There are too many hands in the pot at some point. My reference was to voice calling revenue.
Consider a single carrier scenario, where the incumbent is working alone. Take a $0.015 cent per minute local calling rate and amortize it over the ILEC's aggregated cost base for delivering that service, and you wind up with $0.006 cents of gross profits, for discussion's sake, for that one minute of calling when it is the ILEC alone delivering it.
Now, add another player to the fold - in this case the VoDSL CLEC- and now divide this gross profit number (not necessarily evenly) by 2, since the calls are using Telco switching, OSS and local subscriber databases. We wont discuss SS7 or other long distance costs associated with advanced information networking for now, in order to keep it simple.
Now take out the fixed costs of both the ILECs monthly charges for the local loop, and the costs for MFNX's monthly charges for the fiber rings (which I will assume they are), and the CLEC's take comes down even further.
If there were two or three additional players in the act (like landlords with their hands out for special easement and riser franchise surcharges, or shared-tenant costs for renting the lateral cable pairs, etc.) then you could be looking at five or six slices of the pie, causing excessive dilution to take place at some point.
There is something far more dramatic happening here than meets the eye at first blush. The valuation for voice services has been suspect for some time, now, given the downward spiraling effects caused by ever-increasing competition and the unyielding advances in technology, a la Morres Law.
The hidden message here is that these types of scenarios may be marking the beginning of the end of the dependency on voice calling, alone, for some CLECs to make a living. In fact, I know that this is the case already.
Think about the arbitrary-as-they-may-be numbers above, and then think about where they will be in another two to five years. It shouldn't be any wonder, then, that most CLECs who want to survive have joined the data services bandwagon.
So, what you were "missing" in my earlier message may not have been very obvious, initially. Is it clearer now?
Aside from these arithmetic exercises, though, I was also pointing the strage bedfellow relationships which seem to be emerging, and the ironies associated with partnering with players who will compete with their parents.
Regards, Frank Coluccio |
