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Optical/IP

Esrey Talks Tough, Touts Future

ATLANTA -- Supercomm -- A rousing lunchtime pep talk by William T. Esrey, CEO of Sprint Corp. (NYSE: FON), boosted bedraggled attendees at Supercomm 2002 here Wednesday.

"Investors have been whining so loudly you can't hear yourself think," he told the crowd. "I don't have to tell you the telecom industry has been rocked... [but] this is a solid, expanding industry that's vital to the nation's economic health and future."

Esrey said telecom services will account for $40 billion in revenue over the next three years and will show a 4 percent compound growth rate through 2005, greater than other economic sectors. "I believe you have to be enthusiastic about telecom's future."

And Esrey was tough on carriers who may succumb to the downturn, suggesting that they're only getting what they deserve. They chose to overbuild fiber, driving down prices, he said, and they went into debt while failing to create value for their customers.

On the same day WorldCom Inc. (Nasdaq: WCOM) announced a fresh series of massive cuts and further business changes (see WorldCom Strips Down), Esrey talked Darwin: "In a free market society, what did you expect? There will always be a natural selection process that... defines the enduring players."

Sprint appears to be among the survivors right now, though it's hardly thriving. The carrier beat analysts' revenue projections by three cents in its April earnings report, earning $0.33 per share, even as it cut capex substantially (see Sprint Reports Q1 Earnings). Consensus predictions call for the carrier to match that EPS figure in its next report, due mid-July, according to First Call.

Sprint's expected to eventually wind up among those carriers in a position to acquire the assets of fallen competitors, according to a recent report by the Optical Oracle, Light Reading's monthly subscription research service (see Carrier Crisis: Who's Most at Risk?). The report notes the carrier's strong cash flow and relatively favorable leverage ratios but cautions that things could change, given ongoing market problems.

While confident of future success, Esrey warned listeners that the way won't be easy and change will come at "warp speed," bringing carrier business plans into contact with "hard realities." The industry will continue to transform itself, said Esrey, and consolidation, lack of capital, and changing customer needs must be reckoned with.

The key to success, he contends, will be the ability to deliver "total access solutions" that let business and residential subscribers connect 24/7 to a number of services. And he gave a futuristic example, in which a man maintains a voice call with his college-student daughter while sending messages to his colleagues, riding in the car, and locating the nearest gas stations online [ed. note: presumably without running down any pedestrians]. Arriving at work, he ends the conversation with his daughter shortly before logging onto the corporate wireless LAN with his handheld to get a pre-meeting update.

"Will customers pay for services like these? Customers will not only pay, but they'll be willing to pay a premium."

In his vision, technology and relaxed regulatory policies will help carriers integrate the systems that underlie their networks, so that customers will be able to move among the different offerings without having to use a range of different devices and access methods. Carriers that fail to integrate will suffer "a slow and painful death."

As earlier, he brooked no mercy for laggards: "Today's telecom market is no place for those with single-service strategies, weak balance sheets, and an inability to adapt to regulatory or market conditions."

He boasted that Sprint's taken steps in the right direction by putting local, long distance, and wireless services under one roof and continuing to move its network from circuit- to packet-based technology.

The audience appeared to savor the bravado along with their chicken sandwiches. In some ways it resonated with the speech given earlier in the day by John Chambers, CEO of Cisco Systems Inc. (Nasdaq: CSCO), who stressed the need for carriers to embrace new concepts of service delivery (see Chambers Apologizes, Proselytizes).

But challenges abound. The changes Esrey touts call for software and hardware that hasn't been delivered. Developing what's needed will take enormous resources from suppliers that also find themselves in straitened circumstances. The cycle of telecom supply and demand is a complicated one that calls for a revival at all levels, one that may take a long time to complete.

Still, it's good to hear encouragement for keeping the faith. "I think the best is yet to come." But, he noted, it will only come to those who understand the vision of integrated access and are capable of making it happen.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
dljvjbsl 12/4/2012 | 10:18:01 PM
re: Esrey Talks Tough, Touts Future At last thee is talk about customers paying for services they find valuable rather than the latest 40G whatever. Technology is like music. it is not about expertise. it is not about grand artistic or engineering concepts. Music is about putting paying bumbs in the concert hall seats. Technology is about users using services and paying for them.

