EARLY RECOVERY EXPECTED FOR U.S. CARRIERS' CARRIERS.

After flat growth in 2002, U.S. wholesale, private-line growth is set to reach $19.7 billion in 2003, a 27% increase year-over-year. An evolving customer base will mitigate operational risk and drive sales growth, but challenge "carrier-neutral" proposition.

Within the U.S. telecommunications industry, few firms have soared as high or fallen as low as carriers' carriers. After several years of stellar growth, carriers' carriers are weathering a vicious industry shakeout that has raised doubts about the long-term viability of commercial wholesale telecommunications services and providers.

In a recent Yankee Group Report, "The Carriers' Carrier Playbook," Seth Libby, a senior analyst with the Wholesale Communications Services research practice, addressed these industry challenges, conceding that things will only get worse before they get better. "Chapter 11 protection may provide a new lease on life for a few firms, but it is not a magic bullet for all that ails the industry," Libby said. "In fact, it will ultimately prolong industry turmoil and uncertainty."

Still, Libby notes that carriers' carriers are intrinsic to the U.S. telecommunications landscape and are here to stay. He likens their current problems to "the recurring 'boom and bust' business cycle challenge faced by any growing industry segment," and contends current problems detract attention from their overall value to the industry.

"Carriers' carriers ensure truly competitive telephony and enable new retail service providers and services," Libby said. "They also are aggressive technology innovators, for example, leading the introduction of next-generation transport offerings (including wavelengths), Gigabit Ethernet, and IP services," he added.

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