Probe Prophesizes Super-Catastrophe
Earlier this week, the company released a report that says industry-driven events will culminate in a death spiral.
Of course, you might ask: Exactly how is that different from the industry catastrophe we're already in? Probe officials says we've just entered the beginning phases of the meltdown. The firm characterizes a catastrophe as a situation in which one or more of the regional Bells and large competitive carriers collapse.
Following a devastating day on the market for telecommunications service providers, the doomsday scenario may not seem so far off the mark. After AT&T Corp. (NYSE: T) and BellSouth Corp. (NYSE: BLS) reported weak and disappointing earnings results yesterday, all the big carriers saw their stock prices slide. AT&T was hit the hardest, tumbling nearly 20 percent by closing (see AT&T Results Disappoint and BellSouth Reports Q4).
The catastrophe scenario is one of five described in “Voice and Data Networks – the Next Ten Years,” a book written by Probe chief operating officer Allan Tumolilo, published in mid-2002. Now, for the first time, “the events seem to be leaning towards this scenario catching hold,” he says.
Probe in earlier years professed that only a confluence of a number of extreme external events could lead to the ruin of the industry; but today's danger, as Tumolilo sees it, is the current “industry-adrift scenario,” in which there is little development, along with stifled demand. “There is nothing on the horizon that suggests that telecom is coming back,” he contends, pointing out that many of the large-carrier business models are still seriously flawed. The incumbent carriers, especially, have enormous fixed-costs that don’t just go away when they start losing customers -- and they are very much to blame for their current straitened circumstances. “[The carriers] could have pursued some sound business models a lot earlier. They’ve thwarted a recovery in telecom.”
Other industry analysts agree that the telecom industry might be far from recovery but are wary of talking about Cretaceous-scale devastation. “I don’t think the industry is stabilized. There’s still a lot of rough sledding this year,” says Davenport & Co. LLC analyst F. Drake Johnstone. “But catastrophic?... We’re not looking at a situation where the RBOCs have negative cash flow. We’re nowhere near there.”
— Eugénie Larson, Reporter, Light Reading