ENJOY THE RIDE SAFELY

Over the past two years, investors have lost trillions of dollars in publicly traded telecom company equities. That's in addition to all of the unrecoverable debt and hidden carnage of private company investments written off by once-giddy venture capitalists. The ride down has been so steep and lasted so long that most of us have forgotten how much fun it was on the way up.

Here's how it went: Worldwide deregulation opened the floodgates of competitive service offerings. Potentially disruptive technologies such as packet switching, broadband wireless and fiber optics promised to allow the new start-ups to wallop the lumbering incumbents. The new business models were all about pops, clicks and eyeballs. The Internet was going to change the world, and telecom was going to fuel it. Money poured in, and valuations skyrocketed. Aggressive investment bankers and newly empowered day traders poured it on, and everyone began to invest in momentum. Who knew how high it could go?

Then we went down. The competitive floodgates, it turned out, had opened a little too wide. New technologies weren't that easy to build or use, and the lumbering incumbents were a lot tougher than they looked. Pops, clicks and eyeballs turned out to be less important than revenues, costs and profits. The money went away, as did companies that depended on fresh capital for survival.

So here we are at the bottom, or at least close to it. And here's what I see: The world's demand for telephony will push us past 1 billion lines this year. Wireless users also will pass the one billion mark. People have to talk, and the Internet has generated huge demand for higher-capacity access infrastructure. The companies that have survived — leaner and meaner incumbents or battle-hardened usurpers — are undervalued.

New technologies have matured, and the keys to unlocking their full potential are emerging as attractive investment opportunities. Wireless IP, content and payment switches, compression, security and hybrid networks are going to make people money. Managers, investors and entrepreneurs all have remembered that valuations are driven by profits. The money never really went away. It was resting, and lower interest rates are making it go to work again.

I, for one, plan to stay on the roller coaster. But here's my advice for fellow passengers: Invest in the companies that make the technology work. No product sells itself. Find management teams that focus on profits. And, finally, be sure to ride with someone who knows how to get off before that steep decline begins.

DOSSIER TOM HUSEBY

Occupation: Managing partner of SeaPoint Ventures, a telecom venture capital firm focused on wireless and Internet infrastructure companies

Place of residence: Bellevue, Wash.

Current reading: “Rise to Rebellion” by Jeff Shaara, the first installment in a two-volume history of the American Revolution

Hobbies: Family, work and racing a 48-foot sailboat called Jeito

Favorite Web site: www.nasdaq.com and SeaPoint's portfolio company sites

Next project: Halfway through raising SeaPoint Fund 2, a $100 million venture fund that will focus on wireless IP enablers and transactional hubs