Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : LAST MILE TECHNOLOGIES - Let's Discuss Them Here -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (10610)	2/28/2001 4:22:49 PM
From: MikeM54321	Respond to of 12823

Re: Business Model for Packet Voice(in the local loop). Cable Telephony(circuit-switched) for that matter too. Ray and Frank- Well apparently the editor of America's Network is pondering the fate of future wired voice technologies that make sense too. And her conclusion-Bundle the 100 year old twisted pair with the Long Distance(LD) players is the only thing that makes sense. "Ironically, recombining the original US local and long distance networks is proving to be the ultimate telecom bundle--or should we say the bundle of last resort?" Ouch. This infrastructure investing commentary is getting downright painful. Keep in mind, I just read some grumbling excerpts out of Armstrong that appeared to make a business case for by-passing the twisted pair which seems to be counter to what he is quoted as saying below. So who in the world knows what is going to happen next? Nobody really. I guess that is why just about ALL telecom infrastructure companies are in the dog house. -MikeM(From Florida) ________________________________ The bundle of last resort As RBOCs begin to offer long distance, IXCs must find a way to offer local service. AT&T and WorldCom’s options are limited by their restructuring plans By Joan Engebretson The failure of bundled services. That’s how AT&T’s plan to break itself into three separate companies was widely viewed. The reasoning went like this: AT&T invested in cable companies so it could offer a bundle of voice, data and video services, didn’t it? So isn’t the telco’s plan to split off its cable unit a failure of that vision? What’s missing from this analysis is the real reason AT&T invested so heavily in cable: Recognizing that the RBOCs were going to be getting into long distance and picking off AT&T’s customers, AT&T had to find a way of competing in the local market. Building a brand new network would be too costly and time-consuming. Leasing networks from the RBOCs — also too costly in many cases. Wireless last mile options might be okay for business customers, but aren’t usually viable for residential. Cable networks had appeal because the infrastructure was already there; it just had to be upgraded. A key goal of the consumer units will be to generate cash — which doesn’t leave room for network expansion with long payback periods. AT&T’s cable investment was primarily a defensive move. The real bundle it wanted to offer — local and long-distance service — isn’t really a bundle at all, but an artificial separation of services imposed by regulators at the time of AT&T’s divestiture. Cable TV service was incidental. It was the cable network’s last mile infrastructure that AT&T really wanted. Of course, even as a defensive move, AT&T’s cable strategy has been disappointing. The telco hasn’t been able to negotiate deals to offer voice and data services over US cable networks that it does not own — and that’s a big problem because the company needs a nationwide last mile strategy. The elusive last mile Solving the last mile problem — i.e., entering the local residential market — will be an even bigger challenge for AT&T and rival WorldCom now that both companies have made plans to spin off their consumer units. A key goal of the consumer units will be to generate cash — which doesn’t leave room for network expansion with long payback periods. WorldCom chief Bernie Ebbers says leasing networks from incumbents also may be incompatible with consumer unit goals: “We will pursue profitable new markets and only profitable new markets, which may cause us to limit our entry into states on a UNE-P [unbundled network element platform] basis,” said Ebbers, addressing attendees at UBS Warburg’s Telecom Conference in New York late last year. “The RBOCs’ economics for UNE-P don’t work in the majority of states.” So how will WorldCom’s consumer unit serve the local market? This could just be confirmation that WorldCom’s real intention is to sell off the consumer unit. Regulatory fiat? Also at the UBS Warburg conference, AT&T chief C. Michael Armstrong outlined his company’s new last mile strategy: “We have staked out that our new consumer company will be facilities-based DSL,” said Armstrong [Ouch again]. The consumer unit expects to deliver data and multiple voice lines over DSL, said Armstrong, adding, “With a $12 to $15 average loop lease for DSL, we believe we have an opportunity to facilities-base many of our long-distance customers over time.” While this is a bit more optimistic than WorldCom’s prognosis, AT&T — like WorldCom — has recognized that there is no way to make money offering local service to a large part of its customer base. Does that mean the IXCs would actually opt not to offer local service in some states, even after the RBOCs are approved to offer long distance there? Unlikely. What happened in both Texas and New York — the only two states where the RBOCs have begun to offer long-distance — is that competitors have managed to wrangle comparatively low wholesale pricing from the RBOCs as a condition of the RBOC approvals. Both AT&T and WorldCom have found the RBOCs’ terms in those states to be reasonable enough to support local market entry there. And that same scenario will probably play out in more states as RBOCs get more approvals. Ironically, recombining the original US local and long-distance networks is proving to be the ultimate telecom bundle — or should we say the bundle of last resort? americasnetwork.com