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Technology Stocks : The *NEW* Frank Coluccio Technology Forum
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To: Frank A. Coluccio who wrote (7010)4/2/2004 6:24:22 PM
From: ftth  Read Replies (1) of 46821
 
re: What incentives do local service providers have to ensure that their upstream pipes will handle the onslaught of new demand? In order to make a profit it almost suggests that they will have to be included in the distribution of profits that follow.
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This is a fundamental problem with vertical integration of content and connectivity. The value of broadband to users will always be lower so long as vertically-integrated providers tack on no-value-add profits in the way you describe.

In a horizontal industry structure (separate content and connectivity providers), the connectivity provider has every incentive to upgrade their pipes to meet demand, since increased demand for their connectivity is how they make more money. They have no considerations for how that increased connectivity might substitute or replace their current content offerings because they aren't in that business.
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