A tale of two trade shows (with apologies to Charles Dickens)

When I attended two recent tradeshows--VON in Boston, the World Series Championship City (and that’s really hard for a native New Yorker and lifetime Yankees fan to even imagine) and CompTel/ASCENT, rescheduled to Orlando after being hurricaned out in Miami (in September)--I really expected to see a major contrast. I expected that VON would be the future, the hope of the net heads and CompTel/ASCENT would be the home of the beleaguered competitive providers. Were my preconceived notions ever wrong.

Other than the significant difference in attendance--more than 5000 in Boston and somewhat more than 2000 in Orlando--one might have been hard pressed to find any other difference. VoIP as the driver of the industry emerged as the common ground between these two dissimilar expectations. Except for the exogenous “outside the show” competitions - the Red Sox vs. Yankees (in Boston) as opposed to Bush vs. Kerry (in Orlando)--the common theme of how VoIP is changing everything was all encompassing.

VON is built, or some pundits might say created, upon VoIP. CompTel/ASCENT is the home of the competitive telecommunications industry; certainly so since before the Telecom Act of 1996. The realm of the data-based Internet vs. the realm of the post-Telecom Reform entrepreneur investing in a government mandate for competition in the industry. Both battered by the crash of the bubble, both surviving to build for another day.

VoIP is now also the dominant theme of the new competitive industry. But despite the common underpinning, the conferences did have a different tone, tenor and focus. VON focused on the “future is now,” while Comptel/Ascent focused on “morphing to survive”--growth vs. consolidation to compete successfully. And both certainly had more than their fair share of discussion and positioning regarding the faces of future regulation, legislation and industry economics.

At VON, the two key themes were the need for regulatory certainty and reform and the presence of several platform vendors (hardware and software). At CompTel/ASCENT, the themes were the broad-based belief that VoIP is replacing UNE-P/UNE-L for competitive service providers and the growing acceptance that size does matter.

In Boston, FCC Chairman Michael Powell (who I believe will continue to be chairman for at least part of Bush 43 Round 2 to move his industry deregulation agenda forward), voiced a strong resolve to set regulatory policy that will not stifle recovery of the industry and the deployment of broadband; and to not have a new industry burdened by the rules of the past, stifling innovation and investment. Early in this policy roadmap will be the FCC declaring that VoIP is inherently interstate, in nature and the FCC has jurisdiction (maybe even at the Nov. 9 FCC meeting, by the time you read this). Sen. Sununu also stated his resolve to reintroduce his narrow telecom legislation to free investment. Overall, a theme that public policy is moving in a direction to stimulate recovery and growth; but also recognizing the procrustean jumble of charges, taxes and public safety.

The large presence of platform vendors such as Microsoft, Intel and others is indicative of the fact that the century-old proprietary telecom industry is finally being captured by open, standards-based technology. And this may signal another industry sea-change we will be discussing, investing and profiting from in the next page of our history.

In Orlando, I frequently thought I was still in Boston, as VoIP was everywhere--in every presentation, every booth and on the tongues of all attendees. But a cautionary note about the VoIP transformation of the competitive telecom industry: The industry needs to go beyond VoIP, as a technology platform, and sell value very aggressively. If not, as the early residential price wars signal strongly, price can approach zero, and commoditization doesn’t mean profit. Tying together the deregulation and profitability themes, during the CEO Forum, the need for further consolidation, both horizontal and vertical, are warranted as size will matter when competing against the large incumbents, the wireless providers and the emerging cable and power utilities (BPL).

Interestingly, all the RBOCs had presence (physical, not just IM) at VON, and three RBOCs (or divisions) were exhibitors at CompTel/ASCENT (I did not see Verizon, but I could be mistaken). Could cooperation in a maturing competitive industry become a happening--also pointing to a healthier future? It is possible, the entire industry may be realizing that pulling together to make the total industry pie resume its stagnant (if not negative) growth can mean better results for all.

Certainly there will continue to be lots of skirmishes and some major battles. But, after viewing the tales these two trade shows, overall, I am more optimistic about industry-healthy competition, battling for customers by providing better value and innovative solutions to the customer’s problems (both consumer and business), one at a time - with the winners earning healthy profits and delivering real returns for their investors.

David H. Yedwab is the Executive Vice President of The Eastern Management Group and can be reached at dyedwab@easternmanagement.com.