I prefer that Att and MSOs spin off ATHM. The physical plant is not part of ATHM's business. This distribution system was inherited from the circumstances of the company's birth. ATHM is a broadband ISP which provides basic service, specializes in delivery of pay-per-view media, and is the supporting medium for other content providers. AOL, Road Runner, and others will be its competition. They all will ride on and we will pay for the distribution system which will be a separate and competitive market.
ATHM's current arrangement under the consortium is restraint of trade and this eventually will be affirmed. It isn't in ATHM's interest to stay protected under this apparently favorable umbrella, because it keeps them bogged down with the costs and intractable nature of distribution so that they are distracted from realizing their business objective. Once divorced from distribution their margins would rise because competition would force them to hatch the leverage of added value broadband media. You'd have a great investment.
The FCC and DOJ can't create a competitive market in distribution, but if there is only one consortium of cable interests, they will have to find a way to break it up. A competitive distribution system market was evolving naturally with Comcast's attempt to buy UMG, but Armstrong manipulated the FCC and convinced them that nothing could be made competitive until it existed. This is called expediency and Att made a horrible mistake by interfering with the natural process, if only because the purchase of UMG will be a massive drag just when they have to expend a great deal to widen the build-out. Now there is rising pressure to do it faster as a concession to communities with the added kicker to prevent MSOs from being granted more ATHM stock. This is sinking Att's ship and casts doubt about whether they can follow through to scale. If they do, what then? Att would have an insurmountable advantage in broadband. They better hope the government realizes a prohibitive cost of entry monopoly is developing, and force the distribution consortium to split into at least three pieces. |
