One of the shocks that people often get with their first stock market investment is finding out what a stockholder really is. People often buy stocks thinking they're getting a "piece of the pie" along with the other stockholders. But that's only true if the company doesn't owe anybody any money. Debt holders go to the front of the line, way ahead of stockholders. If there's no pie left after the debt holders finish eating, then the stockholders are out of luck, no matter how good the company's story is or how innovative its products appear to be.

When you a sign a term contract with a carrier, you should think like a bondholder. Do you deserve service ahead of the stockholders? Of course you do. In fact, your term contract with a vendor creates one of the many layers of obligations that it holds ahead of the need to pay off stockholders. But if it can't pay off the bondholders, your carrier's performance is bound to suffer.

In recent months we've begun to see a gratifying upsurge in the number and quality of proposals from telecom carriers other than the AT&Ts and Verizons of the world for specific enterprise-class services. Many are getting their bearings around new services like SIP trunking and related, fully integrated voice/data networks over very high-capacity lines.

But more often than not, these carriers have sorry-looking stock charts that seem never to have recovered from the tech/telecom bust of almost a decade ago. Or they have strange financial histories littered with bankruptcies and buyouts by unfamiliar entities that seem to come out of a dark corner of Wall Street and have nothing else to do with telecom. That naturally makes these carriers a difficult sell within your organization.

You and your management have a right to be suspicious of carriers that look bad in the stock market, but this suspicion should lead to further investigation. Instead of tossing out a carrier because of its stock chart, a bond-like analysis is often a better idea. But it's tricky. Once you know how much debt a carrier has, what does it really mean? What do you compare it to -- the carrier's revenues, operating margins, profits, or what?

For enterprises, the key is the connection to the term of the contract you're being asked to consider. In a way, signing a three-year contract with a carrier is like issuing a three-year bond to the carrier. Just as the bondholder must be paid back in three years, you must receive service for three years. In fact, whatever the length of contract is before you, it's probably best to add one year to the deal for the purpose of this analysis, in order to account for ramping down the old service after awarding a replacement service to a new carrier.

At the upcoming Telecom Negotiation Conference in Washington, I'll be presenting some bond-maturity charts for carriers. Instead of showing the gross level of overall debt, these charts show on a year-by-year basis the amount of debt maturing in given years like 2012, 2013, 2014 and beyond. Making sure your contract expiration comes before a year with a large "balloon" in your carrier's debt is a good idea.

It may even be a good negotiation tactic to have this specific information in hand. But year-by-year debt maturities often have to be calculated from individual bond disclosures by companies in their SEC filings. It's not as easy as going to one of the popular financial websites and looking up a chart, as it would be if you were just looking at their stocks!

Be aware that actually having debt is not necessarily worse than the situation that some other carriers are in -- having no debt because of a past bankruptcy, but also having very concentrated ownership because of the way they were brought out of bankruptcy. That's another trade-off I'll be discussing in my breakout session, called "The Status and Prospects of the Telecom Providers."

See the full Telecom Negotiation agenda for details. Along with the rest of the TC2 and LB3 presenters, I look forward to the opportunity to meet you in Washington!

In the following guest post, TC2's London-based managing director Ben Fox continues his comments about the Mobile World Congress in Barcelona.

Besides the increasing momentum for establishing LTE as a global mobile broadband standard, the other very interesting announcement from Barcelona came from Verizon Wireless and Skype. The two companies reported that, beginning in late March, Verizon Wireless will allow subscribers to use Skype's IP voice application over its network.

By downloading the Skype application to their Verizon Wireless smartphones, end users will be able to call other Skype users around the world for free. This represents a significant change of heart from a carrier (and indeed an industry) that to date has been very territorial in terms of allowing users to take advantage of applications that could reduce its own revenue.

So what's in it for Verizon Wireless? The answer is data revenues. As I noted last month, Verizon Wireless' strategy is currently focused on driving the penetration of data services. And for Verizon Wireless users to be able to use Skype, they will need to subscribe to a voice and data plan.

No doubt Verizon Wireless has calculated that the lost voice revenues from Skype usage will be more than offset by the increased data plan revenues and by the increased adoption of the smartphones that will be needed to use Skype, which typically drive increased average revenue per user (ARPU) compared to more basic devices. Perhaps they're even anticipating a further compensation for lost voice revenues in the increased revenue from the higher ETFs associated with these types of devices and plans!

