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The Road to the ILEC Future

The Road to the ILEC Future. Chapter 11 is where they are headed. 1. The LECs Are Dying. Unless this is understood, policy will keep them alive & bring us Japan style “permacession” 4LECs with debt of about 150 billion Revenues beginning to decline

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The Road to the ILEC Future

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  1. The Road to the ILEC Future Chapter 11 is where they are headed 1

  2. The LECs Are Dying • Unless this is understood, policy will keep them alive & bring us Japan style “permacession” • 4LECs with debt of about 150 billion • Revenues beginning to decline • Data services not profitable ($ from one voice minute = $ from seven data minutes) • Profitable Voice services being cannibalized by IP technologies • Such technologies do for a penny what it costs the LECs a dollar to provide 2

  3. LECs have no money for BBand • They cannot compete because they (1985-95) made wrong tech choices and chasing earnings acquired huge debt • With revenues tipping downward and demands for payment on debt still there they slash capex. • For really good background see http://www.nytimes.com/2002/06/09/magazine/09EARNINGS.html http://www.nytimes.com/2002/06/09/magazine/09COMPENSATION.html

  4. Perfect Storm • Current trends will drive them into losses within a year - Qwest will be in Chapt 11 by then. • The second part of the storm about to hit • Enterprise voice is going to exit the PSTN • SIP, other VoIP at critical Mass • Result will be accelerating collapse • Scenario’s references to ILECs stranded investment in dot com services compared to these is but a small perturbation • A symptom of bell headedness best understood in the NY Times Magazine references

  5. The Industry is Dead • Given luck and sane policy for 3 to 5 years • Given current direction (incenting the LECs to build BB ie bail them out) for 10 to 20 years • Think ‘permacession’, think Japan’s banks • Broadband is not a speed of service • It is a strand of fiber under the control of the homeowner or businessman to a neutral point of service interconnection in the PSTN • users will own as assets the future telecom networks....where necessary they will outsource their operation to the left over husks of the reorganized phone companies

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