Tech integration sparks vendor consolidation: Capellas

The emergence of vertical integration of voice, data and video over Internet Protocol (IP) is driving consolidation efforts among telecommunications and technology companies, according to Michael Capellas, president and CEO of telecom giant MCI Inc.

The capabilities around IP technology will compel big telecom players to take the road of consolidation to provide customers with end-to-end, seamless applications, said Capellas yesterday. He was among the guest speakers at the recent 2005 Telecom Summit held at the Toronto Congress Centre in Mississauga, Ont.

“The customer is demanding vertical integration,” Capellas said, adding that customers no longer want to deal with multiple providers for communication services.

Long distance service, for instance, would merely be a feature on an IP network and not a product in itself, said Capellas.

Practicing what it preaches, MCI recently announced its plans to acquire New York-based Verizon Communications Inc., which the company said would pave the way for “the most advanced broadband platform in the U.S., capable of delivering next-generation multi-media services.”

Theirs are not the only corporate alliance that’s taking place in the telecom industry. SBC Communications’ US$16 billion acquisition of AT&T, as well as Sprint and Nextel’s US$36 billion merger, were also among the strategic partnerships inked over the last six months. In the local front, Rogers Communications recently joined the consolidation bandwagon with its purchase of telecom provider Call-Net Enterprises Inc.

“We have watched technology consolidation in hardware, software and databases. It’s a pretty natural evolution and I suspect there is more to come. I suspect you will end up with more vertically integrated players,” Capellas said.

The future of communications will be centered on the IP network, which would enable “standard building blocks” in development for application interoperability, the MCI chief said. “The ability to do plug and play of devices over wide area networks is the entire future of how we do deployment of infrastructure. This is just the way the world is going.”

Because the evolution of IP has made time and distance irrelevant, it is therefore helpful that government regulations, if any, are able to keep up with technology.

“Sometimes, making a decision and getting clear guidelines are as important as the decision itself. As long as you don’t know what is going to happen (in terms of regulation), you hold back investments,” he said.

He added that the recent ruling of the Canadian Radio-Television and Telecommunications Commission (CRTC) on Voice over IP (VoIP) provided “clarity” that allowed the players to implement their business plans with confidence.

For its part, MCI will continue to invest in the deployment of its VoIP services in Canada, Capellas said.

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