Skype and Verizon Wireless stated that their agreement is "exclusive", although it is unclear what that really means, since the Skype application has been available for some time on AT&T Mobility's network via the iPhone. Perhaps Verizon Wireless's thinking is that AT&T users have so far only been to use Skype over WiFi, not 3G, access. But a version that operates on GSM/HSPA is supposed to be pending.

Of course Skype does not tend to be an application that large enterprises actively roll out and support for their end-users, so this might have limited initial relevance to business users. However, using Skype (and similar VoIP applications) on a smartphone whilst roaming on WiFi networks to save money, compared to paying $1+ a minute to roam on a GSM network in a foreign country, is a far more intuitive and "traditional" phone experience than using a soft phone (Skype or otherwise) on your laptop. So there is certainly money-saving potential in this area for enterprise customers.

But the more important takeaway for the business user from this Skype/Verizon Wireless announcement is the continuing shift in focus for wireless carriers all around the globe from voice revenues to data revenues, driven by the evolution of all cell phones into smartphones. Similar announcements in 2010 already include Google's Nexus One, Windows Phone 7 for mobiles, the Wholesale Applications Community mobile application alliance, and carriers announcing increased after-sales support for smartphone users. These all demonstrate the importance of smartphones to the carriers and the pressure that all carriers, manufacturers and software developers are under to get ahead of the pack and differentiate their smartphone service offerings.

Although much of the initial adoption of the more innovative services (such as the iPhone and Apple's application store) has been driven by consumers, the carriers, manufacturers and software developers now have business users firmly in their sights. Google has already been talking about a version of its Nexus One aimed at business users, and in the UK, Vodafone is specifically targeting business users in its iPhone adverts.

The bottom line is that we are already seeing business end-users at our clients pressuring their telecoms departments to offer an increasing array of smartphone devices, not the least of which is the iPhone, as well as a rich variety of new services and applications. A BlackBerry that only provides voice calling, email, calendar and contact directory functions is no longer enough! Mobile device management, rather than getting easier, will become exponentially more challenging.

On the other hand, when the world ultimately moves to a single global mobile standard -- LTE -- the job of managing your enterprise's global mobility requirements should become somewhat easier, though I'm afraid that the impact of LTE will be a ripple on the ocean compared to the tsunami of challenges presented by user demands for an ever increasing range of smartphone applications and functionality.

The following is a guest post by TC2 managing director Ben Fox, who is based in London.

This week's 2010 Mobile World Congress in Barcelona has been the setting for a number of significant developments in the global mobile marketplace. One of the most significant for enterprise users is the announcement that China Telecom, KDDI and Verizon Wireless, three of the world's largest CDMA operators, have joined the GSM Association (GSMA).

The force that is bridging the CDMA and GSM worlds is the worldwide adoption of the Long Term Evolution (LTE) 3+G (or 4G, depending on the day) standard.

This week's GSMA announcement is further proof that the world is moving to a single global mobile standard, which would bring benefits to all parties, including mobile device manufacturers, carriers and end-users. All parties, that is, except those who don't adopt the standard!

Device manufacturers will be able to focus all their efforts on a single technology platform. Carriers will be able to seamlessly interwork with each other -- even Verizon Wireless and Vodafone, whose incompatible technologies have made them strange bedfellows up until now. And ultimately, we hope, end users won't need to worry about their Verizon Wireless smartphone not working when they travel to Europe (although they will undoubtedly still need to worry about the cost of international roaming).

U.S. users also should not overlook the importance of China Telecom and KDDI joining at the same time as Verizon Wireless. China Telecom is the largest state-owned telecom operator in China, and KDDI is Japan's second-largest cellular operator. We're going to be watching China Telecom's next steps in this space very closely, because historically Chinese carriers have specifically avoided adopting western technologies and instead sought to develop their own solutions. This could signal the beginning of the end of that policy.

Of course the elephant in the room that the announcement ignores is WiMax, the competing 4G technology. Despite being first to market, WiMax does not appear to reach the projected speeds of LTE and, much more importantly, has far less backing from heavyweight global carriers.

Thus describing it as an elephant is probably far too generous. WiMax no doubt has a future in certain key areas such as fixed wireless and greenfield infrastructure builds, but the fact is that the major players are all lining up behind LTE, which makes LTE the hot favourite for the future global mobile standard.

