Dave,
No, those factors certainly don't have any impact on the stock price. Leastwise, it would seem that way.
In this regard, and as a retort, investors are consumed by the notion, and will argue that, ad banners and various forms of marketing gimmickry will save the day. It sometimes almost makes me feel ill, like witnessing so many carnival barkers and snake oil salesmen at work, many times when I least am tolerant to it. Okay, so I'm neurotic. The WWW did it to me.
Sooner or later free PCs at the expense of being on the book for $300 per month in consumables gets rather tired, real quick.
It should be pointed out that those ad banners are getting crowded lately, not to mention really annoying, and they're not doing so hot at the unit level either. There are growing concerns in that respect, concerning shortcomings on previous projections, as well.
The state of the art of running an ISP, and the financial burdens that one entails, has been bid up many-fold since many of the mom and pops first came into the business. That is, if they are keeping up with advances in the state of the art. Many are not, doing just the opposite, in order to survive.
In the next year or two, the ante will have doubled or trippled again, when VPNs, voice and multimedia, all with extensive broadband and privacy requirements come storming on line. AOL is maintaining a kind or reverse tension to this in some ways, by deferring the broadband burden, despite their outwardly appearing, or suggesting that they can't wait to jump in. The moment they do, they will be faced with a new financial model. Will their subscribers be willing to pay the freight?
Many of the M&Ps already can't afford the larger pipes that the escalating bandwidth consumption is necessitating them to lease. These are the ones who can least afford it, since they don't own the fiber as a facility. They wind up paying 15 times more, time factored in, than the amortized costs of the larger facilities based players who do own the glass.
The way they get around it is by delaying the upgrades to 56k and ISDN, and in so doing, they are losing subs anyway, as a result of long download waits and busy signal-related frustrations. It's Darwinian.
And the larger Cable players? When will their assets and the costs related to implementing those upgrades and new builds start turning profits?
I just did a justification for switched voice on a small system in OK. I had to nix the platform they were enamored with because it would not turn EBITDA positive for four to five years, at best. Guess who will start their voice business by reselling the ILEC's services... I figure in another 24 months, they will be able to attach VoIP to their limited subscriber base as second line offerings.
Maybe second through fourth lines. But until then, during this transition period, I told them to hold firm and not to spend even a single buck on a switch. Is that what Armstrong is doing? I don't think so. Instead of transitioning through the use of the resale option, he's first going to put in the $witche$, and then pick up the remainder, they say, with VoIP... when it's finally soup.
Regards, Frank Coluccio |
