COMPTEL: Economic issues looming
ORLANDO-- The recent U.S. economic crisis hasn’t slowed CLEC business models significantly yet, but many expect it will and soon. According to service providers and industry experts at the Comptel show, some slowdown appears inevitable – the question is, how long and how deep will it be?
“So far, we’ve seen minimal impact,” said Roland Thornton, executive vice president for wholesale markets at Qwest Communications. “I anticipate we are going to see an impact, it’s obviously coming, but the leading indicators haven’t kick in yet.”
For one thing, financial services companies, who are huge consumers of voice and data services, will be cutting back, Thornton said. “We will try to anticipate that and look at what other areas we can broaden to offset the financial sector.”
One bright spot, said Current Analysis analyst Brian Washburn, is that most CLECs did major refinancing in the post-telecom bubble period and don’t have large debt issues looming for the next few years, a fact that will help them ride out the current credit crunch. Level 3 Communications does have major debt coming due in 2010, Washburn said, “but if we are still in a deep recession two years from now, there will be bigger issues to worry about.”
At Qwest, for example, “we are generating $1.6 billion in cash,” Thornton said, and the network buildout is more than adequate for the near future, “so we are in a position to ride it out.”
Deltacom, which announced a $20 million investment to upgrade its Southeast U.S. network, has seen some negative impact on its business customers, said CEO Randall Curran. A growing number customers are cutting back the services they order, as they close down sites or shrink their own business. “We do have businesses being negatively affected,” Curran said. “We have seen a moderate increase in churn regarding the number of sites – companies may be cutting back from three to two. But we haven’t seen an overall increase in churn. We are seeing the ability to get new customers on the retail side go down, even though the bandwidth consumption continues to go up. In some ways, this is the best time to sell telecom services, because our customers are under contracts, and the variability isn’t nearly as great for us as for others. But it’s harder to sign contracts – no one wants to be the one who signed a long-term deal.”
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