In fact, in a number of ways the world's leading carriers are either acknowledging or finally catching up to technological reality, and this isn't the only announcement from Barcelona that bears this out. Verizon Wireless and Skype have announced that Verizon Wireless will enable Skype calling over its network. I'll have some thoughts about that for the enterprise segment tomorrow.

It used to be an article of faith that telecom carriers knew how to be Washington players and IT vendors didn't. Decades of Washington experience gave the "RBOCs" and "long distance carriers" hooks into the regulatory scene. A CEO like Ed Whitacre of SBC, the forerunner of today's AT&T, spent much if not most of his day on public policy and regulatory matters, including all those lawsuits SBC used get into with other carriers and the FCC. I'm sure all that focus on federal issues comes in handy now that Whitacre runs the essentially government-owned GM.

Software and hardware vendors, by contrast, were babes in the woods when it came to politics. Typically their CEOs wanted to spend all their days working on their company's products ... silly them! When the U.S. government hauled Microsoft into court in the 1990s for trying to perpetuate a monopoly in operating software, much was made of Bill Gates' shock and ignorance over the ways of Washington.

In fact, it was the Microsoft antitrust case that began to radically change this perspective among IT vendors. Now the big, famous players have become heavy hitters inside the Beltway. It's partly in that light that telecom managers should understand this week's headlines about Google wanting to get into the telecom business by building ultra-fast broadband connections.

Google sits on one side of a debate in Washington over the concept of "net neutrality." That's the notion, which Google supports, that providers must be essentially "agnostic" about the applications sent over their networks. The companies that control the pipes -- the telcos and the cable companies -- pretty much all oppose this idea, saying that net neutrality is an appealing-sounding euphemism for outlawing traffic engineering. The carriers are happy to assert that the same concept applied to enterprise networks would get in the way of your making sure that voice, video and certain data apps get expedited treatment.

Of course, you buy these services from the carriers, so traffic engineering is necessitated by the resource constraint you face -- your budget for buying overall bandwidth to dozens, hundreds or thousands of sites. The carriers build these networks, so arguably they're in control of rolling out as much capacity as they want. Naturally they can claim that money doesn't grow on trees even for them, but part of Google's point appears to be that the carriers can do better and Google's going to show them how.

But in order to do that, Google is going to have to go through the slog of partnering with municipalities for rights of way, franchise fees and all the flora and fauna of facilities-based telecommunications down to the last mile. And even they say it's really a testbed, not coincidentally announced just before the FCC is due to release a National Broadband Plan. Whether Google would really push for net neutrality after building a network of their own is clearly the impression they want to give, but not at all certain in reality.

So it's easy to toss Google's initial announcement to the side as being impractical and short of any scale to matter to enterprises. But there are a couple of things to keep in mind as more news comes out about this.

One is that IT vendors really do get peeved at the telecom industry for what they see as insolence and manipulation of the timeline for rolling out universal high-speed access. Some years ago Cisco CEO John Chambers castigated the RBOCs for purportedly costing him measurable earnings per share by being more interested in merging with one another than building out fiber to the home (and indeed, it took cable entry into high-speed Internet access to get the telcos off their duff).

The other thing is that Google has enormous capital, even by telecom standards, to do the obvious alternative to building a network: buying a network. When Qwest appeared to get into a failed negotiation over selling its long-haul network to Level 3, the talks reportedly broke down over a price gap somewhere in the neighborhood of $1 to $2.5 billion. A back-of-the-napkin calculation at the high end of that range shows that a Google could step into such talks for lunch money. They'd simply have to issue about 4.7 million shares of Google at today's stock price, hardly any dilution for current holders of Google's 317 million shares.

Of course, Google almost certainly realizes that the real key to network entry is the local loop. So it would either have to leverage its investment in the Sprint-backed Clearwire 4G network to complete the connection, or pair a local build and long distance buy.

Regardless, when you keep in mind that Cisco is now a leading PBX supplier, the famous names of the IT industry are buzzing all over telecom. If they have mixed motives, not always sincerely expressed, in doing so, let's face it: That would be entirely consistent with the culture of the telecom industry! Google and some others may not be making an impact yet, but they're certainly welcome to the club, and welcome to keep telling us what they think they have to offer.

For as long as anyone can remember, AT&T has been the carrier that's held on the longest to legacy products. In recent times, AT&T has been happy to let users continue to subscribe to its global business dial-up Internet service until they're ready for AT&T's broadband virtual tunneling service. AT&T has also let corporate WANs sail along on frame relay without putting out a marker on ending frame relay orders or contract renewals, as first Sprint and then Verizon have done.

