For the last couple of years, the telecoms sector has rightly suffered the consequences of hubris. New service providers took out debt to build out infrastructure -- and then found out it was all duplicated, and there weren't enough customers to go round.
Long-distance bandwidth prices went into free-fall. So did revenues. And telecoms share prices. There was no more money from investors for building networks. And that was all before WorldCom happened.
At the same time, service providers were stiffed for as much money as possible for 3G bandwidth, and -- to varying degrees -- fumbled the broadband roll-out. BT was humiliated into selling off assets, and streamlining itself in a very humbling way. But it was far luckier than the start-ups, many -- or most -- of whom are simply not around any more. Some of them, like KPNQwest, found that even their assets were not worth anything. Networks that cost billions to build were unloaded for tens of millions.
Some analysts estimate that 40 to 50 percent of the people who used to work at telcos no longer do so. And we wonder what they are doing instead? The ones without families will have spent the first few months of their freedom somewhere foreign (we already hear of ex-execs of once-stellar start-ups bumping into each other on a beach in Thailand). After that, who knows?
If there is an upturn in telecoms, it won't absorb all these people again -- because the sector is still contracting in terms of headcount. BT is still shedding people, and when people talk about "good" news in the sector, what they mean is service providers returning to profitability by continuing to cut staff.
That is partly what is behind the recent "new deal" BT announced with suppliers. For BT to please its shareholders, and reduce its debt, it has to spend less on staff and infrastructure, so it is asking vendors to help it.
But what are the signs of an upturn? BT's deal is one -- it's the kind of offer that people make when they expect their business, and their suppliers, to have a solid future. There were a few other indicators at the Financial Times World Telecommunications conference in London this week.
Charles McGregor, chief executive of Fibernet, a UK-based service provider, says he has seen turnover rise for four months running. He is cautious (Fibernet survived the bubble by not taking on any debt or rolling out anything too ambitious) but he says that is a good sign. Others felt that developments such as Genuity's assets going to Level 3, represent progress towards final consolidation.