Q&A: Opportunity Calling

As an aide to Secretary of State James A. Baker III in the early 1990s, Scott C. Cleland specialized in telecom policy. Now CEO of Precursor Group, he projects a brighter year, particularly for regional Bells, thanks to shifts he sees at the Federal Communications Commission and industry reshuffling.

Q: What's the outlook for 2003?

A: The story is that telecom bounces back from the bottom.

Q: Couldn't the WorldCom bankruptcy launch a price war that drags down the industry?

A: WorldCom Inc. won't survive independently long term. We're just waiting for it to complete the archaeological digs into its financial records. It'll probably be spring or summer before it has its books in order, but it'll be acquired sometime after that. They've got to merge to lower costs. Both WorldCom and AT&T (T )are likely to get merged into a Bell.

Q: AT&T is takeover bait, too?

A: AT&T has to merge because Bells are getting into its long-distance business. The FCC is going to stop favoring AT&T and WorldCom with deeply discounted fees to lease local Bell networks in the first quarter of 2003. It'll be the biggest regulatory change in seven years.

Q: What's the outlook for wireless?

A: There needs to be further consolidation, with Nextel Communications Inc. (NXTL ) and T-Mobile USA International likely to find partners.

Q: And for equipment makers?

A: Lucent Technologies Inc. (LU ) and Nortel Networks Ltd. (NT ) are going to be survivors. But optical [network] providers such as Ciena Corp. (CIEN ) will have a tough road. There's a fiber glut.

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