The Telecom Dark Ages

IEEE Spectrum Magazine, Nov. 2001

A little over a year ago I wrote about my amazement in seeing airplanes cruising the beaches of New Jersey pulling banners advertising enticing jobs for engineers.  Well, that was then.  This past summer the same airplanes were cruising the same beaches, but the banners advertised beer.  Forget that engineering jobs stuff – let’s get back to drinking.

Engineering employment is tight everywhere, but perhaps no industry is as bad as telecom.  People are calling this the dark ages of telecom.  Around the failed carriers and wounded suppliers, the talk is no longer of opportunities and options, but of layoffs and restrictions.   The unemployed engineers on the beaches stare at the passing beer ads and trade stories of old friends that have taken “packages” or that have been “force-adjusted.”  (Oh, these euphemisms!)  They try to top each other’s stories about which company has proclaimed the most stringent economy measures.  Then they fall silent and gaze into the empty sky, thinking: what did we do wrong?  Where are the airplanes of yesterday?  It’s that kind of time.

So we look for someone to blame.  Unfortunately, I think it’s like the denouement of Agatha Christie’s “Murder on the Orient Express.”  You may remember – everyone was guilty.  In the telecom situation the industry executives blame the financial community for their misguided investments, while the bankers blame the industry for overbuilding the network and over-hyping the Internet.  Other people blame the legislators and regulators for what they perceive as the failure of the Telecom Act.  Meanwhile there has been the dot-com crash and the market recession.  The whole thing has been likened to the perfect storm, where all of the forces aligned to create the maximum devastation.

The question in my mind, however, is whether we engineers are the innocent victims of this storm, or whether we bear some substantial responsibility for helping sail the ship into that storm.  It’s the kind of question that I’ve thought about with respect to other business debacles, and I always come back to the same self-serving conclusion – that at least in our role as engineers we’re relatively innocent.  We just did our technology thing, and we did it well.  However, we are the handmaidens of this technology, and it has been one of the rampaging natural forces causing the telecom storm.

As we pursue technology, we make things cheaper, faster, and smaller, while serving Moore’s Law and all of its corollaries.   Ultimately, we could argue that this improves the human condition, but in the short run it can create disruptions with far-reaching effects.  In telecom the progress in dense wavelength division multiplexing has undermined the cost basis for long distance transmission.  Bits in the big pipes are becoming a commodity that is approaching zero cost, and the idea of a “bandwidth glut” has taken hold in the media.

Meanwhile, the exponential growth of data traffic and the development of Internet voice have exposed the artificiality of the tariffs for analog voice.   There has been a growing and unsustainable disparity between types of traffic and corresponding revenues.  In telecom 80% of the current traffic is data, but 80% of the revenue comes from voice.  And while the telecom infrastructure has been sustained by a century of charging by time and distance, it seems apparent that speech travels essentially free over the Internet, regardless of distance.

In the investment community telecom looks like a risky endeavor.  The fast obsolescence inherent in Moore’s Law has made a mockery of the traditional depreciation schedules, which have been used to structure debt.  The equipment that was supposed to last for 30 years is now ready for the junk heap.  Who will invest in the new generation, and how will it pay for itself over only a few years?  No one seems to have any idea of what business models will succeed in this new environment.

So technology may be neutral, but it doesn’t seem innocent.  It’s a kind of irresistible force, sweeping us all along in its own preordained directions.  In the past I’ve occasionally written tongue-in-cheek articles about how we should slow progress or make transistors bigger, but that’s not really possible.  Technology marches, the winds blow, the waves crash, and the storm rages.  We look for signs of a clearing sky, but so far all we see is gloom..

But this, too, shall pass, and hopefully next year I will write another column about airplanes on the beaches.  “Remember that depressing column I wrote last year,” I’ll start.  Hopefully.

Robert W. Lucky