And there will probably be some companies using AT&T for straight-on, long-haul, T1/T3 private lines in the year 2030 just as in 2010.

So it was jarring when AT&T grabbed some publicity at the end of last year with what looked like a request to the FCC to retire the public switched telephone network. AT&T severing itself from POTS, or Plain Old Telephone Service? It didn't seem right.

Understanding AT&T's about-face on maintaining legacy networks requires an understanding of the concept of financial harvesting. One of the best illustrations of harvesting came during an odd period in telecom carrier finance back in the mid-1990s -- basically a few years before and after enactment of the Telecommunications Act of 1996.

Back then, the Internet was emerging in its browser-enabled incarnation as the World Wide Web, the corporate telecom deal culture was thriving, and TV airwaves and telemarketing lines were buzzing with pitches for 10-cent, 7-cent, and 5-cent long distance minutes. Yet when AT&T held its quarterly earnings conference calls, the first question Wall Street analysts would invariably ask was why AT&T had only raised its basic, no-plan long distance rate from 25 cents a minute to 26 cents, not 27 cents. Wouldn't Aunt Mary from Kalamazoo, who would never in a million years switch to MCI or Sprint, overlook a larger increase and happily pay the bill?

AT&T was essentially harvesting its no-plan customers for a revenue stream for as long as these customers existed. And the analysts, almost to AT&T's annoyance, wanted them to do even more of it. Not until somebody rang a bell around 1997-1998 and the analysts realized that AT&T had to compete elsewhere for voice and data business did the harvesting issue start to fade.

Now look at AT&T's situation today. AT&T Mobility is thriving and sales of the iPhone are zooming. AT&T's share of the enterprise networking market is basically what it's been for years, and with the decline of Sprint it's even threatening to establish a virtual duopoly with Verizon.

But AT&T's consumer telephony business seems to be slipping away. Like the incumbent local businesses of Verizon and Qwest, AT&T is losing residential landlines at a remarkable pace, now edging close to 1% a month. The result is the reverse of harvesting: AT&T says it's bleeding from the need to maintain all-copper loops in a mass market that's beginning to reject them, and it wants to get out rather than stay in as long as possible.

Of course, AT&T, Verizon and Qwest get some of their landline customers right back when the same households buy their broadband packages. And the broadband and telephony customers that the cable companies win instead represent fair-and-square marketplace losses for the telcos. But that only seems to reinforce the reverse-harvesting instinct, feeding AT&T's argument that it needs to massively shift resources.

Aside from the fact that AT&T in the meantime hasn't lost its near-monopoly dedicated access business in its local territories, here's the problem with simply accepting AT&T's conclusion that the PSTN should be retired: From a business user standpoint, there's a little more to the legacy network than consumer migration to cell phones and broadband. As our friend Eric Krapf of VoiceCon/NoJitter has already pointed out, AT&T hasn't quite defined the PSTN to be retired, leaving us to assume they mean everything. But what about Class 5 switches and their unique functionality that's still in the process of being emulated in various VoIP services? What about the fact that many of the poles, trenches and conduits are the same for both older and newer services?

And what about all the people who make calls to the businesses who make up the enterprise market? If they don't have a cell phone or a broadband triple-play package, are they out of luck, and your business out of a sale?

Many business customers would benefit enormously if AT&T does what it says that PSTN retirement will free it to do: help create universal, affordable broadband. Widespread remote-agent call center functionality, broad-based telecommuting, and many facets of unified communications do rely on a pervasive broadband network.

But it's important to realize that AT&T is responding in a classic "lobbying" fashion to the current broadband stimulus, which requires the FCC to develop a national broadband plan. In effect AT&T is saying that if there has to be universal broadband, there can't be universal narrowband. That's either one of those unintended consequences that can result from regulatory initiatives, or an unproven assertion of investment motivation by an experienced Washington player.

At this point I think there are two key things for corporate telecom professionals to remember. One is that AT&T, with all of its legacy pressures and characteristic behavior patterns, has many piece-parts. In this case we're clearly talking about an AT&T whose heart is the former RBOC SBC, not the former interexchange giant.

The other is that some of the regulatory nuance got lost in some of the initial reports. What AT&T is supporting, in the context of a question posed by the FCC, is the initiation of a Notice of Inquiry about the PSTN, which is a more preliminary proceeding than even a Notice of Proposed Rulemaking, which itself has many procedural checkpoints before it results in new rules. It's unlikely that AT&T really wants to lose all its POTS customers in one fell swoop right now. More likely, it's just drawing a line in the sand.

