October 27th, 2009

Banks and auto sector got bailed out, are telecom providers next?

Posted by Doug Hanchard @ October 27, 2009 @ 12:45 PM

Categories: Budget, Canada, Comcast, Commerce, Congress, E-government, FCC, Google, Government technology, IT Management, International, Microsoft, Net neutrality, Personnel Management, Regulations, Telecom, UK

Tags: Innovation, Bank, Debt, Internet, Telephony, Smb/Sme, Government, Telecom & Utilities, Telecommunications, Strategy

U.S. Senator John McCain came out with statements against government interference or the creation of regulations by the FCC. Instead he came out proposing a new law to prevent law. The Senator stated that Net Neutrality would stifle profitability, innovation, commerce and that jobs would not be  created with such regulation. Telecom and Internet Service providers are not hiring and with current debt levels some are barely profitable. But for how long? The FCC’s proposed Net Neutrality rulesare probably the least of the worries that are on the horizon for the Internet. Worldwide the industry has been turned upside down and none of the industry players got bailouts like the banks or auto sector did. Debt at many of the main telecom players are at unbelievable levels;

• France Telecom: 34.7 Billion Euros
• British Telecom: 16.1 Billion Euros
• Cable & Wireless: 922 million Pounds
• Italia Telecom: 35.8 Billion Euros
• Telstra : 16.1 Billion Au
• New Zealand Telecom: 2.8 Billion NZ
• NT&T : 639 Billion Yet
• Bell Canada: 14 Billion Cdn
• Telus: 7.5 Billion Cdn
• AT&T: 60.8 Billion US
• Sprint: 21.6 Billion US
• Comcast: 30.0 Billion US

These levels are sustainable for most, providing the economy doesn’t get any worse and credit facilities do not collapse any farther. Nortel collapsed under debt, Alcatel and Lucent merged and is heavily leveraged,  leaving Cisco as the only healthy one. Job creation and innovation will have to come from companies that have little or no debt burden. Most of ones listed above have made significant cuts in employment. Government regulates providers already, and does offer some incentives, grants and loans for internet innovations, and they are in debt in the trillions of dollars already. The private sector will be the innovator and career opportunities engine for internet services and applications that create healthy profit. Companies like RIM, Microsoft, Cisco and Google have significant advantages in growth capabilities. But it will be small and medium business (SMB) sized companies that will likely be responsible, and are rarely given credit for doing so around the world. Many wonder if they can bail out the industry before government has to.