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Some local tech, telecom firms feeling pinch from slowdown

Dot-coms bombed; so what about the telecoms?

JACKSON — Nationally, troubles loom for the telecommunications industry, which seemed on the verge of unprecedented growth not too long ago, when companies were snapping up networks and licenses. But the industry seems to be teetering on the brink of a decline, like the one that precipitated the dot-com bust.

Locally, the telecom industry has seemingly reached a plateau. Because industry leaders have practiced conservative fiscal policies, the downturn has been minimal compared to the rest of the nation, and telecom companies are poised for growth when the economy rebounds.

More than 200 WorldCom employees were laid off in March. The next month, Vention, a Jackson-based company founded in 1995 by John Spivey, closed. Some telecom companies in Metro Jackson have downsized, including Air2Lan, which laid off 10% of its workforce earlier this month. And other companies are feeling the pinch.

Tony Bailey, CEO of Business Communications Inc. (BCI) in Ridgeland, a communications and network system integrator, said, “While BCI has certainly felt the pain of the downturn, we have formed partnerships with very good, long-term customers that have enabled us to work through this downturn.”

Clay Lewis, senior technology officer of Mississippi Development Authority, said he’s seen evidence of short-term difficulties in the local telecom industry.

“The national trends have hit some of the companies in Central Mississippi,” he said. “We’re hoping the struggles these companies are going through right now are just temporary. Information technology is critical to the economy.”

According to the December 2000 report by the Mississippi Institutions of Higher Learning, the telecommunications industry has had an estimated $401.7-million impact on the Metro Jackson economy. That number is based on direct and indirect employment of 12,806 people.

The telecommunications industry encompasses the movement of voice, video and data over distances and is comprised of local exchange, fiber optics, copper wire, wireless services including cellular phones, palm-type devices and pagers, satellite broadcast, undersea and coaxial cable, microwave, private networks, long distance service, video-conferencing and the Internet.

Nearly 6,100 residents in the tri-county area, earning an average annual wage of $43,919, contribute to a $267.8- million payroll of employees directly employed by the telecommunications sector. Slightly more than 6,700 residents indirectly employed by the telecommunications industry account for a $133.9-million payroll. Because of telecommunications-related activity, $220.9 million in retail sales are generated and $2.5 million is paid in sales tax to cities in the tri-county region.

“We’ve started some long-term efforts to help this sector grow in the state by working with the Mississippi Technology Alliance (MTA) and Mississippi Economic Council to support CIT.ms — to cooperate and coordinate with industry leaders about some of the issues that are of concern to them,” Lewis said.

“The Porter study was helpful in identifying some issues to help them get started. Now the study from Dr. Stuart Rosenfeld of Regional Technology Strategies — a preliminary report is due Aug. 1 — is the second part of a look at the industry. It will specifically deal with workforce needs and how to address those needs. We’ll look at it long term and build the infrastructure needed so that when things turn around, we’ll be able to take advantage of the growth. This ties in well with the Advantage Mississippi Initiative, which provides incentives for technology based companies,” Lewis said.

Angeline “Angie” Dvorak, Ph.D., president and CEO of MTA, a public/private partnership that promotes and coordinates science and technology-based economic development, said local telecom companies are faring well, compared to their national counterparts.

“Our telecom leaders have been conservative and have shown business savvy,” she said. “Even though they are feeling a blip, they’re also pretty strong. The wireless arena is where Mississippi is getting its crown jewels. In terms of saturation in the market and prevalent availability of strong wireless providers, we’re postioning ourselves real well.”

Hu Meena, president of Cellular South, said, “Cellular South is thriving in today’s slowing economic conditions and, in fact, I see many opportunities for growth. The wireless sector has shown significant resilience both in consumer and business usage. During a period when each customer counts more than ever, smart organizations understand that wireless connectivity is one of the most important points of differentiation between them and their competitors.”

For several years, the number of cellular phone subscribers has consistently outpaced projections. Two years ago, close to 220 million people worldwide used wireless communications devices. Today, more than 500 million people use them and projections are for that number to surpass one billion by 2003.

“In 2000, Cellular South expanded its digital network by adding an unprecedented 170 towers in Mississippi, Mobile, Ala., and surrounding area, and the Pensacola, Fla. area, providing customers with free incoming calls and superior service — all in an effort to meet the wireless needs of customers in this region,” Meena said. “In 2001, Cellular South’s commitment to the South and our growing number of customers continues with an aggressive network expansion in existing markets and through network build-outs of Memphis and Jackson, Tenn., as well as Destin and Fort Walton, Fla.”

William M. “Billy” Mounger, II, chairman of CIT.ms and chairman of TeleCorp PSC, one of the nation’s top wireless providers, said the local outlook is stable.

“With mergers and integrations, some people have lost jobs in some areas, but we’re adding in others so I think on net we’ve been even,” Mounger said. “In the CIT cluster, there are a whole host of new companies and start-ups like Kite Networks. Raising capital is hard right now for start-ups but there are a lot of them starting so that’s encouraging.”

Bill Hays, Air2Lan’s vice president of emerging technologies, said Air2Lan’s focus on five markets — Jackson, Baton Rouge, La., Houston, New Orleans and Montgomery, Ala. — is part of a controlled growth plan.

“Our whole business plan is predicated on a positive cash flow basis, not speculation like some telecoms have done,” he said. “We are reaching a cash flow positive status in Jackson and expect to achieve that in the other markets. Any market in which we deploy we expect to be cash flow positive in 14 months and it looks like it’s happening in those other markets.”

Hays said many telecom companies started out with a business plan strategy where debt was accrued in the beginning, expansions were made into other markets, and they hoped to make cash flow.

“Ours is not like that,” he said. “We build out to where the customers are. We have what we call pocket deployment so we don’t build in areas until we identify potential customers. In Houston, for example, we don’t have to cover the whole city. We just build in pockets. It’s the same in the other cities I mentioned. That’s got us on a good path and it’s controllable and we haven’t gotten into trouble.”

Telecom companies are also jockeying for position in anticipation of the third-generation (3G) wireless networks that will one day deliver high-speed wireless communication. Some industry reports predict that will happen after 2005.

“The heart of that technology will be what I consider pole vaulting,” Dvorak said. “It takes you away from a linear development progre
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n and pole vaults us to a new arena. It’s like second generation Internet, where it takes a while to see what the multiplier factor is. We don’t know what the ramifications and value will be yet. Most of the data we get is that this will be th

About Lynne W. Jeter

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