Telecommunications, Boom or Bust?

Robert Albee
Director, Telecommunications Engineering
Vanasse Hangen Brustlin, Inc.
Watertown, Massachusetts

The American Public Works Association, acting through its Utility and Public Right-of-Way Committee, continues to play the lead role in bringing together the telecommunications industry and public works practitioners to foster responsible construction of telecommunications networks. APWA hosted a very successful "Common Ground Summit" in Houston during November 1999, which brought together leaders of the telecom and public works sectors to discuss common issues. APWA will sponsor "Communications Facilities and Public Right-of-Way Management: A Peaceful Co-Existence" in Atlanta, Georgia on October 16 and 17, 2001 as a continuation of the discussions. The current uncertainty in the telecommunications industry makes this a very timely meeting. To understand the telecom issue, it may be helpful to review the state of the industry.

The national and international build-out, the urban backbones, the reach to suburbia
Since the enactment of the Telecommunications Act in 1996, a wide array of new and established telecom providers have been hard at work re-networking the entire world. By 1999 they brought the national and international fiber optic "backbones" to the very edges of our major metropolitan areas. During this process they merged, they married or they consumed each other, leaving a smaller number of survivors, each with a nearly completed inter-city fiber optic network. But, to get to the customers (or put another way, to get to the revenues), the urban backbones needed to be built. These proved to be a lot more difficult to build than the inter-city long hauls which were built along highways, through cornfields and following railroad rights-of-way. In the cities the providers unexpectedly had to deal with congested streets, traffic, business interests, neighborhood concerns, and political complications.

In addition, municipal agencies were reluctant to issue needed right-of-way or street cut permits until they were convinced that all these companies could rip up all those streets and still maintain quality of life and quality of commerce for their citizens. APWA worked very hard to bring municipal officials and telecom company officials together, at one table, to understand each other's needs and responsibilities. The result of the hard work at the Common Ground Summit in Houston lead to the development of concepts and ideas that lead to tools and processes that ensured quality of life and commerce while respecting the goals of the telecom providers.

This tool kit can now be applied as we witness the next steps in the evolution of the new fiber optic networks...the completion of the urban networks and the reach to suburbia. The urban networks are under construction although running behind schedule. Next, fiber will follow the highways out of the core cities because of the available linear right-of-way. Where customers (real and potential) exist, fiber will exit the interstates and occupy the town roads and easements until it closes a loop on the targets of opportunity. The town municipal officials will likely have the same concerns as those of the municipal officials in the big cities. What's different now is that there is a willingness to work together. Towns in the know want as many competitive offerings as possible and telecom companies in the know want to be seen as good citizens and good neighbors.

The current financial slowdown
I am not an economist but from my own observation I think I used the right word, "slowdown." Two things are at play here: (1) a shakeout of non-viable ventures, and (2) a rationalization of the capital markets. On the shakeout, we have always been told that 80 percent of all new businesses fail in the first two years. It looks like the telecom sector is no different. On the rationalization of capital markets, those with money to invest now want to see revenues before they jump in. This is probably a healthy adjustment from the wild days of late 1999 and early 2000 when revenue was less important. The important thing to keep in mind is that the services and benefits that all these telecom companies promised to bring are still wanted, desired and demanded. And, as companies fall off the big board, others will fill the void and provide those services and benefits, and venture capital will return with more realistic control. It will get done but at a slower pace.

The relationship between bandwidth and real estate development
There is a growing awareness that there will be a direct relationship between property values and the availability of multiple bandwidth providers. As important as modes of transportation on our roadway systems were to commerce in the last century, modes of communications under our roadway systems will be the driver in the new century. Commerce will depend as much on "light-over-glass" as it did on "rubber-on-asphalt" in the execution of its business.

Information Technology, data storage, teleconferencing, outsourcing, work from home, the Internet, e-commerce, and things we haven't dreamed of yet will change the way we do business. Some indicators are:

  • Emergence of the Internet as an increasingly more important business tool in terms of customer access, e-government, and Business-to-Business applications;
  • The trend for businesses to outsource expensive and time-consuming functions such as data management, data storage and retrieval, communications management, even human relations and insurance management;
  • Apparently unlimited opportunities to create virtual networks to connect our operations, our clients, our manufacturers and suppliers;
  • Efficient "work from home" programs to take advantage of our senior talent who may be tired of the daily commute and want to work as needed, our young mothers and fathers with new family responsibilities, and our middle age talent with senior care worries.

Availability of the widest selection of fiber carriers will be one of the most important considerations in business location and relocation decisions. Those municipalities that recognize this and encourage the implementation of state-of-the-art telecommunications systems will be posed to reap the economic benefits-those that don't may fall behind.

If the suburban cities and towns are to be competitive with the core regional city or competitive with each other in pursuing new growth and opportunities, they need to be as technologically sophisticated and offer the same competitive telecommunications services as the core city or as their competing neighbor. Those suburban cities and towns situated on the highway system servicing the core regional city will probably find an abundance of fiber providers passing through or by their turf. The trick will be to get them to recognize the opportunities that your town has to offer. In real estate terms: "Location, Location, Location" will be replaced with "Bandwidth, Bandwidth, Bandwidth."

The answer to my opening question, "Boom or Bust"? Let's call it a "Slower Boom." If this brief update whets your appetite for more information on this exciting new challenge, then plan to attend "Communications Facilities and Public Right-of-Way Management: A Peaceful Co-Existence" in Atlanta, Georgia on October 16 and 17, 2001.

Robert Albee is a past president of the American Public Works Association and Director of Telecommunications Engineering for Vanasse Hangen Brustlin, Inc., Watertown, Massachusetts. He can be reached at (617) 924-1770 or at ralbee@vhb.com.