So we'll have some time to watch this, and the market will invariably shift more along the way. Let me know if you have thoughts of your own on this fascinating matter that threatens to turn the tables of telecom history upside down.

In the telecom industry, life is different when your name is AT&T.

Recent network difficulties that iPhone users have experienced in big cities such as New York and San Francisco are reminiscent of any number of past capacity and congestion incidents with AT&T services. So is AT&T's stated determination to furiously catch up -- and, in the current situation, also blunt Verizon's "war of the maps" 3G claims now that AT&T has dropped the legal attack on Verizon's ads.

Going back many years and generations of technology, AT&T has often given the impression of being constantly surprised by the popularity of the new services it brings to market. Incredibly, this tendency seems to carry over to whatever entity newly obtains the AT&T moniker as the makeup of the company changes.

Is there something about hanging the old "American Telephone & Telegraph" legacy around your neck that causes this phenomenon? Perhaps it's really because the AT&T brand is so powerful that it pulls in users beyond what the company originally plans for or, sometimes, merits.

During my time as a writer at Network World from 1994 to 2001, this kind of thing happened at least three times, and veteran telecom managers may remember all of these incidents:

-- AT&T was late to market on frame relay, having been beaten by the "first WilTel," an innovative carrier that later got sucked into the vortex of WorldCom mergers, and then by Sprint. AT&T executives had poor visibility into the popularity of the service, and within a year or two ran out of capacity and had to quickly order up more "Stratacom" (later Cisco) switches to catch up.

-- Later in the decade, AT&T management missed the speed of a trend by branch offices to move from switched to dedicated access. (Believe it or not, back then the only dedicated connection to interexchange carriers that even some sizable offices had was a 56K bit/sec frame relay link.) Rapid price-downs on dedicated-to-switched voice, plus growing data bandwidth demands, led many offices to finally order T1s. AT&T literally ran out of T1 ports in a number of POPs and had to hustle to recover.

-- Around the turn of the decade/century, capacity problems bedeviled the original, pre-Cingular AT&T Wireless network. This caused significant embarrassment for a veteran AT&T wireline executive who had lost a battle to become CEO of the main company -- that prize went to an outsider, Michael Armstrong, which is a whole other problematic story -- and who tried his hand at the wireless operation instead.

Make no mistake -- AT&T is responding now. In fact, AT&T's huge $18-$19 billion capital expenditures budget for 2010 includes a doubling of wireless network investment. That throws light on the capex-vs.-"free cash flow" paradox that we've highlighted as a key financial point in evaluating carriers. A modern-day carrier can almost never declare its networks "finished" and push away from the table.

There's another factor driving AT&T's situation besides capacity, and that's the urgency of the applications themselves. For significant portions of your end-user base, gone are the days when they considered mobility a second choice to fixed lines. We've noticed this in increasingly strict service management requirements demanded by enterprises in wireless competitive bidding -- device delivery, line activation, feature and call plan changes, that sort of thing.

Often telecom managers who do recognize the difference in maturity between wireline and wireless services say they're nevertheless driven to demand stricter wireless metrics by their end-user base. Not only AT&T but the other wireless carriers are learning this quickly as well.

And AT&T's 2009 earnings announced yesterday? They came in at $12.5 billion. And look at this: $17.1 billion in free cash flow even after capital expenditures. How about that?

Obviously there's no shame in asking for a great deal and a great network all at the same time -- even from, or especially from, the greatest legacy name in the telecom industry and one of the most enduring brand names in the history of business.

A growing number of large enterprises are reporting various experiences in sounding out and testing AT&T and Verizon on SIP trunking services. The big carriers are moving at sometimes uncertain speeds to completely leap into the market with aggressive proposals that actually leverage the replacement of legacy elements in their own incumbent infrastructure.

But there's no question about the speed of SIP trunking's ramp-up at the other end of the carrier market -- the small-business CLECs and alternative carriers. One after another they are jumping head-first into the SIP trunking pool. And if past experience with new carrier products is any guide, you'll be hearing about sales calls from these companies to your business units and branch offices, no matter how many protections you have in place for who's authorized to buy telecom services.

