The end of something

Overlooked somewhat in the news about the telecom service provider behemoths spending tens of billions of dollars to become even more colossal is how it all could dramatically alter the long-term business prospects of network technology developers--particularly those that already have a difficult time breaking into the big-carrier leagues because of their relative size.

This is not meant to lament the death of entrepreneurialism in telecom. Entrepreneurs must adapt to their environments, so if being able to compete in a telecom sector with fewer, larger carriers as sales targets means growing larger, that's what they must do. (For better or worse, one of the possible outcomes of carrier combinations like SBC/AT&T could be more vendor rollups, this time for reasons of competitive ability as much as economic reality.) What it is, however, is a question about the even more complex and labyrinthine sales, testing and approval processes for new technology and equipment that could result from such a large-scale merger.

One of the results of a mega-carrier tie-up, for example, is likely to be force reductions across all sectors of the combined company. Set aside for a moment the various other implications that kind of personnel cut has for the telecom industry and think about how it could trip up the hundreds of technology adoption and integration projects in progress within the carriers in question. Not only does all forward motion probably stop--or at least slow way down--once the merger intention is announced, what's more, the personnel dismissals and departures that result once the merger is finalized also mean that many technology developers must start all over again with their pitches to the resulting carrier, as departments within the combined company get realigned and the people they were talking to at the company leave, change or get stripped of their decision-making ability.

Many technology vendors put a brave face on the carrier mega-merger because they either already work with the carriers doing the merging or would like to at some point. They talk about the possibilities that are created--especially those vendors whose technology somehow fits into the integration of networks and disparate network elements. But you have to think that behind the scenes, even those vendors are quaking about how much more difficult their approaches to the combined carrier entity are going to be--or, more specifically, how that multimillion-dollar contract they've been working on closing for eight months just went out the window.

Much of the talk in the wake of announcements of large carrier merger intentions surrounds what it will mean for the end customer--the telecom consumer who either benefits from the price breaks driven by economies of scale or ends up having fewer options offered by fewer competitors for more money. What should also be carefully considered is how mergers like this potentially threaten the cycles of technology innovation that make all of those services possible.

E-mail me at jmeyers@primediabusiness.com.