At the same time, an influx of new competitors has created steep competition for the same customers. In the early part of the year, this was seen as healthy rivalry. But as stocks fell, and worries began to rise about the high level of capital expenditures necessary for some, the amount of money available to the industry plummeted. A bright spot in the recent storm clouds has been the big Baby Bell local phone companies. Those giants have traditionally been viewed as slow-moving, highly regulated dinosaurs of the industry, but those onetime weaknesses have meant that Verizon Communications, SBC Communications and BellSouth have been less exposed to this year's ill winds.
Defenders are better off than attackers in times of credit crunch.
What many point to as the deciding factor behind the fate of telecommunications over the next year is the cutback in available capital. Building and maintaining a network infrastructure is a costly business, and if the markets remain hostile to new borrowing, communications companies will likely continue to face Wall Street hardships. That means that many eyes are on the U.S. Federal Reserve Bank and Alan Greenspan, who is expected to ease pressure on interest rates early next year, and on president-elect George W. Bush, who risks a recession led by technology and communications slowdowns. Their action could help turn around the problems, some say, or could lead to a precipitous decline in the once-healthy U.S. economy. The demand is there, and the need for capital expenditure is huge.