Telecom stuff

The telecom industry has been very much on my mind lately. One of our competitors, Redback , has been acquired.

STOCKHOLM, SWEDEN -- (MARKET WIRE) -- December 19, 2006 -- Ericsson and Redback Networks Inc. have today announced that they have signed a definitive agreement under which Ericsson will acquire Redback for USD 25.00 per share, or an aggregate price of approximately USD 1.9 billion. The offer represents a premium of 60 percent to Redback's [90-day] volume weighted average stock price.

Unfortunately, this means that Ericsson will no longer be available as a customer or a distributor channel to the company I work for.

Ericsson seems to be on somewhat of an acquisition binge. Earlier it snapped up what was left of Marconi, another company we used to partner with sometimes. Marconi was the very same company that bought out FORE Systems. I wonder if any of the FORE code is still in use.

Meanwhile, another momentous decision was made in the U.S. government. The Federal Communications Commission (FCC) decided that telecom firms offering video services will no longer be subjected to the same requirements that cable companies once were.

From the article:
As described at Wednesday's public meeting here, the FCC's order would require local governments to approve new franchise agreements within six months for new entrants and within 90 days for companies with existing access to city facilities; limit franchise fees; and prohibit so-called "build-out" requirements if they obligate new market entrants to serve all of a particular area within an "unreasonable" time frame or on a scale not expected of existing companies serving the area. A copy of the order's text was not immediately available.

The provisions are a direct response to ongoing lobbying by the nation's major phone companies, which have complained that the process by which companies must negotiate local franchise agreements with individual cities and municipalities before rolling out TV offerings is cumbersome and overly sluggish.

The cable companies worked long and hard to get franchises from local governments. Usually, they were granted monopolies in the communities that they served. In one broad stroke, this decision erases undoes a lot of their hard work.

And what about the cable companies?

Even if the commission decides to apply the same policies to incumbent cable providers, the FCC would only apply the new rules to existing TV providers when their franchises expire. Kyle McSlarrow, president and CEO of the National Cable and Telecommunications Association, said during a conference call with reporters that this would be unfair to cable operators, especially those that have several more years left on their franchise agreements. He emphasized that the new rules would ultimately hurt the incumbent providers while giving the phone companies an unfair advantage.

"Whatever deregulation measures are adopted should apply to all providers," he said. "These new entrants aren't start-ups who are under-capitalized. They are large phone companies, one of which is larger than the entire cable industry. We think it is absurd to have different rules for us and the phone companies."

Unfortunately, in the real world, when it's David vs. Goliath, the smart money is usually on Goliath.

This decision also legitimizes a sort of "redlining," whereby the cable or telecom companies can decide to offer services to rich parts of town but not to poor. This might be acceptable if there was some competition for DSL and phone providers. But in most cases, they are local monopolies.

I wish the United States would adopt a system more like what they have in Britain, where the government owns the "last mile" of fiber that goes to the home, and then different companies compete to offer internet access. That would be real competition, that would benefit the end user.

I could get started on "net neutrality," but I think I'll save that for another day. Suffice it to say that there's a lot of shenanigans going on in the industry.


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