Is BellSouth being smart or stupid in avoiding the merger mania now sweeping its business?

Rivals and investment bankers say it's stupid. BellSouth must either eat or be eaten, they claim, and once SBC has finished eating AT&T it wll chow down on BellSouth.

Maybe yes, maybe no. It must be admitted that rivals who've merged, and bankers who are selling deals, both have reasons to diss the company refusing to dance.

But there's another way for things to go. Because while there will soon be fewer players in the telecomm space, there will also be fewer real assets.

Real assets in the future will include cash, spectrum and bandwidth, by which I mean fiber bandwidth. And maybe, just maybe, the second will be more important than the first.

Right now fiber is practically free. But this will not always be the case. As core requirements continue to increase the glut of the late 1990s will be worked off. Some of that fiber will never be lit. There will be a need for more cables, which does cost money to lay.

Moore's Law of Fiber means that a single cable could easily replace capacity from many existing cables, and at less running cost. Someone who puts in long distance cable in, say, 2007 could easily obsolete many competitors, and bury them with lower costs.

Free spectrum is best exploited with cash and backhaul. It's plentiful, thanks to Moore's Law of Radio. But, thanks in part to government greed, not all spectrum will be free. Those with owned spectrum assets will have advantages over those without, both in terms of providing real service and providing flexible backhaul without fiber.

What's going to happen, over time, is that all telecomm services will become more like cellular. That is, the economic model will be to sign fixed-length contracts, backed by equipment giveaways, so upgrades are as simple as getting a new contract, and a new box, maybe from the same provider and maybe from someone different.

BellSouth could be set up well for such a world. If it's wrong, it can sell out at any time. Or it could buy Qwest, which is in even-weaker position than BellSouth is.

BellSouth, in the end, is neither clued-in nor clueless. It's conservative. In finance, that's not a terribly bad thing.