Broadband Redux (and a belated Happy New Year, Everyone!).
With the hum of 750-plus (x 43) ponies running The Great American Race yesterday, I contemplated the state of the telecom sector; pending legislation; and how this might affect ADCT. The following are my thoughts compliments of a Partagas #10.
In July and August 2001, SBC (Pac Bell) budgeted CY2002 cap ex spending at around $750M. This is down from the pre-Y2K billion number. Looking ahead, SBC planned to sequentially increase spending through 2005 (figure 10 – 20% annual increases). The tragedy of 9/11 "put on hold" these plans and only "emergency" and “maintenance work” would continue.
There were two main reasons for this: 1) possible changes to pending legislation after the 9/11 events (Verizon alone lost $1B in cell equipment stationed on top of the WTC!) 2) how things would play out with the continuing collapse of the independent carriers.
Before Dub’ya took office, legislation has been floating around Washington to further shut out the independent carriers from local access (last mile loop). Remember, the independents were allowed to co-locate equipment in an RBOC central office, but that did not mean they had local access! This is why the long-distance carriers (Global Crossing, Qwest, MCI, Sprint) have survived for the most part while almost all the local exchanges (Rhythm, Covad, McCleod, etc.) have filed Chapter 11. This RBOC strategy deployed in the late 90s played out as dreamed and helped the Baby Bells fully secure their dominant role. In this new era, the nugget is not the non-AT&T long-distance revenue (so-called tiered toll charges [e.g. interstate calls, say, between two counties]), but BROADBAND. There are too many “5-cents a minute” players and the proliferation of cellular and its free long distance hasn’t helped. BROADBAND is their premium play.
For years, Washington Lobbyists pushed to further restrict the small carriers from local access. Their focus shifted after the 9/11 attacks and their cry is now to label Broadband an essential service under the guise of national security (“communication is necessary, and rapid communication is essential,” speaketh John Q. Politician). There are bills pending on the floor as we speak. Think of the implications if they pass – subsidies, possibly accelerated rollout because the government would now pay the carriers to do this, etc. This would be akin to the US buying fighters from Boeing! Whoa!!!
So, how would this affect the telecom sector? It’s my belief that the fiber folks will not be major beneficiaries. There is way too much fiber in the ground right now. But how many people have broadband? The bottleneck remains the last mile. ADC is the last mile king.
Things should get interesting and hopefully profitable. Good luck to all. |
