Jim- Well I can't agree more with your point number 1. But the rest of your points I see problems with.
Take the CD-ROM burner argument. You have the option of waiting for a DVD burner. But a SP(I'm going to use Service Provider to cover ALL telcos and cablecos of any type) doesn't have that luxury when a customer calls him wanting to throw money his way. The SP can't say, "Wait just a little while until we can run fiber to your home." If you tell the customer, "Okay, give us a month." That even brings laughs.
The customer can even ring up the WSJ and the Journal can do an article on how slow the SPs are so everyone can get a laugh. So the SP has to say, "Okay. We will get it for you in two days." Of course it's a T1, E1, SDSL, HDSL, HDSL2. A la Frame Relay, TDM, POTS, etc.
Another difference with your CD-ROM vs DVD example. Say a SP sees the demand, of which there is now plenty due to the Internet. The SP knows they have to prepare or be crushed by their competitors. TODAY they have to order something. So the SP orders up a multi-million dollar Lucent 5ESS circuit-switched piece of hardware. Or they order up a TITAN 5500. Do they load it up to full capacity over a week? No. It runs at a miniscule capability initially. Then as the orders come in, the SP adds capacity as required. Something that may take years to max out. In the meantime, the SP is paying for these multi-million dollar boxes by collecting the outrageously expensive $40/month rate that residential customers, luckily and reluctantly, are willing to pay. It takes a lot of those checks, a very long time, to pay for that beautiful new 5ESS machine.
Another problem I see with your CD-ROM vs DVD example. Say the customer rings up the SP. Customer says, "I need this number of voice lines and I need this bandwidth for data, and I need this link between cities, and I need, blah, blah, blah. And oh by they way, I'm only allowed to spend exactly this much for it. Not a penny more our my CFO will kill me." So what does the SP tell this customer?
Does the SP say, "Look we have a need technology that will blow you away. It will give you HUGE capacity that will last you to the year 3000. In return for this, all we ask you is pay for it all upfront with these HUGE monthly bills we send you. Otherwise we can't afford to deploy it." Or does the SP says, "Okay. We can give you exactly what you want. Exactly what you need. Exactly the low, low, low price you want it at." Which do you think the customer will go for?
Ultimately of course, you and I end up in the same place. But I think reality, ie. money constraints, will make it take a much longer than technology constraints.
Thanks for the discussion. It's talks like these that will help prevent me from getting caught on the wrong side of my investments. As changes do inevitable occur. -MikeM(From Florida)
PS What I wrote above is a layman's version of a much more technically oriented, and well written viewpoint from a person that obviously knows more about the details of what a real life SP faces than I as an investor. See their outstanding post at:
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