Yes, You could hate MSFT all the way up. The companies that provide good products, service, and last, are either a GE or endlessly muddled like Diamond Multimedia. There are times when I wish I'd put my dough in GE and go back to math and theoretical physics only.
Aside from @Home from where is TCI growth coming?
At the rate they are rolling out cable modem, it's going to be a long time for @Home or TCI to substantially benefit. There are lots of problems with xDSL, but the opportunity door won't stay open indefinitely. You gotta grab the brass ring when it presents itself.
People may accept slower transfer speeds with inferior quality because it still represents a substantial improvement over what we have now. Once adjusted to mediocrity, they never change. There are millions of 486-25's still out there and the owners have just adapted to the hopelessly slow snail pace. They build a life around the pace. They go get coffee, read the newspaper, take a shower, while waiting for a file read from their 60 meg hard drive! They don't want to change because everything is organized.
The issue is not barrier to entry just like the issue to make cable modem go is not an issue of paucity of money. It is an issue of will to succeed. Having a vision and a conviction to make it happen. That is entrepreneurialism. You have to sacrifice, take risk, bust a--, run like h---, and be lucky, to succeed. I don't see Billionaire Malone doing any of that.
Are you saying that, say, Cox wouldn't come into my area because of cost? All the items you mention are fixed costs. Essentially you are saying that TCI is the only operation that can be run efficiently enough to handle the operating overhead, so no one comes in. Hogwash. In my area there are specific delineated boundaries where one company's territory ends and another's begins. The cable companies didn't specify those boundaries. Territorialism is antithetical to free markets, but is invoked to ensure "fair markets". And TCI like so many other American corporations hides behind the wall of fairness because they believe it protects their paper thin margins. Well, if their existence depended on delivery of an added value product, you wouldn't be seeing airhead proposals like doubling the number of channels as a viable way to increased profitability.
I don't need to tell you all about old man Brown, CEO of the old ATT, and how he fought deregulation. He warned, "If they bust up our monopoly, everyone's phone bills will go sky high." I don't know what happened in your state, but my phone bills, not even adjusted for inflation are lower than they were any time in the last 30 years. At the same time quality and variety of available services has gone up substantially. Whereas the local RBOC owns the infrastructure, they are required to rent it out. I don't see the Communications Act following suit with Cable.
@Home thinks they're going to see profitability in 1998. Oh come now, it ain't gonna happen. Their market is diluting under their sluggish feet. Their marketing stinks to high heaven. They have little visibilty outside of the cognoscenti. What did AOL do? They sent everyone in the world a disk several times over. When this was going on, I had Wall Street experts and Madison Ave types tell me that this wasn't the way to properly establish a market. But brother, it sure worked. So much so that Case practically had to promise the Congress that he would cease and desist. You see, @Home can't even send out a flyer. I suspect because they are afraid that it might work. Then they can't proceed with the slow and careful rollout that is well calculated and controlled. Great success is never calculated and controlled.
Huge barriers to entry are a plus for shareholders? Sounds like you learned business at the university. This concept is like the common Wall Street belief that profitability concentrates when monopoly is in place. That may be true as a transient state, but never over the long run. Competition, as much as we all hate it, makes us achieve greater accomplishments. Low cost of entry means plenty of competition, stable prices, variety of price and quality. The good company thrives in such market. Anheuser-Busch is a good example. You don't see 100%/yr growth out of BUD, but the company sports a high multiple because of product consistency and reliabiltiy of ROI. Wall Street has forgotten about that aspect of investment having become enamored with hyper-growth as the only way to performance. It hasn't been the small companies that are being bid up during the greatest bull market of all time since 1995. |
