[ATHM]Bargaining power over suppliers..................PART I
First, this part of the discussion will focus on the @HOME/@MEDIA arm of the company, which together make up the residential services portion of the company's offerings. The @WORK arm of the company operates under very different (and more favorable) constraints. @WORK is the "crown jewel" of the company in my opinion. @WORK will be discussed separately to try and keep confusion to a minimum.
BARGAINING POWER OVER SUPPLIERS:
The company's end-to-end residential service includes product from the following third-party suppliers (some of these products are shared with the @WORK service): Cisco, Oracle, Sun, Silicon Graphics, Tivoli Systems, Objective Systems Integrators, Netscape, Microsoft, and leased backbone capacity from Sprint with tier-1 peering (this means the national backbone utilized by the company "hooks up" to the internet at the highest-level connection points (the "NAP" or Network Access Point)). This is not a unique connection. All national backbone providers interconnect at the NAP's, which establishes the core concept of the internet.
The group of third-party suppliers mentioned above primarily affect roll-out costs of the service. These are not constraining suppliers at present. The company's bargaining power over these suppliers would rate as favorable, as they have strategic relationships with them which allows favorable pricing due to the volume.
A second supplier to the residential @HOME service is the company's own @MEDIA arm. @MEDIA aggregates the core service providers offerings (programming, advertising, transaction processing), and supplies them to @HOME (so they are an indirect supplier). @MEDIA's bargaining power over ITS suppliers is "favorable", but will likely improve to "high" as advertisers begin to pay up for the reported response rates (called "click throughs") on the @HOME service which are substantially higher than traditional services. They are also beginning to charge on a "cost per thousand impressions" basis, rather than one time "sponsorship" payments. In addition, these advertisers are provided more extensive usage statistics than they are able to get from traditional services (due to the monitoring capabilities of the @HOME inTRAnet), which makes advertising on the @HOME service (through @MEDIA) a value-differentiated product.
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