A key point came in early December with the announcement of SIP trunking from XO Communications. XO is a fixture in the telecom industry that's hung on through Chapter 11, mergers, technology migrations and strategy shifts. It's primarily seen in the small business market, although it has a clear strategy to move substantially into the middle market and occasionally provides circuits or hosting to large enterprises (and would like to do more).

But XO is hardly alone. Individual companies with no particular play (yet) in the enterprise market, and much less of a legacy in the 1990s CLEC boom and bust, are clearly putting SIP trunking front and center.

Speakeasy out of Seattle, which began as an Internet cafe company and is now actually part of Best Buy, offers an "Integrated Voice" package that neatly offers SIP trunking provided you have an IP PBX at a centralized voice location (or old-fashioned PRIs if you don't).

Cbeyond out of Atlanta offers what it calls its BeyondVoice with SIP service, boasting its early role in helping develop the "SIPconnect" standard. SIPconnect, as we've previously discussed, is a kind of global certification label that IP PBX makers and carriers can use to specify that they adhere to a certain approved subset of SIP procedures, and may be appropriate for locations without large-enterprise, mission-critical requirements (like full-featured contact centers) or strict testing requirements.

And our friends at Network World just reported on the new "Dynamic Office" service from Windstream Communications based on SIP trunking. This one is particularly intriguing because Windstream is actually an independent ILEC -- an incumbent, not alternative, local carrier based in North Carolina that serves areas that the big incumbents either never served or offloaded.

Clearly there are some cautionary items with regard to these new services. Most small SIP trunking carriers will in fact rely on SIPconnect or other methods to ensure compliance rather than engage in individual carrier-PBX certification tests. Some of them don't offer MPLS, so what you're basically buying is integrated voice-data access over dedicated Internet lines to bring voice streams from branch offices to the SIP trunking core and out to the public network.

And you have to be aware of any alternative carrier's financial status -- XO, for example, has an odd set-up where it's 89% owned by Carl Icahn and his affiliated companies. It's still not really profitable and probably not independently viable without this single backer, which doesn't need to be a large concern until you start using them strategically rather than tactically.

But all of these SIP trunking carriers are leveraging the now solid penetration of pure IP PBXs from Cisco, Avaya, ShoreTel and others. And they're certainly less beholden than the big carriers to separate voice trunks, unconverged dedicated access lines, and old ISDN infrastructure. It's great to see them pressuring the market from below, and that can only bode well for the acceleration of SIP trunking into the large enterprise market in a truly competitive, financially compelling way.

One of the things about being on the user side of the telecom business is that the statements the carriers make to Wall Street can come across as funny or ironic. They have to brag and spin to financial analysts about what gobs of money they're going to make, all the while poor-mouthing themselves to you and us until they finally realize they have to cut prices in a competitive bid.

But I get all that as part of the game, so I let the financial facts speak for themselves (such as the outsize operating margins that Verizon Wireless, in particular, is currently posting). Meanwhile, there's a qualitative as opposed to quantitative aspect of the Wall Street vs. marketplace divide that's potentially even more telling about a carrier's suitability as a supplier going forward.

You want to be able to tell from a company's Wall Street presentations and statements that their C-level folks are at least living in the same world as their own customers. On this score, Sprint Nextel Corporation, even though it's hardly the financially weakest carrier compared to other, smaller U.S. players, seems to have a particular disconnect with its historic installed base.

This difficulty with Sprint is, to some extent, simply inherent in its business model. As an overwhelmingly wireless carrier in terms of both revenue and corporate identity, Sprint isn't in much of a position to be pressed by Wall Street to obtain core, mission-critical enterprise network wins. But odd disconnects occur even in the discussion of their wireless financials.

In one recent note from a top Wall Street analyst following his meeting with Sprint CFO Bob Brust, Sprint was quoted as determined to improve its revenue even at the expense of further deterioration of its wireless profit margins. That actually sounds pretty good for customers, right? More effort to win business with lower profits?

Not really. The problem is that Sprint tends to get its revenue fixes largely by boosting its share of point-of-sale, prepaid wireless plans, which is far from the world of corporate wireless (whether on pooled or pay-as-you-go plans) and has little or nothing to do with its Nextel Direct Connect base. That's largely what the analyst was referring to here.

The analyst, who is one I've known and respected for a pretty good record on telecom stock calls for most of a decade, noted that Sprint's "postpaid" base -- what most of think as simply normal wireless monthly subscription plans -- has been declining. And even the way that Sprint goes about getting its revenue up on the postpaid side has an uncomfortable side-effect, he explained. On consumer sales as well as in good business deals, they do provide subsidies for new devices compared to their manufacturers' costs, but given Sprint's cost structure (including debt), that invariably must be offset with operating cost cuts.

