TRADITIONAL MODELS, GOOD NETWORKS SAID KEY TO VENTURE FUNDING
SANTA CLARA, Cal. -- Current market conditions will force telecom businesses to return to “traditional business models” when seeking funding from venture capital firms, said a panel of financial analysts and venture capital partners at Executive Forum workshop Mon. at Telecom Industry Assn. (TIA) Supernet conference here. Valuations of telecom companies are coming “back to earth,” so having a fully funded business plan and cash flow is critical to obtaining venture capital funding, said Bart Schachter, founding gen. partner of Blueprint Ventures. Onset Ventures partner Susan Mason said telecom enterprises need to return to fundamental business models where “cash is king.”
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Growth areas in telecom industry include software and infrastructure support services, where “much money will be made,” said Signal Equity Partners co-founder and Man. Partner Alfred Puchala. But he said “networks need to be smarter” and service providers not offering multiple networking services would flounder in near future. DSL “is a product, not an industry,” Puchala said, and companies offering DSL must combine it with other services if they're to remain competitive. “Pure DSL carriers are dead,” he said. Diversified national telecom providers will prevail over smaller regional services, Puchala said, which he said were too localized and based on niche marketing to be successful.
“Broadband revolution will happen,” said Deutsche Bank/Alex. Brown senior research analyst Brian Moloff, but that revolution is being slowed by a “bottleneck” in the “last mile.” Wall St. now thinks broadband wireless networks “don’t work” and “no one uses” them, he said. But Schacter said strong demand continued to drive the revolution as the number of wireless data devices grew.
Convergence of services and networks is critical to the future of service providers, panelists said at Supernet plenary session. Service providers wanting to compete in increasingly competitive markets must take “customer-centric” view and move “upstream,” or closer to consumer, said ITT Industries Network Systems & Services Pres. Jonathan Chauvin-Blitt. Customers want to work with single network and limit number of vendors they deal with, said Focal Communications Broadband Network Engineering Dir. William Heilenbach. Service providers need to bring together differentiated services so customers can “make one phone call” when things go wrong, he said. Service providers investing in “soft stuff” such as customer management will reap benefits later, said Xiaolin Lu, vp-strategic engineering and IP networks, AT&T Broadband.
Lack of software architecture makes service convergence “hard to do,” said Fred Harris, Sprint vp-design, applications, and services. Heilenbach said other roadblocks to convergence include differing standards, equipment and accounting and billing procedures. Broadband access is growing 77% annually, Chauvin-Blitt said, and market opportunities for service providers exist in areas of finance, media and medicine.