David Dornan, AT&T chairman and chief executive, said during a Tuesday (June 3) keynote at Supercomm here that spending on optical core transport was virtually out of the question.

Such an observation might not be unusual for an incumbent local exchange carrier, but is coming from an interexchange carrier specializing in long-distance transport. Dornan's message reinforces the commoditization of physical-layer transport equipment that continues to rule in global telecommunications markets.

Dornan said the number of service providers may shrink within a year to half its current number, even though the number of carriers already is a fraction of those present in the late 1990s. Given the debt overhang and physical network overbuild of the boom years, he said, shrinkage is probably a good thing.

Unfortunately for service providers, OEMs and component suppliers, he said, there is no money available for expansion, in the form of either debt or equity. "What we are left with is the ever-receding 'imminent' recovery," Dornan said. "Capital was over-abundant, now it has fled the sector completely."

Dornan said AT&T responded to "false economies in our industry created around fraud" by keeping its head down and reducing corporate debt from $52 billion two years ago to its current level of about $12 billion.

Of the $3 billion in new spending at AT&T this year, some $500 million will be for such initiatives as design and deployment of simpler contract structures, providing unified billing systems, moving to customer self-provisioning of services—particularly VPN services—and extending secure intranets to WiFi hotspots.

Part of AT&T's motive in funding the Cometa nationwide WLAN service network, he said, was to make wireless LANs a regular, secure part of carrier networks.

Dornan said AT&T will move to a global network by the end of 2005 based on Internet Protocol and Multi-Protocol Label Switching, using multiple-service edge aggregation devices. The big spending on new hardware will thus be at the edge of the public network, he said.

Core transport may need minor upgrading as it shifts to an all-IP infrastructure, Dornan added, but transport cores will not be a key area of carrier investment for the foreseeable future.