Tuesday, July 02, 2002

Worldcon More than a week ago now, the story of Worldcom's unprecedented fraudulent statement of earnings began breaking. Since its inception, Worldcom's sole mission has been to grow bigger at any cost - not nearly any cost, but at any cost. Serving customers has been entirely a secondary mission, except perhaps at UUNet, the only Worldcom acquisition that seems to have survived with its mission and customer focus at least somewhat intact, likely because its former CEO, and now Worldcom CEO John Sidgmore was given a senior management position within Worldcom where he could "protect" UUNet somewhat from the inevitable degradation that all Worldcom acquisitions suffer. Worldcom was derailed by the 2000 stock market collapse that was especially brutal to telecom companies, and the US Government's decision to block the merger of Worldcom and Sprint. Stopped cold in its mission of acquisition, Worldcom's decline was inevitable because it was a company that was not structured around the fundamentals of business... such as real and sustainable profitability. A number of people I have met with describe Worldcom as "malevolent". I'm personally aware of two companies in the Broadband Wireless Internet Access industry where Worldcom's actions (which made no financial, business, or operational sense) directly caused the demise of the company. In a word, Worldcom actions were nakedly and unabashedly predatory. I think that Worldcom's demise will prove to be a catalyst, beginning a cascading "beginning of the end" of conventional telecommunications companies and before the end of this decade, the end of the Public Switched Telephone Network (PSTN). Here's my take on how the dominoes will begin tumbling: Short of a government-led Chrysler-style financial bailout (unlikely in the extreme in the Bush II era), it's inevitable that Worldcom will enter Chapter 11 bankruptcy. Stockholders will lose all value in their holdings (late update - not exactly a bold prediction; latest share price is $0.06). Creditors will receive pennies on the dollar, if that. Customers will experience "creeping unreliability". Worldcom's fraud will cause banks to reconsider and increasinly reject bridge loans to struggling telecom companies such as Qwest because they simply cannot assess, with any degree of accuracy, the substance of any company's true financial status, especially any company such as Worldcom and Enron, that was audited by Arthur Anderson. Lack of working capital to service bonds and loans will cause large telecom companies such as Qwest to default and declare Chapter 11 bankruptcy. Entering Chapter 11 bankruptcy, telecom companies will shed massive numbers of highly-skilled personnel that are critical to maintaining the Public Switched Telephone Network (PSTN); positions such as on-call fiber-splicer, etc. will be eliminated. Lack of such personnel will begin to significantly erode reliability and mean-time-to-repair (MTTR). At first this will be merely inconvenient but will rapidly trend towards chronic. From a lack of maintence, regular updates and upgrades, and skilled personnel, the wireline, copper-based, circuit-switched PSTN will become increasingly unreliable, and it will eventually be recognized as being completely cost-ineffective to maintain. Incumbent Local Exchange Carriers (ILECs) will petition to be relieved of the "burden" of servicing rural areas in their territory (even with the lucrative subsidy from Universal Service Fund). Qwest may well be first in line - its service territory has the greatest percentage of rural areas of any ILEC. The reasoning for the request is that rural wireline service, provided by ILEC, is no longer needed and that reliable, cost-effective telephone service can now be offered by mobile wireless telephony companies (at higher prices for services equivalent to wireline). Quite possibly, government (both federal and state) will attempt to financially "prop up" telecom companies with incencitives, tax breaks, subsidies, etc. If there is government money to be handed out, new companies will quickly emerge to say (but not necessarily do) what is required to get a piece of the government lagresse. To "pick up the pieces", Broadband Wireless Internet Access technology will finally begin to be generally recognized as a cost-effective, quick-to-deploy, quality and reliability more-than-good-enough solution to widespread deployment of broadband services and incidental telephony services such as Vonage. This scenario has been coreographed in excruciating, agonizing detail - who, why, when, etc. by the inimitable Gordon Cook beginning in the April, 2002 issue of his excellent Cook Report On Internet. If your business stands to be materially affected by your various telecom services simply going down and staying down, you're simply foolish if you don't immediately order up the April, May, June/July, and August/September issues at a minimum! Admittedly, and by design, these issues are slow slogging, but the information is there. By the time you get through these issues, you'll have a good idea of what happened, why it happened, and at least some clue of what to do about it. That will put you ahead of 98% of the rest of the pack. Disclaimer - I had a hand in the June/July 2002 issue, my contributions to same soon to be posted. Update 7/5/2002 It's nearly laughable to see some of the claims being made in the ensuing scramble after WorldCon's announcement. Sidgmore's claim that "the current team had nothing to do with this"?!?!?!?! Sidgmore title immediately previous to becoming CEO was Chief Operating Officer of Worldcom!!! There have been some statements made that Sidgmore wasn't "in the loop" for the last year or so, he had wanted to resign after a merger that he championed was killed by Ebbers, and then Ebbers wouldn't release him from his contract, so Sidgmore just didn't show up for work much. Sorry... you have the title, you collect the paycheck, you bear the burden that the title entails- fiduciary responsibility and all that entails. That national security is at risk if Worldcom collapses... affected, perhaps. The lucrative contracts that Worldcom holds (at the moment...) would surely be snapped up by many qualified entities such as IBM, EDS, even AT&T with its myriad challenges. For that matter, with all the dark fiber running to all corners of the nation, the General Services Administration ought to consider buying dark fiber outright from some of the many bankrupt fiber companies and begin running its OWN network - again. Update 7/10/2002 I've seen it mentioned in a number of places that Dotcom Scoop's coverage of the Worldcom saga is the best going. 11:45:59 AM

