Inquiring minds want to know

One of the most interesting aspects of being a "go-to-guy" for the press on industry topics is cataloging what is on their minds. This is always a challenge because:

• The question they are asking isn’t always the one they want answered. Sometimes they are really looking for an answer to the question they did not ask.

• The difference between commentary on breaking news and longer-term trends has become a juggling act as time becomes compressed and everything seems to become short-term.

• Context is always important. This means both framing the context of a specific answer so that I sound like I am knowledgeable and providing press bytes of substance that will stand on their own given the lack of ability to predict where or how anything one says gets reported--something I am very sensitive to after years of sitting on the other side of the phone.

With the above as a primer, this seems like a great point in time to give all of you who are not members of the media (99.99999% of the readers of this space) a glimpse at the past few weeks' top three items that inquiring minds want to know--and how this particular talking head views things.

1. Is the FCC going to regulate voice- over-IP? The short answer is that they will, because they abhor a vacuum and there is immense pressure on them to put the lid on what many feel is going to be a Pandora's Box. This leads to a few follow-ups about what will they do and how successful they will be. History says that this subject has the look and feel of the infamous Computer Inquiries--i.e., hold on for a long period of rules being written, challenged and then thrown out by the courts. If you are a member of the FCC Bar, you have won the lottery. Your young children are assured of going to college without tuition assistance no matter where they wish to go and no matter what age they are right now. Meanwhile, VoIP will gobble up vast numbers of subscribers despite its warts--quality, security, E-911, legal intercept, etc.--and constraints. Businessmen pursuing market share and profits are not going to sit around and wait. The pending out-of-franchise competition between ILECs, CLECs, IXCs and cable companies will be the driver, along with consumers looking for the best value.

2. Who is going to end up with AT&T Wireless? With a tip of the hat to Martha Stewart's trial as context, I have no insider information on this. Logic says that Vodafone should get out of its deal with Verizon and acquire AT&T Wireless. However, logic and the wireless industry are an oxymoron. Think about the history here. In the early 1980s, MCI concluded that the market for mobility is a niche and just for high-end users in their cars. It sold its licenses to a small cable operator in Seattle by the name of McCaw. AT&T, reaching the same conclusion as MCI (one wonders if they spoke to the same pundits), gave their mobility assets to the Bell companies at divestiture. Fast-forward a few years, and we see AT&T making Craig McCaw a billionaire in order to get into the wireless business while MCI fails miserably to catch the wave they missed. In fact, MCI (and then WorldCom and now MCI again) still have no answer for the missing link. What happens next is that AT&T inexplicably spins out the wireless business because it does not fit then-CEO Michael Armstrong's vision. As was stated, logic says these assets will end up with Vodafone, but these assets seem to be star-struck. Reality is that a healthy MCI or AT&T should be the owners (see above and below), because the missing links may be the most critical.

3. Who is going to win in the battle between wireless and wireline? This is the question that is my current favorite. The answer is that in a converging and bundled world, it is actually the wrong question. Owning access does not mean owning customers. Owning the servers that provide value-added services is the way to own customers. Hence, being the wired or wireless access provider does not assure victory. The mantra of this space for years has been that controlling customers' identities, locations (presence) and trust while online begets victory. Thus, a wireline ILEC using 802.11x technologies, SIP and softswitches in conjunction with out-of-franchise wired carriers is now, as the Southwest Airlines commercial says, "free to move about the country." Through roaming, Wi-Fi and agreements with cable companies, wireless carriers can mimic the bundles, as can cable companies and any number of potential entrants who can compete without owning any outside plant. IXCs need to be putting all of the puzzle pieces together for their own bundles, or perish. This dire statement stems from a residential-centric view of the market; however, real convergence in the value-added end of the communications market is the blurring of the boundaries between residential and business. Indeed, it can be argued that the growth of IP VPN is going to be driven by the need for remote access (wired and, increasingly, broadband wireless) and not just from traditional B2B/HQ-to-the-boonies needs.

My answer to the question above about who will win keeps coming up Microsoft, eBay, the credit card companies or a revitalized AOL, if they can wake up and smell the roses in time. However, that is just personal prejudice and conjecture based on my current assessment of who understands how important owning my profile happens to be. Reality is that this is the ILECs' market to lose. Thus far they are showing every indication that they are capable of losing and doing so quite fast, but we are still very early in the game and there is ample time to recover. Complicating all of this, of course, is a hopelessly obsolete regulatory regime, a Congress that is unwilling to own up to its responsibilities, general business uncertainty, lingering technology issues and ILEC schizophrenia. The latter is not insubstantial as a concern since the ILECs (including Sprint as a hybrid, for the sake of discussion), outside of AT&T and Nextel, own the wireless industry in the U.S. What is a self-respecting RBOC CEO supposed to invest in? To say that betting the wrong way could be hazardous to one's health would be a gross understatement.

What the top three have in common is that, in reality, they are all the same two-part question. That is: "What are the services that will drive top line growth and who is likely to dominate them?" Inquiring minds want to know! They are just going to have to wait and see who can execute and who gets executed. One thing you can take to the bank: The next 12 to 18 months will go a very long way toward determining winners and losers for the next decade and possibly beyond. As Robert Duvall famously intoned in “Apocalypse Now,” "I love the smell of napalm in the morning..."

Peter Bernstein is President of Infonautics Consulting Inc. He can be reached at pb111451@optonline.net.