Jacob, Thanks for your comments. I must admit, I don't know how much internet data traffic is increasing, but for years it certainly increased very quickly. It is one of those difficult things to figure out, and seems very central to the whole telecom issue in my opinion. Clearly the rate of growth of internet traffic in the U.S. will tend to slow down a bit with time since the rate of growth in PC's (the main internet access device) has slowed down here in the U.S. However, I think there is much more video on the internet now (e.g. CNN video clips, Yahoo Finance Vision, On24, etc.) and also more photos/grahics being sent over the internet. Also, one could argue as bandwidth increases, the idea of the network is the computer may become more true. We may eventually keep the hard drive out on the web somewhere, and that would really increase the data traffic. In addition, I think in other parts of the world the PC growth rate is much higher, and there is a much lower percentage online, so the rate of growth there will be higher. I am sure the rate of growth has slowed a bit temporarily due to the slowdown/recession, but that should not be a long term problem.
One must admit, the "build it and they will come" plan seems to have worked incredibly well for semiconductors over the past 20 years or so. I am referring to the growth in the semiconductor market during this time and the fact that Moore's law has held during this period. The "build it" part has certainly happened with semiconductors during this time, and this extra capacity was absorbed. Some have argued bandwidth will grow in a similar fashion. I think part of the argument is that applications will come along that have not been created yet, just like as has occurred in the computer world.
Having said all that, maybe you are right and it will be different with bandwidth. I just see the other argument as more likely to be correct at this time. And if this other argument ends up being correct, then it seems that there will be a big recovery at some point in these telecom related stocks, and maybe sooner than we think.
I also have a "failure of imagination", but I recall an interview with Gordon Moore when he was asked what the next big killer application will be. He said he has no idea, and historically, nobody has been able to predict these things, they just happen. In the case of satellite phones, I think what killed that is that the non-satellite wireless phones just proved better (smaller, lighter, good coverage). A competing technolgy won out. In the case of fiber optics, there is no competing technology to win out. Light is the ultimate medium for fast communication. Wireless will never be anywhere near as fast as through fiber, but of course wireless has mobility advantages. In the case of 3G, there was a disconnect in the buildout. It was not coordinated well. But I agree, I don't know how much the average person is going to need 3G. I guess we will have to just wait and find out. Hope it goes the way of semiconductors - that the new capacity will be absorbed, and then some.
One final comment. This bandwidth growth issue is very central to the growth of companies like EMC (if not much traffic, should not be much storage needed either), and AMAT as well. As I think Cary pointed out, everything is sort of interconnected now. Even the Nasdaq is tied to the health of the economy through the wealth effect, and Greenspan knows this. We live in a wonderfully connected world, and I think/hope it just keeps getting better.
John |
