Not so fast

Consolidation within the U.S. telecom industry is inevitable and even necessary--but that doesn't mean consumers have to like it. If there is one appealing aspect to seeing our telecom service providers morph into super-carriers, it is that they are finally beginning to resemble--or resembling once more--other service providers around the globe.

This has the potential to help the U.S. regain its global stature as a technology leader--or to accomplish just the opposite.

SBC Communications Chairman and CEO Edward Whitacre insists the SBC/AT&T merger will restore the luster to U.S. leadership in broadband, but there are many who believe that diminished competition doesn't play to stronger service profiles.

In talking with U.S.-based hardware and software vendors about their foreign escapades, however, I've been surprised by how a different competitive view is sometimes a catalyst for positive change.

In Europe, for example, major telecom companies are moving ahead of U.S. players to offer video-on-demand and other advanced entertainment services in part because they don't have the pressure of cable competitors.

"Europeans have less cable penetration, so the telecom service providers are competing with satellite services, and it is easier to gain market share with an innovative, multi-channel service," says TeleChoice analyst Patrick Hurley.

Without intense cable competition, European carriers aren't as worried that they'll lose basic voice service to voice over Internet protocol, says Sanjay Castelino of Motive, which makes broadband service management systems. His company has been successful in selling it software to major players such as BT, which is bundling it into broadband service offerings to help avoid the kind of customer service nightmare that can destroy credibility and eliminate profits.

For many European carriers, however, rolling out a service quickly becomes important because of the top-line growth capability, he adds.

"Europe has become a testbed for services," says Castelino. "They are willing to use various stopgap measures to enable the technology. But they are in a very different situation from U.S. carriers. In the U.S., if [telco video] is not done right, no one is going to switch. It would be like the cable company offering phone service and making you go through 2.5 calls to get it set up. Also, the Europeans aren't under pressure for VoIP, so looking at video as next alternative to grow their revenue."

By contrast, U.S. carriers "are under more pressure to get it right" or risk losing customers to the worthy competition, he says.

If the telecom industry gets swamped by merger fever, and forgets what being bigger and better is supposed to be about, that competition may reap the rewards.

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