Telecom Players Devoid of Vision

Verizon's interest in acquiring MCI is a case of another amalgamated former Bell company pursuing another weakened long-distance provider.

February 11, 2005

3 Min Read
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Besides the artificial distinction between local and long distance, name a fundamental difference between the services provided by AT&T, MCI, SBC, Qwest and the other major telecom providers. Gillette has an easier time differentiating its Mach3Turbo shavers from Schick's Quattros. "Innovation Is Gillette" is the company's rallying cry. "Survival Is Us" is more like it for the petrified progeny of the Bell system.

At least AT&T, which has faced real competition in long distance for two decades, has invested in the world's most extensive fiber optic IP communications network. Local operators like SBC and Qwest (the former U S West), having decided years ago to pump their monopoly profits into overseas boondoggles and domestic lobbying campaigns, still rely mostly on copper wires installed generations ago. SBC spent 42 percent of its revenue on construction and capital in 2001, but only 24 percent in 2003. Is it any wonder its business is a bore?

Although SBC and its Bell brethren have been upgrading their copper plant to provide broadband data services, they still derive most of their revenue from plain old voice, a commodity that would cost next to nothing were it not for regulations that prop up prices. Voice over IP will kill that cash cow, whether or not the former Bells participate. Then what? The consolidation growth strategy will work for only so long.

SCO's Last Stand

Speaking of industry has-beens, SCO Group last month won a temporary victory in its two-year legal assault on IBM when a federal judge ruled that IBM must turn over all its Unix source code for SCO inspection. What SCO hopes to produce from those 2 billion lines of code is evidence that IBM infringed its SCO Unix license by contributing pieces of that licensed software to the Linux development community. Will IBM now settle?Don't count on it. SCO's win is oddly reminiscent of World War II's Battle of the Bulge, when the German armies made their last, desperate assault on Allied troops in the hopes of forcing a negotiated peace on the Western front. In the end, the Germans expended so much time, money, equipment and manpower that the offensive accelerated their defeat.

Even if IBM had placed some SCO-copyrighted Unix code into Linux, SCO hardly has the resources to pore over 2 billion lines to find it. Despite CEO Darl McBride's bizarre statement that SCO's latest financial numbers "demonstrate continued progress," the company is running out of time and money. SCO reported a $6.4 million net loss in the fourth quarter on 59 percent lower revenue, as its SCOsource licensing revenue dried up and its Unix business continued to falter. Even with a new version of its OpenServer due out this year, SCO can forget about Unix. It alienated those customers long ago. As the court proceedings (not only with IBM, but also with Red Hat and Novell) grind on for another year or two--and they will--SCO will become even less relevant.

Rob Preston is editor in chief of Network Computing. Write to him at [email protected].

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