Panelists disagree on telecom recovery timeframe

The telecommunications industry will begin to recover in mid-2003 at best, said Joseph Kraemer, president of the Law and Economics Consulting Group (LECG), during a panel discussion on telecommunications competition hosted by the New Millennium Research Council in Washington, D.C. Thursday.

Kraemer based his forecast on a study published recently by LECG which paints a somber picture of the telecommunications industry future.

The telecom industry’s rebound will trail that of the overall U.S. economy, Kraemer said. Estimates have placed the economy’s return to growth at late next year, so Kraemer’s prediction for the telecom sector adds a few quarters to that time frame. However, he added that some experts are saying the telecom recovery will come much later, perhaps not until 2004 or 2005.

However, other speakers at Thursday’s panel disagreed with Kraemer’s assessment.

The telecommunications industry will be on its way to recovery by the middle of next year, said Philip Richards, a senior analyst with Insight Research Corp. “I don’t think that industry was that hard hit,” he said.

Another panelist, Arlen Communications Inc. president Gary Arlen, said he believed that skies would brighten for telecom companies by the fourth quarter of next year. It’s a difficult prediction to make, Arlen added, since recovery is dependent on “so many wild cards.” He called Kraemer’s 2003 prediction “conservative, but I don’t see anything (happening) before this time next year.”

Until recovery occurs, there will be consolidation in the market as struggling companies fold and the survivors, comprised of aggressive and well-managed businesses, take advantage of new customer opportunities, Kraemer said.

While the telecom industry’s rebound will be largely caused by improvements in the overall economy, sustained growth will be reached after that as demand for telecom services grows, he said. This contrasts with the late 1990s, which the report characterizes as dominated by “supply push,” resulting in network capacity that far outweighed demand.

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