This may be considered to be an obvious truism but it was only a year ago that technology analysts were eschewing applications in favor of infrastructure. I can recall an analyst describing with a smirk applications were not fiber optic networking where all the money was. Remember the idea that infrastructure was the best strategy because infrastructure was needed for any application. Well not all types of infrastructure are needed for the types of application that people will pay for. The applications described by the Sprint CEO were typical in that they emphasized high connectivity and low latency over high bandwidth requirements. Massive bandwidth in the backbone and access is that least important thing for these applications.
Fiber Lord 12/4/2012 | 10:18:01 PM
re: Esrey Talks Tough, Touts Future "The key to success, he contends, will be the ability to deliver "total access solutions" that let business and residential subscribers connect 24/7 to a number of services. And he gave a futuristic example, in which a man maintains a voice call with his college-student daughter while sending messages to his colleagues, riding in the car, and locating the nearest gas stations online [ed. note: presumably without running down any pedestrians]. Arriving at work, he ends the conversation with his daughter shortly before logging onto the corporate wireless LAN with his handheld to get a pre-meeting update."

...and this guy is going to drive on the same highway I am on??? With ludicrous visions like this it is no wonder the industry is in such bad shape.
alcaseltzer 12/4/2012 | 10:17:55 PM
re: Esrey Talks Tough, Touts Future Don't worry...none of these "visionaries" have delivered on such pipe-dreams yet - they aren't about to start any time soon...
willywilson 12/4/2012 | 10:17:52 PM
re: Esrey Talks Tough, Touts Future "The key to success, he contends, will be the ability to deliver "total access solutions" that let business and residential subscribers connect 24/7 to a number of services. And he gave a futuristic example, in which a man maintains a voice call with his college-student daughter while sending messages to his colleagues, riding in the car, and locating the nearest gas stations online [ed. note: presumably without running down any pedestrians]. Arriving at work, he ends the conversation with his daughter shortly before logging onto the corporate wireless LAN with his handheld to get a pre-meeting update."

====================

This from the CEO of the same Sprint that lied through its teeth about the ION network, and will spend the summer trying to get wireless customers to buy a pike in a poke known as CDMA 2000 1XRTT, which doesn't work.

Earth to Bill Esrey: If the s*** doesn't work, people won't buy it.
HeavyDuty 12/4/2012 | 10:17:45 PM
re: Esrey Talks Tough, Touts Future Bill talks of a person in a car doing everything but paying attention to the road; dead people don't pay a premium for their telecom services. Come to think of it, neither does this live person!

Visions of people paying many hard earned dollars for 4th generation wireless services when 3rd gen of same is still a pipe-dream could be ahead of his time, or nuts; you choose.

Even if I considered ponying up nearly a thousand dollars (I'm won't), I still can't get a vendor (especially my ILEC) to guarantee viable BRI (two pair/EU style), or PRI at an E1 rate to my home.

That's what this customer wants, and I want to maximize the value I get from the connectivity, not the profit margin of a vendor!!!

Bill's day-dreamin' will give customers nightmares (just like another big-cheese named Bill)!
voyeur 12/4/2012 | 10:17:44 PM
re: Esrey Talks Tough, Touts Future "This from the CEO of the same Sprint that lied through its teeth about the ION network, and will spend the summer trying to get wireless customers to buy a pike in a poke known as CDMA 2000 1XRTT, which doesn't work.

Earth to Bill Esrey: If the s*** doesn't work, people won't buy it."

-------------------
Considering Sprint hasn't rolled out 1XRTT yet, how can you say it doesn't work? If you are talking about the current network, I can understand your views (lots of dead zones, etc.), but give the guy a break. These speeches are pep talks and vision statements, so you should expect this stuff. What do you want him to say, "Business stinks and we are going no where?" That kind of talk will land him in court.

Concerning 1XRTT, any one out there using it willing to give it a review? Korea or Verizon Wireless, especially. How's the throughput and service? I, for one, am looking forward actual wireless web, instead of what is available now. I wouldn't picture using it the way Esrey envisions, but I am sure there are better uses.
Fiber Lord 12/4/2012 | 10:17:41 PM
re: Esrey Talks Tough, Touts Future " Men of vision have lousy eyesight"-Unknown author
rjmcmahon 12/4/2012 | 10:17:40 PM
re: Esrey Talks Tough, Touts Future That's what this customer wants, and I want to maximize the value I get from the connectivity, not the profit margin of a vendor!!!
___________________

Exactly. A car metaphor applies in that it reveals that consumers require the freedoms of time and space, in other words, time of departure and choice of end destination.

A more important benefit of a next gen network is to reduce the need for the car by reducing the number of commutes.
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