Kim outlines future after the telecom crash

DENVER--With so much doom and gloom surrounding the telecommunications industry, trying to pinpoint which business models will succeed and which won’t is critical. At today’s keynote at DSLCon by Gary Kim, president of NxGen Data Research, he detailed how the industry is reacting in light of the downturn and shakeout.

“The people with the most money to spend are the RBOCs and IXCs. They are not slashing their capital budgets,” Kim said.

The fact that those firmly established players are still spending highlights the flaws in the Telecom Act of 1996. The act has completely failed to provide a way for residential customers to get competitive services, according to Kim.

“The jury is still out as to whether or not it may be salvaged to [get] services to small- to medium-sized businesses,” Kim said. “The big enterprises have been the only ones that have benefited.”

As part of the shakeout, Kim also predicted that none of the legacy long distance carriers will be able to make it. Instead, they likely will be purchased by RBOCs or international PTTs.

“The three giants aren’t in any position to be strong going forward,” Kim said, adding that fiber operators like Broadwing are not safe either. “There are too many fibers chasing the market, and there will probably be a glut. Most fiber isn’t lit now and most likely won’t be.”

The prohibitive cost of lighting fiber in contrast to the relatively low cost of laying fiber also may be impacting service providers’ strength. With the cost of lighting fiber about 10 times the cost of laying it, most carriers will wait until the capacity is high to light more, Kim said.

And as for the future of DSL, Kim said the misnomer is that DSL is being portrayed as an industry.

“It isn’t an industry, just like T1 isn’t either,” said Kim. “DSL will be used as part of broadband,” Kim said, adding the task is to now determine what business model will work for the second wave of competitive carriers.