Don't Lose Heart, Says Hundt
Like a general rallying the troops, Hundt's Wednesday morning keynote speech exhorted attendees at the Opticon show here to retain their confidence in the battered telecom business, and to keep battling to build the networks of the future, from which revenues will one day flow again.
Backing his words with some research from his associates at consultancy McKinsey & Company -- while flavoring his speech with regular touches of humor -- the former FCC Chairman tried to brush away the current gloom with his contention that the spoils will be there for those who build the products and provide the services for the smarter networks of the future.
"This is not the 'pet rock' business, where people are going to wake up one day and say I don't want these things," said Hundt, who is also chairman of Sigma Networks, a startup in the metro services arena (see Sigma Relies on Star Power).
"Demand [for telecom services] is not steady: It is going up as a factor of disposable income... We do not have a demand problem. We just have not, as a country, or an industry, gotten anywhere close to delivering the services and products the country demands."
Hundt laid the blame for the current market situation at the feet of the companies and investors who fueled the largely inefficient buildup of networks over the past few years, a situation that has caused the current scenario of too much bandwidth in the network core and too few compelling services to attract new customers.
The current long-haul overcapacity came, Hundt said, via "chaotic" network planning that was not rational. "It [the buildout] produced 14 intercity long-haul networks, which is more than we need and more than we can sustain."
While telecom-related capital expenditures were increasing from $41 billion in 1996 to $110 billion in 2000, Hundt said return on those expenditures dropped by 50 percent during the same period, showing that "people from the financial community didn't look at this chart."
Hundt, who was chairman of the FCC from 1993 to 1997, defended his legacy, the oft-assaulted Telecom Act of 1996. Though many detractors say the Act has created a market with less competition and higher prices -- the opposite of its stated goal -- Hundt said it's time to stop whining, and take advantage of the ability to compete.
"Nobody was guaranteed to win [because of the Telecom Act], but everyone can try," Hundt said. "When someone loses, it's always the law that was responsible. I don't know why it should be different for this industry. When PC companies fail, nobody says we should change the law."
However, Hundt did concede that government action -- or inaction -- is not in step with the rapid change that the telecom and technology industries deal with on a daily basis. Laying blame on slow courts and a current FCC administration he characterizes as "asleep," Hundt said telecom revolutionists need to have some patience to go along with their enthusiasm.
"Unfortunately, the kind of change we want is responsible for interminable litigation. The truth is, it can take five to 10 years to actually get policy in place."
Though not wanting to predict when a market turnaround might start, Hundt did offer McKinsey figures that foresee an 86 percent overall growth in IP traffic by 2005, as well as an increase in metro-market expenditures from $15 billion to $50 billion.
Service providers can make money, he said, by providing better services, especially on the operational and provisioning fronts. Better pricing, like that found in the long-distance voice market, also needs to emerge.
Long-distance voice providers have learned to "market with brilliance," he said, noting the multitude of pricing plans, which vary by time-of-day usage and other parameters.
"We haven't seen that yet in the IP business, to price services by time of day. I think it's just too soon."
While Hundt, an ardent Democrat, dinged the Bush administration for its lack of any initiatives on the telecom infrastructure front, he also said that the future lies in the hands of people like the Opticon attendees -- the builders of next-generation networking products and the service providers that use those wares.
"Think about this as a battle between packet-switch attackers and circuit-switch incumbents. And attackers take casualties."
But eventually, Hundt said, the attackers have the advantage, because they can build next-generation networks at a fraction of the cost of the incumbents. What keeps Hundt awake at night is the thought that the warriors might leave the field of battle too soon.
"What worries me the most is people losing confidence," Hundt said. "It's just a question whether we have the confidence to pursue these goals. Americans have shown they're willing to tackle problems that exist. This one can be tackled, and we're counting on you to do it."
- Paul Kapustka, Editor at Large, Light Reading