The Telecommunications Act of the 1990s gave the Federal Communications Commission (FCC) a tool to make the telecom services industry more competitive. With companies like AT&T
Flashing forward to 2004, it has become painfully obvious that the FCC has accomplished exactly what it set out to do. The telecommunications industry is now as competitive as children scrambling for candy from a broken pinata.
AT&T is still the leading telecom company, but other companies such as SBC Communications
One look at AT&T's first-quarter earnings tells you all you need to know about an industry that is struggling to find new sources of growth. Revenues declined 11% from the previous year, largely due to double-digit declines in long-distance voice and data revenues. Fifteen years ago, AT&T lived off its long-distance base; of course this was back in the day when it had a virtual monopoly for the service. AT&T's earnings per share (EPS) sagged to $0.38, from $0.73, highlighting the effect of the company's shrinking consumer base.
Telecom companies have been leaning on their wireless, Internet, and foreign operations to call on any growth. Former AT&T CEO Mike Armstrong tried to expand the company's local presence through cable, but that failed as miserably as Ben and J-Lo in Gigli.
The question remains: Can AT&T lead the telecom industry out of the doldrums? If you had asked me that five years ago, I would have replied with a firm "yes." The future of the telecommunications industry today is much more clouded, however, with the possibility of industry consolidation on the horizon.
The fact is that there isn't enough room for a handful of players to compete against each other. I would look for future market share to be split between AT&T, SBC, and Verizon, with weaker players such as Sprint and MCI potentially acquired to fill out coverage areas.
I wouldn't completely hang up on the telecommunications industry right now. A wise play would be to put any call on hold for the time being until a few dominant players emerge from the battle.
Love AT&T or hate it, there are folks to discuss it with on the AT&T discussion board.
Fool contributor Phil Wohl spent over 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.