The headlines are still filled with the latest allegations against MCI/Worldcom. Incumbent operators are still shedding wire line customers, employees, and expenses. Businesses are still shying away from new investments in IT. And debt-free carriers are emerging from bankruptcy in time to drive the few remaining survivors into bankruptcy. Why would any sane person invest in telecom today after the biggest bubble in history?

But judging by the rally in telecom stocks in the past year, Wall Street is willing to bet the worst is over. Even venture investors are selectively investing again. From an end market perspective, venture investment in communications (broadly defined as telecom, networking, and related software and semiconductor components) still leads all industries, even ahead of life sciences and software. Investment in wireless (both hardware and software) startups alone topped $lB in lQ03. What are the key post-bust trends emerging in telecom?

Live on the edge
Many of the key bottlenecks and opportunities of the future are in the edge of the network. Despite all the hoopla about broadband and the last mile during the bubble years, the industry is still in its early days. DSL and cable deployments are just reaching critical mass in many countries with prices approaching parity with dialup. New fiber and wireless (both fixed and mobile) technologies for the last mile are just beginning to become viable economically.

Turn underachieving networks to overachievers
After a massive investment cycle in network infrastructure and bandwidth, there is an acknowledged need to stimulate demand. New applications, services, and usage patterns are emerging to take advantage of ubiquitous wire line and wireless broadband connections. Digital content distribution (MP3 ‘s, DivX, and even PDF’s) and online gaming are early examples. Satisfying the “need to be heard” whether through blogs or voting via SMS is another intriguing segment. There are many opportunities for innovation not only in developing new applications but also in creating the tools and resources essential to large-scale deployment and acceptance ofthese applications.

Feel the VoIPhoria
After many false starts, 2003 marks the year that Voice over IP (V oIP) has finally arrived as a viable mass-market alternative to traditional telephony. Although VoIP is an impressive technological feat, its impact on the economics and business models of the industry is even more significant.

It accelerates the shift away from the metered usage of the telephony world to the flat-rate pricing and service bundling ofthe Internet era. VoIP also serves as a platform for providing value-added services such as virtual phone numbers and personal assistants. And wireless VoIP via WiFi is just around the comer.

Emphasize form as well as function
The proliferation of communications into every facet of society places significant demands on user interfaces and form factors. Technological developments as disparate as voice-driven user interfaces and novel displays and battery technologies are likely drivers of future growth in usage.

Follow the Korean teenager, not the Fortune 500 CIO
The technology industry (and Silicon Valley in particular) has had a difficult time adjusting to reduced business capital investment. The dependable enterprise adoption cycle for IT and communications provided a safe haven for many startups and a desirable risk-reward profile for venture investors. However, future growth will much more likely emerge from consumer applications and developing countries. There are countless examples of this trend with the surge in wire line and wireless gaming, camera phones, and of course, file sharing.

The fickle nature of demand, lack of expertise in mass marketing and distribution, and the low prices (and presumably low margin) demanded in these markets has traditionally discouraged many entrepreneurs and venture capitalists. It is essential to address the concerns and participate in these markets.

Wireless Fidelity or Profitless Prosperity?
WiFi has captured the imagination of many. In fact, it has been too successful in attracting attention as one of the rare success stories of the past few years. The WiFi market has been transformed into a cut-throat commodity business about to be devoured almost entirely by established technology and service providers before it has even grown to appreciable size. What is good news for users is bad news for WiFi vendors.

Innovation in telecom has not stopped. It has merely shifted to address changing needs and new bottlenecks. Successful startups need to identify the bottlenecks of tomorrow.