Much partisan discussion going on here re: T v. AOL & the RBOCs; cable v. DSL. But the key to investing is to be objective to what is really taking place. The real winner of this battle for the last mile will be the consumer, but as investors, we want to identify who stands to profit & who is at risk to fall from grace.
DSL & cable will both be around. Cable has the clearer short term advantage in terms of reaching a broader residential market than DSL due to present distant limitations & the inability of some of the RBOCs to respond to a now-clear threat they are under.
My ILEC is PacBell & they clearly appear to be at the forefront of provisioning DSL to the residential market in California, ahead of SBC's own ILEC in TX. BEL is also moving forward. Believe me, T's proposed acquisition of UMG is sending chills down PacBell's twisted pairs here in CA. The smarter RBOCs know that they must respond to competition presented by the HFC plant or ultimately lose their core business -- local access for both voice & data. Plan to see the telecos invest more heavily in the ensuing years. Deployment of ubiquitous DSL is necessary to establish a large enough broadband footprint to compete with HFC which passes 90% of the nation's homes. Expect to see deployment of DSL plant equipment this year by the RBOCs who are at the cutting edge of DSL technology that will extend deployment of DSL beyond the present 17.5K ft distance limitation. Notwithstanding, major investment going forward, IMHO, will be focused on the ultimate deployment of VDSL, which is what the telecos must offer to compete with the MSOs.
This does not mean the MSOs will win or lose. There will be competition. IMHO, VDSL, when deployed, will superior to present capabilities now delivered over HFC. But VDSL will require large investment in fiber & co-axial plant, more than the upgrade investment most of the cablecos are doing today. VDSL will likely be a higher priced service for a superior service. But until then, broadband over HFC will win the hearts of residential customers.
Over time, the shared cable pipe will become crowded & the speed/throughput the user experiences will drop. The cablecos, too, will be forced to make additional investments by extending the fiber plant, adding more nodes, or deploying wireless cable transmitters -- or lose customers to the telecos that have invested in DSL & VDSL.
Its gonna be a sea-saw battle. The consumer will benefit. T will flourish by its unique ability to offer a comprehensive package of services to its customers. But competition will be present. And as such AOL should not count on the unbundling of the nation's HFC pipes. AOL should step up to the table & negotiate an equitable deal with T for the delivery of direct AOL access over T's plant that it has & will make a huge investment in. Steve wants access to T's pipes; Michael wants access to AOL's customers. I think a deal can be struck. The only problem is that, presently, Steve is demanding a free lunch from Congress. Time for Steve to get real. JMO. |
