Recovery in the telecoms industry is being hampered by a glut of fibre optic cable, warn US analysts.
Over the last six years a telecom boom saw companies build vast, expensive networks of fibre optic cable to carry the coming boom in internet traffic.
Russ McGuire, TeleChoice chief strategist, estimates that only 22 per cent of the fibre on the 22 routes it studied is used.
Since the crash, expensive unused 'dark' fibre optic networks are causing problems for debt-strapped telcos.
Scott Cleland, chief executive of the Precursor Group, a telecom investment research firm, said it will be years before businesses will need all the capacity. "We're off-the-scale overbuilt," he said.
The result is that telcos have had to slash their prices to compete with each other.
"The price of a T1 connection between New York to London, for instance, has fallen from about $10,000 a month in 1997 to about $1,000 a month," said Cleland.
The result was a wave of bankruptcies and layoffs among telcos overwhelmed with debt. But it is unlikely that telcos will start to make profits until they are able to use this redundant cable, he said.
McGuire predicts that once the telecoms industry consolidates it will return to health, although he thinks that will leave just AT&T, WorldCom and "two to three others".
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