A crisis in communications

A crisis in communications

A crisis in communications

Battered by the tech-wreck of the dotcom crash, the Enron
misfeasance and ongoing revelations of corporate greed and corruption, the US
economy is taking a hammering. Whilst investors worldwide are seeking respite,
the bad news continues. Only twelve months ago the US companies "Global
Crossing" and "360networks" were the leaders in the burgeoning global
telecommunications sector. These companies were optimistically described as
battling for worldwide supremacy in a trillion dollar market where there could
be no losers. Now both companies have filed for bankruptcy, the mighty have
fallen and fallen hard. The losers are the banks and shareholders who are
suffering huge write-downs on their investments.

The Economist magazine, has described the collapse of the
Telco's as the most dramatic rise and fall in business history. There is the
real possibility of the US economy plunging the rest of us into a worldwide
recession. Assurances from President Bush that things are not as bad as the
recent scandals might suggest ring hollow when confronted with the enormity of
the Telco crash.

The collapse of the telecommunications sector is ten times
bigger than the dotcom crash, the reverberations of which were clearly felt in
our own small part of the world. The total global debt owed by the Telco's is
at a reality challenging $US 1 trillion.

Revelations have been made of another Telco "WorldCom"
reclassifying $3.8 billion in network maintenance costs as capital spending, to
hide huge losses. WorldCom is teetering on the edge of bankruptcy and analysts
have predicted that its demise would over shadow the Enron collapse.

There is a human face to this corporate collapse. Firstly the
boardroom leaders whose greed led to the mess are undeserving of any sympathy
and already the industry has seen a succession of Chief Executives being shown
the door. Our concern is for the job losses that will be suffered by the
everyday workers. In the US alone Telecom's operators and equipment vendors
have laid off nearly half a million people over the last twelve months. The
harsh reality of the crash has come early to these individuals and their
families.

The future for the sector remains uncertain, but there is
already speculation that the crash may see a relaxing of the anti-–trust rules
that would allow the American Baby Bells (the US telecom companies that arose
from the anti -–trust break up of the AT&T company in 1984) to re-enter the
telecommunications long distance market.

Similarly in NZ the monopoly enjoyed by Telecom may be
strengthened as the repercussions of the US collapse reach our shores. Telecom
and the US Baby Bells generate huge wealth and their actions are already largely
ungoverned. Regulators in the US and New Zealand have done little to release the
strangle hold that these companies have on the local network. Control of that
last part of cable, which runs into our homes and offices, ensures the ongoing
monopoly enjoyed by Telecom. The overseas crisis is likely to see a
strengthening of that monopoly. The risk is that a largely unregulated group of
private companies are gaining greater control over the way we communicate and
with such a prospect the Telecom, "Kiwi Share" provides no comfort.