No carrier is immune to the turmoil. Yet customers can't stop buying -- they've got to go somewhere -- and a heap of money is on the table. More than one-quarter of IT budgets lies in nondiscretionary communications spending. So even as IT budgets shrink, the percentage spent on communications will rise over the next few years. Data centers are consolidating, the work force is becoming more distributed and new applications call for ever more interactivity. Communications spending must increase to keep organizations together. While unit prices for bandwidth will continue to drop, consumption will rise faster than the rate of discounting.

For the carrier survivors, success will have little to do with pricing. Strategic service providers focus on execution and don't let customers squeeze them on price. When you need a doctor, you don't look for the cheapest one in town -- you make sure your M.D. is the best M.D. for the job.

The more strategic value the service provides, the less you need to worry about price. In fact, the best questions are, "What other organizations have purchased this service, and are they happy with it?" and, ironically, "Is the carrier making money on me?" Don't go with a service on which the carrier makes little or no profit margin. When you get a price quote that's half its nearest competition, start worrying -- you're not dealing with a survivor. At best, your service will degrade; at worst, you'll wake up one day with no service at all.

Sizing Them Up

The surviving U.S. carriers will have a nationwide presence and a broad base of business services, including voice, data, wireless and Internet. They will have substantial market share (at least $500 million in revenue) and will compete not only on price, but also on superior service. Dominance also matters. Most of the new Tier 1 carriers will have a captive local audience that guarantees a profitable revenue stream.

Looking two or three years out, the incumbent local exchange carriers will be nationwide competitors. The winners will be Verizon (in combination with Genuity), SBC Communications (through its acquisitions, especially internationally), BellSouth and AT&T (thanks to its relationship with AT&T Comcast). The rest will merge, get acquired or implode.

However, the new top tier will not be determined solely by coverage. Moving bits around is easy; delivering predictable business value is not. In two years the landscape will be marked by surviving telcos going up against -- here's the surprise -- the full-service outsourcers, such as Computer Sciences Corp., EDS and IBM. Communications will be a major part of larger outsourcing deals. Some of it will be delivered on the outsourcer's own infrastructure and some will come through resale agreements with telcos. In the end, the best choice may be no carrier at all.