And it's on the corporate spending -- both operating expenses and capital expenditures -- that Sprint especially risks falling behind the competition. Although Sprint is officially planning a slight increase in capex this year, this analyst noted that in the end, capital spending may be flat given Sprint's statements to him about its requirements abating on mature buildouts.

Well, any time a carrier makes statements to the effect that it doesn't have to spend as much on existing networks, a red flag goes up. I first began hearing this line from troubled carriers in the bankruptcy era in the early part of last decade. It invariably coincides with that carrier's stagnating in the marketplace. Telecom is a capital-intensive business, period. Time marches on, and whether it's bandwidth or spectrum upgrades, network maintenance, or generational technology migrations, capital needs cannot be easily foregone.

Sprint is a complex story. Some of its capital requirements are in effect assumed by Ericsson (through its Network Advantage program) or 4G WiMax carrier Clearwire (in which it holds 51% of the stock). Sprint wireline customers who've stuck with them by and large like them. Even when Sprint is second banana to AT&T or Verizon in an enterprise, relations generally remain good. On the wireless CDMA side, Sprint is relatively good to negotiate with, and the Nextel base is, up to now, largely loyal.

But telecom managers have increasing difficulty thinking of Sprint as a long-term partner when they know their senior managements increasingly have the image of AT&T and Verizon as the only two full-fledged carriers based in the U.S. Capital restraints, endless talk of prepaid wireless for the lowest rung of the consumer "cell phone" market, and the apparent invisibility of the enterprise wireline market to its executives are taking its toll on Sprint's corporate market image.

If Sprint appears to drift away from the center of corporate telecommunications culture, we will continue to see users hesitate about including them strategically. We hope that Sprint senior management takes note, and that potential acquirers of part or all of the business are factoring this into their plans.

The next time you go out to bid for anything, I hope you can stir up a fight between AT&T and Verizon that's as good as the one they're having on television and in federal court right now.

Verizon is sticking it to AT&T in U.S. TV ads for lacking 3G wireless coverage. Here's Verizon's ad technique: Show big, white spaces around the USA on what Verizon says is an AT&T network map. A putatively outraged AT&T has gone to court to stop the ads, claiming that of course it has good wireless coverage throughout most of the country, and the average viewer doesn't realize Verizon means a more-advanced network exclusively relying on 3G technology.

Verizon says that AT&T just can't handle the truth, and the ads do clearly use the label 3G. But some analysts say that Verizon is pushing the edge of how it presents its claims because it still can't match the momentum of the iPhone. So far the court has declined to stop the ads, but the judge is continuing to hear the case, and meanwhile AT&T and Apple are putting up their own ads touting both coverage and unique capabilities as much as they can.

Finding telecom carriers in court is hardly a new phenomenon, but I think this contretemps has a much different feel than the old days when the "RBOCs" and the "long distance carriers" would slug it out before the judge. In my view, the war of the maps has the potential to benefit both Verizon and AT&T at the expense of everyone else, no matter how it turns out. That's because the highly publicized incident furthers the Coke-and-Pepsi-fication of the telecom industry, something that the budding duopolists have to realize beneath it all.

In marketing, choosing to attack another vendor by name without being prompted to do so is, in part, a subtle way of paying respect to them. Besides, both carriers are continuing to build their networks, and the long-term potential for leapfrogging each other in capabilities is in place.

On a customer-by-customer basis, obviously AT&T and Verizon are playing for keeps, and they mean it when they battle for each customer contract. But as considerations of end-user preference on both carriers and devices seep further into the realm of corporate telecom procurement, image and status threaten to create a two-tier system where corporate executives may be forced to consider only a diminishing slate of brand-name vendors for large group purchases.

If those brand names cite only each other -- everywhere from the point of sale to Super Bowl ads -- it could create a self-fulfilling prophecy whereby they split the lion's share of the business. And the fact that in large parts of the country, either AT&T or Verizon can bundle end-user telecom and media needs in a way that Sprint and T-Mobile (or anyone else) can't helps keep these brand names on end-users' lips.