Back At The Keyboard Ahhh... the comforts of home - my familiar bed, bandwidth, beloved cat, bandwidth, a customized computer environment, email archives, and, of course, bandwidth. My family and I returned from Boston late Sunday night, so of course we spent most of Monday re-acclimating, catching up on sleep, and tending to the most urgent tasks. Today is catch up on not-quite-so-urgent emails, weblog, all to the strains of sledgehammers disassembling (and eventually replacing) our 35 year old, way-too-weatherbeaten deck just outside my writing office. My well-padded hearing protectors attenuate the worst of it, but the "priority interrupt" of unexpected vibrations and shocks (this is earthquake country) is distracting... not to mention the sight of sunlight where it's never been been before (my office is on the ground floor, and the second-story deck extends... or extended (and will again) from the second story above my office window. WCA 2002 - A Success - I'll write more about WCA 2002 at length as I dig out my notes and info I brought back. In general, it was a highly successful conference. Measured as a purely commercial event (which it isn't), attendance and exhibitors were down from last year. From my reading, the only conferences that can honestly report no such declines are the ones that are brand new and didn't occur last year. But the WCA Annual Conferences aren't purely commercial events, and including that, WCA 2002 was a success. During the first days of WCA 2002, the Worldcom, or as it's more commonly known now, Worldcon scandal began breaking, with overtones for the Broadband Wireless Internet Access industry. Motorola Canopy "Debuts" - Despite having publicly unveiled it in March 2002 at WISPCon Spring 2002, Motorola apparently chose WCA 2002 to be the official debut of their Canopy product line. Canopy's feature set and price/performance is indeed impressive, and as I predicted, the Motorola brand name is proving to be a potent attention-getter in the mainstream press, despite equivalent products (by lesser-known vendors) having been available for some time.  Again, more later. Hotspots Needed! - After WCA 2002 (which ended Thursday), my family and I packed up and headed for a couple of days exploring the Southern Coast of Maine. The area is delightful, if a bit "touristy". Because I don't currently have a national dialup account, I didn't try to do dialup from our motel room. But it was amazing to me that in our travels, I saw only one Internet cafe'. I would have happily plunked down $10 (or, truth be told, more) for a couple of hours of high-speed Internet access to get my "fix". I could have easily accessed my email via web and checked in at the sites I monitor for relevant news. The area we visited, Portsmouth to Kennebunkport, Maine, is serious "tourist country". Almost all the motels were small and independently owned, catering to the summer tourist crowd. Generally, few of them would be interested in investing in high-speed Internet service (though I think it would be an interesting and profitable business to market same to the more progressive and upscale motels). In some areas, there are regular trolly services connecting the various points of interest - bigger motels, downtowns, beaches, etc. It seems to me like an Internet cafe' would be a major draw to the teens brought along on family vacations, not to mention the adults wanting to check on their investments, email, etc. (And yes, I'm sensitive to the argument that one of the main reasons for a vacation is to get away from things such as email and the web...) Some Catching Up: June 25, 2002 - Cell Phones Rebuild Afghanistan - The cell phone has become critical to the rebuilding of Afghanistan. Until the April 2002 start of Afghan Wireless, there were only 12,000 functioning telephones in the city of Kabul, where the population approaches two million. Now wireless service, begun in Kabul and extending to major cities across the country, is connecting government officials to each other and their counterparts around the world. The fixed wireline network is so damaged that the government has decided not to attempt repairs. Instead, Afghanistan will become an all-wireless nation. (Source: Associated Press) - Thanks for the pointer to the invaluable Dewayne-Net mailing list hosted by Dewayne Hendricks.   10:35:10 AM

© Copyright 2002 Steve Stroh.