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Saturday, August 28, 2004

Built for America, Sold (Cheaply) to the World via NYTimes

Jennifer L. Schenher writes,"Billions of dollars worth of global telecommunications networks bought or built by United States investors now belong to Chinese, Indian and other non-American companies that have snapped them up for a fraction of their cost.The shift in ownership of the networks, which are used to carry much of the world's Internet traffic, comes less than four years after the telecommunications bubble burst. Asian companies in particular have taken advantage of the troubles at American companies, at a time when government monopolies on telecommunications in their countries are waning, access to capital is greater and consumer appetite for bandwidth is growing.In retrospect,American investors overpaid to set up the global networks and have ended up inadvertently financing them for foreign owners who bought at fire-sale prices when the companies fell on hard times.".Different comments about this go like this: "The United States, with its capital markets and openness to outside investors, eased the shift in control. Foreign companies like Asia Netcom adroitly purchased the remnants of the overbuilt infrastructure at prices that should insulate them from the large losses suffered by the original owners"."While the U.S. is still smarting from the telecoms catastrophe, it has awoken to find that it has significantly assisted everyone else, which was really sort of dumb"."Some $30 billion in international telecommunications infrastructure owned by United States companies was sold to foreign-owned entities from 2000 to 2004 for a total of about $4 billion"."Because it bankrolled the networks, "Wall Street has inadvertently financed more telecom infrastructure overseas than the World Bank and other international agencies.""The change in the balance of ownership may have political consequences. The international pieces of a nation's communications infrastructure, considered strategic and defensive holdings, can be controlled by some who may not share that nation's interests.The new profile of owners has changed the business. The smaller companies that sought for years to be treated as equals by American rivals can offer their customers global end-to-end services, including access to the biggest market - the United States - over their own networks or others owned by partners they are better able to negotiate with.
Future trends to watch:
A.When the Internet first began to gain traction, most traffic was routed through the United States. But with network-connecting exchanges in so many countries, that detour is no longer as necessary.
B.Selling global bandwidth capacity will never be the kind of high-margin business it was when carriers had monopolies, and many believe a shakeout of the remaining companies is coming.
C.The growing number of new applications that require more bandwidth - like movies - would ensure a respectable future for the industry.
D.The driver is the broadband market.Broadband is growing so I still see a future in this industry.

Very significant things are happening in telecommunications - one of the most important industry of the present and the future.

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