Thankfully, we're not at the point yet where wireless competition has been reduced to an either-or. But in the broad strokes of the telecom industry's future, I'm willing to bet that Verizon has finely calculated what attacking AT&T in this way means, and AT&T understands the publicity it's gaining from a legal war with Verizon, no matter how plainly it seems to many people that Verizon's ads are technically clean. Keep an ear out for how your user base talks about telecom vendors, for surely they're talking about them more than ever before. Ultimately, that's part of what all this is all about.

Cutting costs is the name of the game in a tough economy, and many corporate telecom managers are dealing with cost cuts in two distinct senses.

Some U.S. and overseas carriers have continued to announce layoffs and other cost-reduction measures following their latest earnings, and such moves always raise the possibility of reduced service to their customers. On the other hand, cost-reduction programs in many telecom managers' own companies are driving their current procurement projects, so you can't automatically fault all carrier cuts when everyone's in the same boat.

The key to evaluating carrier cost cuts may be whether they indicate fundamental rather than marginal or temporary shifts in the carriers' business. To the extent that carrier cutbacks both reflect and exacerbate problems for enterprise users, they're a serious concern for both day-to-day and strategic sourcing considerations.

Two such carrier cost-cut programs are worth examining under this framework. Sprint specifically announced this month that it will eliminate 2,000-2,500 positions on top of earlier layoffs. BT, for its part, reported this month on a set of ongoing cost-reduction measures, including what it rather charmingly labeled "people and transformation costs," some of them focused in its global services unit that sells to multinational corporations.

On the surface, the two situations do not provide a neat parallel. Sprint's cuts are related to its overall business, which is heavily focused on wireless. They deal with the paradox that Sprint is not holding its own vs. the more diversified AT&T and Verizon even in Sprint's own area of specialization.

BT's situation relates largely to a specific part of its business but one important to corporate users -- its attempt to compete against AT&T, Verizon, and Orange Business Services for global or regional contracts. Unfortunately for BT, this is an area where we've observed it's not winning all that many new deals.

But the way in which the two situations resemble each other is the potential for the cost cuts to have a "treadmill" effect. They provide relief that satisfies Wall Street analysts but run the risk of making the carriers even less attractive to customers, reigniting the original problem.

Sprint has suffered from low profit margins in its wireless business compared to competitors simply because it gets fewer new subscribers than AT&T and Verizon and still loses more through churn, even after improving its customer service somewhat. Strikingly, Sprint said that some of its new personnel cuts would be in customer contact centers because they're getting fewer complaint calls. But that only recalls that poor staffing in call centers was part of Sprint's problem in the first place, one that it was too slow to recognize the first time around.

The Wall Street analyst reports that I get also note what they call Sprint's "negative operating leverage" from the fact that more than twice as many Sprint customers leave to go to AT&T and Verizon than the other way around. That's just a fancy way of saying that Sprint has to provide more equipment subsidies, more prepaid plans, and other profit-reducing concessions to stay even. There's the treadmill factor all over again.

The manifestation of BT's situation takes a different form. Some of our consultants have noticed what comes across from BT as a re-assessment of its stance on multinational bids. Its bids are often not as aggressive or responsive as they should be in the face of eager competition from the U.S.-based big carriers or major regional players in Europe and Asia. Maybe they're fearful of sacrificing margins, but remember: This is for the business of global brand-name companies, where a loss of position could cost BT for years to come.

Of course, the financial markets can at first react positively to cost-cutting moves even if these moves threaten to provide no long-term marketplace benefit. I know this is somewhat counterintuitive, but when a carrier says it is doing something to "increase free cash flow," or an analyst says that a certain carrier action does result in "increased free cash flow," that is actually potentially worrisome to enterprise users.

Free cash flow is nothing more than dollars (or another currency) in minus dollars out, making no distinction on what those dollars are spent on, including capital investment or customer-facing positions. It's actually not a measure treated under Generally Accepted Accounting Principles, because there's a good reason for GAAP to calculate earnings based on differential treatment of money spent by companies (even acknowledging the widespread abuse of GAAP rules earlier this decade).

Of course, free cash flow is highly important to determine whether a company will survive or not. But now that the telecom industry is not on the brink -- it's actually been one of the better-performing sectors in the global recession -- corporate users are hoping to deal with carriers that can thrive as well as survive while still making very good deals. That depends on ongoing investment and consistent operations.

This framework for evaluating carrier cutbacks is a useful starting point even when the facts differ among situations. We'll be continuing to examine the potential "treadmill" impact on the two carriers mentioned here as well as others. Feel free to suggest those you would like to see covered as well.