2009 business risks

The 2009 Ernst & Young business and risk report is now available. The predictions that E&Y has made in previous editions of this report have been fairly accurate, so I always look forward to seeing the next edition of it. Like the reports from previous years, this year's report has a few interesting things in it.

The first thing that I noticed was an obvious non sequitur by Edmond Escabasse. He's the CEO of Asialis and a member of the board of directors of ParisTech Telecom. He's also the person who wrote the section of this year's report that talked about how regulation, convergence and the evolution of economic models are important to businesses. Here's what he said.

In the complex world of telecoms, care needs to be taken to avoid confusing industry drivers with sector risks. Instability is driven by a number of factors, such as the capital intensive demands of infrastructure, constant technological disruptions and the rapid rate of service development. Taken together, they make for an industry that is as unstable as it is innovative.

He then follows with this totally unrelated statement.

In this light, regulation is key to ensure that all players get fair remuneration for their work, avoid economically unjustifiable network migration and are allowed to cooperatively evolve with other segments of the industry.

It's not at all clear to me why regulation is needed to ensure that companies make a fair profit, don't make bad investments and negotiate mutually-beneficial deals with other companies. Shouldn't successful companies do these things on their own? If they can't, they probably shouldn't be in business. Perhaps Mr. Escabasse's view of the world has been affected by the telecom bubble of 1997-2003. But even if this is the case, it's not clear why regulation will keep managers from making bad decisions, which was really what caused the telecom bubble.

One thing that's interesting in this year's report is the fact that there a new threat to businesses listed. This year "business model redundancy" is the 9^th biggest threat, and appears on the list of the biggest threats for the very first time. This is a threat because "technological change and industry transitions are making long-established business models obsolete, forcing industry-leading firms to reinvent their corporate strategies and structures."

This reminds me of the hearings before the Subcommittee on Economic Goals and Intergovernmental Policy of the Joint Economic Committee, back in June of 1982 when the Post Office tried to get their monopoly extended to cover email. The Post Office's pitch, "The future of mail delivery in the United States," is hard to track down these days, but it shows how they tried to justify this. Luckily, the Postal Rate Commission and the Federal Communications Commission didn't let them do it, and the use of email became widespread. And you didn't need to deal with the Post Office to get it. That's a bit of email history that's probably not widely known.