Are Services Worth Investment?

For incumbent telecoms, ramping up for the future would seem simple enough.

For incumbent telecoms, ramping up for the future would seem simple enough. A few boxes here, a strand of fiber there and youre raking in new revenue from a customer base clamoring for advanced services, vendors said at that U.S. Telecom Association show in Scottsdale, Ariz.

Cisco Systems was pitching its IP services, Myrio was touting its video-over-IP systems and Paseon was promoting its passive optical networking gear. But which service providers are steely enough to roll the dice on what Bart Alvarez, Paseons director of business development, calls "futureproofing" the network?

Although some operators seemed intrigued by the idea of being able to offer lucrative advanced services, there was plenty of grumbling about the uncertainty of making big capital investments, even if the potential return is high.

Arne "Skip" Haynes, incoming USTA chairman and president of Rainier Group, says the business uncertainty is compounded by the regulatory climate. Phone companies have a duty to "maintain and expand the telecom infrastructure of the U.S.," Haynes says. But in a regulatory environment that forces them to share their infrastructure with competitors, "the incentive to invest is low," he says.

"If you look at the economics of my telephone company, it costs me $105 per month to serve my customers," Haynes says. Rainier Group has both incumbent and competitive operations in rural California and Washington State. "Under line sharing, a competitor can offer high-speed Internet, voice and video over my copper loops for $7. So whos gonna pay the other $98 per month? Not this cowboy, because Ill be out of business.

"We cannot continue to be micromanaged and still compete," Haynes says. "We cannot build and maintain infrastructure with this oppressive myriad of rules."