I would remind you that neither Bell Atlantic nor NYNEX has had anything like an HFC technology plan since the days of the planned TCI acquisition -- and those HFC plans were clearly driven by a desire for broadband infrastructure synergy in the new merged company, not any sense that HFC made economic sense as a technology direction for a LEC. By my last count, only ONE of the eight major LECs (RBOCs + GTE) in the US have adopted HFC as a technology of choice for network migration and upgrade (viz.,Ameritech). USWEST is a special case - they bought coaxial networks outside their telephone area as an entry vehicle for their video business, and their experience upgrading older coaxial networks to neighborhood node HFC nets has not been without its difficulties (they might put that much more strongly!)
Let's remember this is all a business, not a technology senior class project, and also keep in mind a virtually enexorable challenge: a fixed-cost HFC network needs >40% penetration to begin to look economic if the major revenue stream is video (with data/telephony secondary.) Cable has 60% - 72% penetration in major markets, and multichannel video penetrations may rise from the impact of competition on prices -- say, 10% from the top end of the range, to 80%. If the LEC takes away half of the cable company's business and gets half of the new business (remember - they built a me-too network, essentially the same as what cable has or can readily upgrade to), then both cable and the LEC are on the 40% bleeding edge of system operation economics. You might correctly point out that there are additional revenue streams available, but I would counter that the 40% break-even penetration is really predicated on an in-place 450MHz or 550MHz 1995 vintage MSO network -- once you start chunking in a lot of money for network upgrade to support advanced services, the 40% goes up. Penetrations of advanced services anyway are really problematic to predict on a system basis using a new technology, and a LEC, of course, is not really generating NEW revenue with services like voice on HFC, they are spending a lot of money to shuffle them around. To net this out, the seven major LECs that didn't elect to go down the HFC path may have concluded that a very unstable market condition is created when the LEC goes with a me-too architecture, leading to a market condition that virtually requires the economic failure of either the incumbant of the challenger for the other company to win enough customers to be truly profitable.
Finally, Congress DID get behind cable two decades ago and jump- started it with special tax incentives (especially rapid depreciation and investment tax credits -- remember those days?) There were also sweetheart arrangements guaranteeing very inexpensive access to power and telephone company poles and other R-o-W. That tactic got us where we are today -- want another helping of the same? You will definately not find any consensus that HFC is any kind of technology holy grail -- economically or technologically. I tried to find the N. Negroponte comments about HFC to share here (probably on the last page of Wired a while ago, but I couldn't find a site with the text.) I will tell you he came up with a list of reasons to pan HFC as the technology of the future for broadband connectivity.
To sum up -- companies that deploy and operate networks using shareowner and bondholder money had a fidiciary responsibility to make the business work economically. Shareowners don't swell up with joy from pride of ownership when the investments (in the many $B) don't and can't generate the revenue to make them profitable. The market is speaking about the direction of LECs into broadband -- xDSL looks like an economic step for the near term, and then they'll take another look from the perspective of two more years experience with customer buying behavior, willingness to pay, and advances in network technology. One of the lessons that LECs have had to learn as their business has become more competitive and as plant investments must be recovered over shorter and shorter time spans is the absolute need to avoid deploying expensive capabilities on the come. They can deploy absolutely the RIGHT technology, but if they spend the money two or three years before the revenue stream really gets going, i.e,. at the WRONG time, then the investment will probably NEVER go positive. There just isn't the regulatory safety net and the former long plant lives for depreciation anymore that used to conceal questionable investment judgement.
A final note - consider the MSOs, certainly the experts at building and operating HFC networks today with the benefit of just a smattering of multichannel video competition (or go back to pre-DBS days if you want to make the observation then): Who is making money? How do their economics look when competition becomes fierce? How would a me-too competitor have a long-term edge over the incumbant provider in the incumbant's business, using the incumbant's technology? |
