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| Monday, 14 May 2007 | |
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Whatever happened to competition in the telecom sector? It was the big idea, gestated in the 1980s and coming soon to a market near you in the 1990s. Today it seems like a rather tired and almost theoretical notion.
For many, network competition all but died with the dot.com implosion. This struck a mortal blow at the flakey financing models by which alternative carriers attempted to leverage their way into the market on the back of misfiring unbundling regulations and near-priapic funding frenzies. Even today you get one-time DSL moguls complaining of the VCs and the banks that “they lied to us.” While hard to love the financiers, they were not the only ones doing the lying ca.2001. More importantly (if you disregard the ‘car-crash’ fascination over what happens to putative DSL millionaires when they get turfed out of their Malibu mansions, bought with the backing of share options and HP), head-to-head network competition now looks like an illusion. The great names of network-based competition have vanished. In the case of the early adopters, New Zealand has endured endless legal turmoil; groundbreakers like Mercury in the UK or MCI in the USA have disappeared. Gone and lost forever, as my darling Clementine might have sung. Japan is a case in point. Bureaucratically manufactured head-to-head network competition has descended into farce. An old state-owned monopolistic system of domestic (NTT) and international (KDD) operating was spatch-cocked into liberalisation via carefully vetted mini-NTTs and mini-KDDs. Staff were even transferred from the old monopolies to ensure that the alternative carriers did not develop any cultural abnormalities. The vestiges of these companies are now largely focused on the mobile sector. Not only did Japan fail to deliver significant competition beyond the iconic Tokyo-Osaka-Nagoya backbone, it also failed to create a credible global player. The entire Japanese telecom sector looks like a Kafka-sequel civil service nightmare more than 20 years after it was ‘liberalised’. In a global and converging telecom market there is competition of course. Wireless is eating away at voice revenues. Skype and Vonage are doing their bit to cut the cost of calling, albeit while setting back the cause of call quality by almost a century. And then voice over Wi-Fi is nibbling at the margins of wireless network operators. Tomorrow we look at the possibility of collusion between the private equity investment sector and those seeking a return on long-standing (and long-suffering) portfolios of telecom investment. Just why is it that they back old-style network carriers as readily as ‘flash-in-the-pan’ new technology companies? Jim Chalmers |
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