Telecom equipment makers ripe for change

Steve Rosenbush

I met earlier today with Andy W. Mattes, the president and CEO of Siemens Communications Inc. The telecom unit of German industrial conglomerate Siemens has a smallish presence in the U.S., but it's active in up and coming markets such as IPTV. It won a share of BT's recent IP network contract, beating out incumbents such as Marconi. And it won a share of of Cingular's 3G network build. Here are a few highlights of the interview:

On U.S. broadband deployment--Mattes says the U.S. is well behind global broadband leaders such as South Korean and Japan. That's going to hurt U.S. companies, and by extension, the U.S. economy as a whole. "It's got to change," he says. In his view, the biggest hurdle to broadband deployment is the regulatory regime in Washington. Geared toward consumer protection at the expense of all else, he believes it imposes yesterday's regulations on today's technology. The main problem is that the Bells have been discouraged from investment, he says. They still can't be sure that they won't be forced to share their networks with every rival that comes along. Until that muddle is resolved by a revision of the Telecom Act, U.S. broadband deployment is likely to lag.

Another problem with broadband deployment in the U.S.: the pricing structure. The cheap-flat rate pricing model that's prevalent in telecom is fine for basic voice service. But carriers need to charge higher prices to support more advanced services. That phillosophy might be at odds with the prevailing thought among regulators, consumer advocates and the press, where low prices are regarded as the highest good. But higher prices might be necessary to support the deployment of services that the U.S. needs.

Telecom consolidation--Telecom services companies are consolidating across the board, in wireless, wireline and cable. "Sooner or later, it's got to have an effect on vendors. Whether that leads to outright consolidation or joint ventures is hard to say. If the business case for consolidation was so simple, it would have happened already."

Cingular's 3G build out--Starting late this year, Cingular will begin to deploy 3G service to every major market in the U.S. The service, aimed mostly at businesses for the time being, will provide speeds of 3-4 megs a second to mobile devices. Consumers will have access over time, too. "It's going to change the communications infrastructure in the U.S.," Mattes says.

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