58 percent of them consider Telcordia’s charges “a complete ripoff,” while 63 percent think the whole Osmine process should be subjected to an antitrust investigation.

The poll also suggests that RBOCs end up paying higher prices for equipment and can’t take advantage of the latest advances in telecom technology, because they’re usually not covered by Osmine. Some RBOCs appear to be rebelling against this (see Will RBOCs Undermine Osmine?).The second upshot of Telcordia’s management of the Osmine process is that Telcordia gets a detailed look at the network management aspects of new products targeting RBOCs, which gives it an unfair advantage over its competitors in the OSS market.

What is truly amazing is that Telcordia hasn’t managed to capitalize on its Osmine advantage, particularly as the RBOCs have become the focal point of most vendors’ sales efforts in recent years. Its revenues have been declining, even during the telecom recovery, which is probably why SAIC appears to have decided to put the whole shebang up for sale.

I guess the argument for selling the whole thing as one entity is that a Telcordia under new management might do a better job of exploiting its Osmine advantage. But in the wider scheme of things, is it a good idea to hand anybody a monopoly on a plate? Don’t we already know that monopolies in the telecom industry breed complacency, arrogance, and inefficiency?

My solution is to split Telcordia into two: Tel and Cordia – one handling standards and testing, the other taking on the OSS business.

In a perfect world, a way ought to be found to turn Tel into an industry forum, one that could be run for the benefit of not just RBOCs but all service providers. It would keep Osmine abreast of new developments, speed up compliance testing and charge reasonable rates for it. I guess the TeleManagement Forum could take on the role. It got fairly decent ratings in yet another poll we conducted recently (see Industry Forums: Useful or Useless?). Alternatively, could the RBOCs club together and buy back a part of what they originally sold to SAIC?

Cordia could be bought by... well, perhaps not Burger King. We’ve named a range of other options in our August Research Poll, and right now IBM Corp. (NYSE: IBM) is the (distant) second favorite. To share your views on potential acquirers and to say where you stand on splitting up Telcordia, please click on this link.

— Peter Heywood, Founding Editor, Light Reading

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