Gary,
do you actually think I don't know the difference between twisted pair wiring and voice on cable using DOCSIS? The point is: in the UK, cable operators offered apples to apples telephone service over twisted pair through CO switches for 15-20% discounts to BT rates which were frozen by regulation and only got 40% take. T knows this phenomenon very well, since it sustains a 60% market share of LD at rates that are the highest in the industry some 15 years after divestiture. The reason to look to the UK is that you cannot assume that some huge percentage of users will change, even if the cost structure is better.
I agree ILECs are schizoid, but I still believe their local franchise in res and small biz is difficult to attack. IMHO universal service obligation issues will come back to rear their big ugly head. Relieved of the burden of cross-subsidies, the marginal costs of the existing telephone company plant will be difficult to beat. Yeah, yeah, I can hear you now saying "maintenance costs" but I urge you to take a look at the maintenance costs for a cable company and contemplate what it might cost to keep it running at the same level of reliability as the telephone network. But I know you won't bother.
For the penetration of PCs to US households at year end 1998, I've seen estimates from 32% to 45% - I think 50% is too high given unit sales data. A clarification on the growth rates, I was trying to indicate 4-5 percentage points of penetration not 4-5% growth. 10% unit growth does equate to about 400bp.
I also wouldn't bet on failure to upgrade, but I would bet on delays. Also, even w/ TW, AT&T will control ~40 million households. Nice, but only a third of the total.
As for POTS growth vs. take rates, go back and check your back of the envelop. If TOTAL US POTS is growing 6% each year today and accelerating, how is it a wash if cable modems reach 6% or even 10% total penetration into US households by 2003? That's 2-3% a year in cable modem penetration assuming 100% of all cable modem subscribers take the telephony and pull their telco connection, which I don't buy. Come on Gary, do the basic algebra - you're in such a hurry to justify your company's party line that you don't even stop to think about the logical underpinnings of your arguments.
Yes, I've always maintained that POTS growth in the US will decelerate - not the same thing as decline (another confusing math concept). LU total revenues from its CO switches will continue to accelerate for a few years, as international revenue growth acceleration should more than offset the deceleration at home.
Would it surprise you to know that CO switching is only about 20% of Lucent's revenues? Lucent is delivering both 5ESS solutions for the large number of customers who continue to buy them despite Cisco's best efforts AND stand alone packet solutions for the mavericks. Why is this such a difficult concept? LU is prepared to win in either case and has extremely strong products - for a fifth time I suggest you check out the PathStar product.
Gary, your arguments sound really tired because someone else thought them up and wrote them in a position paper for you to parrot. Yes there is a big opportunity in IP. No it will not be the end of telephony as we know it. Yes Lucent is well positioned under almost any market evolution scenario. |
