Telecom Business keynoters gaze into crystal ball

In a rapid-fire succession of keynote addresses, U.S. telecommunications and networking executives last month opened Telecom Business Expo in New York City with a mix of market predictions, current issues and good old-fashioned sales pitches.

Bill Schrader, PSINet Inc.’s chairman and chief executive officer, was outspoken in his assessment of the market and his projections for its future.

As a major ISP with its own fibre-based networking resources, PSINet will continue its overseas forays, pushing Web hosting and virtual private network (VPN) services, beefing up its global distribution channel, buying or leasing fibre-optic infrastructure, and expanding its worldwide hosting centres, according to Schrader.

Schrader predicted that within the next four years, 80 per cent of voice traffic will be carried over IP networks, which he claimed will consume 80 per cent of the available spectrum.

Other 80-per-cent phenomena will include the portion of non- Fortune 1,000 businesses with a phone, fax machine, and computer that will be on the Internet — totalling about 40 million; and the percentage of global GDP (gross domestic product) that will be dependent on IP networks.

Countering some predictions of consolidation in the ranks of ISPs, Schrader expects the number to rise from about 12,000 this year to about 50,000 in four years, by which time he expects flat-rate pricing to predominate.

His crystal ball also tuned in social and political futures. While he predicted that old-guard carrier companies would be forced to write-off at least $500 billion of outmoded facilities, and would lay off hundreds of thousands of workers, he predicted that Internet companies would take up the employment slack, although at lower salaries bolstered by stock options.

He also predicted the demise of the universal service fund, with Internet access to under-served areas supplied by schools and libraries.

The political landscape will include 80 of the world’s countries permitting strong encryption, and 80 per cent of countries with deregulated telecommunications industries, tax-free Internet trade zones, legalized Internet gambling and (adult) pornography, as well as 80-per-cent international support of a global uniform commercial code, according to Schrader.

Robert Annunziata, CEO of U.S. telecom carrier Global Crossing Ltd. spoke of his company’s recent acquisition of Frontier Communications as a conduit to the consumer market. Going forward, he said, Global Crossing will offer a mix of carrier services for other carriers, and business-to-business retail services, with an emphasis on fixed cost pricing.

Emphasizing his company’s international presence, Annunziata said Global Crossing soon will seek to provide communications services commonly offered in the U.S. market to customers abroad. Until recently, he said, cross-border legal and regulatory restrictions, particularly in Europe, made such moves impractical.

Of future prospects for competition in the telecommunications market, Annunziata predicted that voice service would become a baseline service among a range of broadband multimedia networking services, and would often be a loss-leader.

Tom Lord, co-founder, CFO, and executive vice-president of Allegiance Telecom Inc., rallied attendees to the opportunities for competition with the traditional telephone companies, and focused on the network services market for small business.

While he described players in the competitive local exchange carrier (CLEC), and ISP category as more nimble than the regional Bell operating companies in the United States, he stressed that their infrastructure and personnel positioned them well to both compete with and partner with content-oriented Internet companies such as Yahoo.

Lord noted that Allegiance’s strategy calls for partnerships with content providers.

Joe Hirko, president and CEO of Enron Communications Inc. discussed the trend toward commoditization of bandwidth.

The core issue, according to Hirko, is the need for consistent and defined quality of service. With established quality-of-service standards, a market for bandwidth trading that would permit quick, potentially short-term bandwidth acquisitions by providers looking to reach more customers with a flexible set of services, according to Hirko.

He predicting a commodity market for bandwidth in the next two years, one with turnaround times for deals of as little as 20 minutes. Consumers could expect savings of 30 per cent to 70 per cent, along with more flexible offerings, he added.

Underpinning such a market will be, in addition to quality-of-service standards, standardized agreements, and benchmarks, according to Hirko.

Citing precedents in the gas and electric industries, Hirko banged the drum for the concept of bandwidth trading, and outlined his company’s recently announced pilot programs for bandwidth brokering, through which he expects to see the first trades by year-end.

Paul Gudonis, president of GTE Internetworking, sketched the characteristics of next-generation networks, which he said will be driven by on-line services and communities, infotainment, electronic commerce, and specialized business communities and micro-markets.

With regulatory barriers dropping, and traditional market definitions blurring, he predicted the emergence of a wide range of IP-based services from a broad assortment of providers, including computer vendors, software companies, and others.

Referring to the freewheeling competition among media, communications and utilities companies to provide services to home consumers, he cited the need for home networking products to bridge the many potential gaps.

Positioning GTE Internetworking as an infrastructure provider, at the edge of the network, he mentioned his company’s ongoing installation of mixed-function servers for such capabilities as IP fax, e-mail, Internet telephony, and unified messaging.

Cisco Systems Inc. vice-president Larry Lang told attendees that the network market is fast coming to resemble the computer systems market.

He likened the network infrastructure to a PC or other system’s hardware, VPNs to operating systems, and services to applications.

He warned telecommunications veterans against viewing packet-switching technology as simply a conduit for better voice services, but to anticipate a new business model that blends services from a variety of sources.

Rounding out the keynote-athon, Nina Aversano, president of Lucent Technologies Inc.’s North American global service provider unit, touted her company’s trove of technical innovation in the form of the old Bell Labs, and hawked Lucent’s telecommunications services.