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TWST: What, over the past 12 months, have been the key issues and trends that have set the stage for the next 12 months within the telecom/Internet network?

Mr. Powers: You’re starting to see the convergence between the telecommunications network and the Internet. Over the next few years, the telecom network itself, which has been originally engineered to carry voice traffic and which has had data traffic grafted onto it, is going to reverse that architecture. You’re going to see the emergence of networks that look a lot more like the Internet with a provision for voice and video traffic grafted onto them.

Beginning last year, a number of events made it come together more slowly than most people anticipated a year ago, primarily the financing situations for newer emergent carriers during the last year, which has slowed down some deployments. The overall trend toward being a network that is more focused on high-speed data and carrying voice traffic on top of that will certainly continue over the next couple of years.

In the Internet sector, certainly we have been seeing, and we’re going to see, a lot more high-speed access. It’s become a mainstream consumer product. The biggest area where you see that right now is over cable TV networks. There’s an increasing number of people getting high-speed access through DSL, and you’re going to see a significant increase, over the next couple of years, in wireless high-speed Internet access.

You’re going to see the telecom network itself evolve into something that looks more like a high-speed Internet, and you’re going to see a lot more consumer access to that network over DSL, cable, and broadband wireless connections.

TWST: Specifically on companies, who are the top picks? What separates that top pick from the rest of the group today?

Mr. Powers: There are a number of companies presenting at the conference that we think will be very important players in some of these technologies.

On the Internet access side, EarthLink (Nasdaq:ELNK), a Strong Buy rated stock, is the second largest Internet service provider in the US, predominantly with a dial-up subscriber base but with tremendous growth in broadband subscribers. The key issue for a company like EarthLink is how well they can transition their dial-up subscriber base to the broadband world. If you look at the earnings of a company like EarthLink, they are heavily influenced by the number of subscribers that they add each quarter, because that’s where their marketing dollars go. To the extent that the customers they add are replacing the attrition in the existing customer base, they can spend a lot of money without any real net gain in subscribers. So the answer to that, in our view, is for the company to, instead of losing customers as they migrate toward higher-speed access, convert their dial-up customer base into a high-speed access base. As they’re successful in that, you’ll see a significant improvement in the earnings situation for the company.