Crystal Ball 2.0: Crazy ideas for 2010

It's that time of year again. A full economic cycle has unfolded since just last November, when I offered up "Eight Crazy Ideas" re: industry predictions. In hindsight, six of these eight ideas have played out pretty much as foreseen; the other two are still pending (or unraveling). Let's take an objective look at what has transpired and then dip our toes into the murky waters of the future, for a few new predictions for 2010.

Those crazy ideas from last year turned out, well, not to be so crazy. Two broad buckets: Yes, it has happened; No, it hasn't happened (yet). What six predictions have actually materialized?

"Barbarians at the Gate" via direct foreign investment: Yes, distressed sale of assets like high-profile North American icons such as Nortel did occur — Ericsson with LTE, Avaya barely squeaking by Siemens on Enterprise; Sprint still active on the rumor mill, with Deustche Telekom.

"Back to the Future" in media and advertising wars: Yes, we witnessed major reshuffles in this sector; re-set of the long tail investments by Google and Conde Nast, a continued flight to quality in editorial copy, consolidation of marquee mastheads like BusinessWeek with Bloomberg; transformation of total cost structures, even down to the precise manner in which paparazzi photos are purchased! Whether a Comcast and NBC combination makes sense is debatable — is this the best use of free cash flow when buildouts are not yet complete?

"Portal of Choice" turns out to be (surprise!) mobile handsets: This continued to be an all-out war, proliferation of product designs and IP addresses, accelerated app store wars — all despite a couple of sequential quarters of down sales. Plus, companies everywhere are scrambling to make all applications mobile-enabled, from car companies to traditional retailers.

"Road to the Final Four" in managed services: Yes, this prediction played out, including a few marquee cross-bracket deals such as Xerox/ACS and Dell/Perot, to go with the HP/EDS deal in the prior year. Telecom networking, technology solutions, professional services and Indian BPOs continued to consolidate aggressively within their own sector; we counted 85 announced global deals with over $250MM in transaction value in the last year in 13 "hotspot" domains.

"Pay as You Go" broadband deployment: Well, the good news is that the marginal costs of fiber-to-the-home deployment came down, making deployment more viable (witness the explosion in pilots and continued take rate and upsell enjoyed by all the majors); the bad news is that capital is still scarce, and the top line trajectory is not helping.

"Quad Play" loses its strategic luster: Not much you can do here, short-term economic necessity dominates; the cablecos have had to play their wireless hand, despite diminishing returns on churn-reduction; and doubling down on Wi-Fi is a hope shot. The TV rollout by telcos is spurring subscriber attention and retention, but also increasing the number of Prisoner's Dilemma micromarkets in which they must duke it out in the end game with cable.

Two of my predictions have not quite turned out according to design (it’s simply a matter of time), and in defense I also said some of these predictions would bleed into 2010 anyway.
“Musical Chairs” in wireless mergers: I had predicted five deals in North America, but clearly MetroPCS/Leap has not occurred, and more licensees are now in action in Canada, not less. However, Sprint is still a natural seller, and the Canadian regulators will allow the biggie “Belus” deal one day, I am sure.

“Net Neutrality” hits a new wall: Obama struck a near-term victory for the Internet (and for industry lobbyists everywhere, on both sides of the aisles), but never underestimate the full power of the telecom “deathstar.” I am old enough to remember how any operator can disguise an international call as a local call; so with advancing packet-sniffing technology and quality of service business rules and programming, what is the practical definition of net neutrality anyway?

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