Mike, I don't view our perspectives as necessarily polarized at opposite ends of the spectrum. Yes, equipment sales will continue to go up in units sold, as more individuals acquire additional means of communicating and amusing themselves. And SP margins are continuing to decline for commodity services. We've already seen the throw-away razors, cameras, and throw-away phones. What else does one do with a unit that has been obsolesced beyond hope?
The challenge for the providers is (yes, this is a mantra, I know) to introduce value-adds that are truly worth the extra nickel they are seeking to add to the cost of each session or call, and staying ahead of the same services that would erstwhile be free by someone else who views it as a must carry, or as a free enticement to attract users to a larger set of offerings.
In contrast, we can all recall when a cell phone sold for close to a thousand dollars.
If we're in the chasm stage of Web-based phones, well see higher entry costs for early adopters here, too. But these new widgets will also decline to commodity status right along with everything else that follows the Moore curve, unless they are protected by some serious IP rights. And even then, there is no real guarantee.
And many of the complicated DOCSIS CMTS and Central Office GR 303 platforms will yield to simplicity in the future, whether it be 10 or 100 GbE-based, or more streamlined forms of ATM/PONs.
What is the salvation? It would be if the vendors who are being cannibalized are doing it to themselves, and not being supplanted by others.
Let me mind blast for a moment about another aspect of consolidation, if I may. If we agree with the premise of the article that I posted in my last message here, then one of the problems with a shrinking number of players is that some of them will default or merge themselves into someone else's platforms. This tends to leave the bankrupted- or acquired- providers' vendors holding the bag, or minus a customer, respectively.
Awareness of these dynamics causes vendors to be more careful, tightening credit criteria, or cutting back on investments that some of them sometimes make in carriers (by way of direct and equipment financing), carriers who would otherwise purchase their products. Neither case is good for vendor revs.
You are right, of course. The top line revenues of providers are important. Margins and overall earnings, more so. Ask the folks over in T and WCOM who are looking at their LD results.
When you consider the overall costs to sustain some platforms, sometimes the guys who are making the most money --certainly, the cleanest -- are the independent sales agents who receive residuals from the carriers on each wireless account, or dsl service, sold.
FAC |
