The Letter: And the Winner Is

Written by Channel
August 31, 2002

Posted: 09/2002

And the Winner Is

AS
WE HEAD INTO THE CAMPAIGN SEASON, it seems appropriate to talk about winners and
losers. Only, it’s not tight races for Senate and House seats that weigh on our
minds, it’s the contest for the embattled telecom market.

WorldCom’s July bankruptcy filing
signaled a new, more desperate phase of the fight. It’s self-incriminating
revelations of accounting "irregularities" already have resulted in
indictments against its former CFO and controller for securities fraud, alleging
they forged an elaborate accounting scheme in order to meet Wall Street’s
earnings expectations. Similar questions are being asked about accounting
methods at Qwest and Global Crossing (Click
Here)

With such large companies shrouded
in scandal and uncertainty, we are left wondering which companies will be left
standing — in whole or part. WorldCom’s fate has been the subject of endless
discussion. After it sheds its wireless resale unit (Click
Here) and its paging business, will
it be able to hang on to UUNET, its corporate long-distance business and its
consumer long-distance company MCI Group?

Its acquisition also has been
discussed ad nauseaum with PTTs, other IXCs and even the Bells as buyers. FCC
Chairman Michael Powell’s admission that the agency might OK an IXC-Bell
pairing–a change in policy–has competitors reeling. ASCENT’s new chief Walter
Blackwell says consolidation is the last thing competitors need, and our op-ed (Click
Here) author warns against allowing
the Bells to reclaim their dynasty under the ruse of "stability."
Interestingly, the Bells told PHONE+ they are not that interested in acquiring a
troubled long-distance business (Click
Here).

Meanwhile, Global Crossing’s assets
were up for auction as I write this letter, and several other struggling
carriers reported progress. Williams Communications July 30 said it was on
target to emerge from bankruptcy by Oct. 15, after reaching an agreement to
secure a $150 million investment. On the same day, Mpower Communications Corp.
emerged from Chapter 11.

At the same time, competitive
provider US LEC reported positive EBITDA and Allegiance Telecom reported
positive EBITDA for 20 of its markets for second quarter.

Finding these bright spots and
shielding end users from the failures represents an opportunity for channel
partners — both resellers and agents. That is not to say there won’t be pain
along the way. (WorldCom’s bankruptcy means agents won’t be paid July 15
commissions and CLECs are likely out owed CABS.) But, the ones that can become
trusted advisers of diversified services have a good chance of weathering the
storm. This continues to be the focus of PHONE+’s editorial
(Click Here)
and its Channel Partner’s Conference & Expo, which is being held this month.
The attendees and exhibitors at this event know that business as usual isn’t
working, and they are investing in a different future. So, if you’re looking for
"winners," you’ll definitely find some there.

See you in South Beach.

khenderson@vpico.com.
Editor in Chief