Thanks for that find Stephen.
At the nexus of Romero's message in your post and that of ftth's post immediately preceding (and how both intertwine with the ongoing discussion here over the movement toward gorilla wireless networking meshing with municipal FTTH) it almost appears that there is a sixth sense that end users and townships are following in order to somehow escape what appears to be the inevitable collapse of their incumbent providers' services. Is this a chicken and egg situation, stemming purely from market factors leading to a cultural shift? One could almost argue that there is a level of subconscious preparation taking place here. Almost akin to getting one's self prepared with the equivalent of a telecom bomb shelter.
It is also interesting to compare the account given by Romero in the larger industry sphere to that of Cringley's, recently, who spoke of a similar debacle taking place in the 'broadband' space, which I will copy below. But not before I state that it now appears that Roxane Googin was dead on last fall, looking back to past issues of the Cook Report, and was apparently 8 or 9 months ahead of the pack in calling for an industry collapse of the magnitude now being agreed to by Cleland, Kalla and a growing lot. Having stated that, it's interesting that Cleland continues to put considerable weight behind the three remaining RBOCs' chances to succeed (omitting Qwest, of course) based on his assessment in the article. It would lead one to conclude that he actually understands and knows how to interpret their financial reporting ;)
Cringley on broadband:
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R.I.P. Broadband
By Robert X. Cringely June 2002, Worth Magazine
We come not to praise broadband—because it kind of stinks—but to bury
it. For now.
On April 10, I spoke in Las Vegas at the annual convention of the
National Association of Broadcasters. Mine was a technical
presentation, and the audience was approximately 900 engineers
representing every television network, cable network, and Internet
outfit you can think of. With so many nerds (my people) in
attendance, it ought to have been a lovefest, except for my topic:
Broadband Is Dead. My contention was that although high-speed
Internet access, or broadband, is probably the future of the Internet
and of entertainment, most of the current crop of broadband companies—
which was to say the employers of half the people in that ballroom—
will be out of business before that happens. Uh-oh.
Broadband is dead, or certainly dying, and the vision of business
empires built on streaming video or downloading movies over the
Internet is years from being realized. The industry for providing
homes and individual users with Internet access at speeds in excess
of 500 kilobits per second is not economically viable. Growth in
broadband subscriptions is slowing, and it will be very hard for
broadband Internet service providers to be profitable this year. The
current players will either die for lack of an audience or be killed
by faster, cheaper technologies such as ultra-wideband that make
broadband data-compression schemes unnecessary.
Look at the major digital subscriber line providers—Covad,
NorthPoint, and Rhythms. All three have been through bankruptcy, and
two of them aren't likely to ever emerge. Covad is back, it's true,
but as a company aiming primarily at businesses. These DSL vendors
have been wounded or killed primarily by the phone companies, using
techniques I wrote about last October.
But aren't the local phone companies—the incumbent local exchange
carriers (ILECs) doing well with their own DSL efforts? I don't think
so. Their motivation for doing DSL was twofold: (1) to comply with
requirements of the Telecommunications Act of 1996, and (2) to keep
the competitive local exchange carriers (CLECs) such as Covad and the
others from stealing that business. With the CLECs dead or dying, the
phone companies have little incentive to put more money into DSL. And
they have fallen out of love with the 1996 law that essentially
allowed them to spend lots of money to get into the long-distance
business, where they make no money at all.
No company—ILEC or CLEC—has yet made a consistent profit on DSL. As a
result, investment in this area is inevitably going to dwindle. If
you don't believe this, look at the declining sales and widening
losses of DSL equipment makers. A simple rule of thumb in the network
hardware business holds that if sales in a particular segment fall in
units and dollars from one year to the next, it is time to start
making something else. Look for hardware companies to leave the DSL
market in droves.
But there is more to broadband than DSL, right? Broadband also
rightly covers fiber to the home, cable modems, and various wireless
and satellite Internet schemes. Well, cable modem penetration is
slowing, and the biggest cable ISP, Excite@Home, is busted in
spectacular fashion. Any volume for fiber to the home is years away,
I'm told by the very folks who have so far invested hundreds of
millions of dollars trying to provide it. Wireless 802.11b (Wi-Fi)
works fine, except nobody wants to pay the real cost of an 11-
megabits-per-second link. Some Wi-Fi roaming schemes are afoot, but
none of them have reached critical mass. And satellite services such
as StarBand, alas, can't really be thought of as broadband, since
their uplink speeds aren't much better than dial-up.
This is what happens with new high-tech industries. A bunch of
vendors spend a lot of money developing and marketing products and
getting users excited about them. Then there is an inevitable falloff
in demand. The trick is to keep the business running until this
valley is crossed and demand increases again. That is going to be
difficult in the current market. Raising money is difficult, so all
the players are pulling back, just trying to survive. That's the
smart-stupid thing to do, because the company dies anyway, since no
money is spent to develop the market.
It would be great if a lot of new DSL and cable modem companies were
coming into the market to take over for the ones that have died or
are dying, but that isn't happening. Venture capital has cut back,
and broadband will be hurt as a result.
But wait, there's more! Not only is the broadband carriage business
in trouble, so is the broadband content business. There is not a
single company making money by providing high-bandwidth content to
mass consumers. When you watch a broadband video clip on ABCNews.com
or CNN.com, the company is losing money to bring you that content.
And the accountants have spoken: There is no way they'll ever make
that money back. So companies that used to put a lot of money into
high-bandwidth content are putting in less and less money, so there
is less and less content available.
Sure, the pornography business is probably doing okay on broadband,
but smut can't support the whole Internet.
The mobile phone business was supposed to bring broadband connections
to our cell phones, but so-called 3G mobile systems are being scaled
back and canceled like crazy the world over. If broadband can't make
it to your handset even after the investment of tens of billions of
dollars, why should we expect it anytime soon in areas where money
has yet to be spent?
So there is a falloff in demand, a falloff in carrier incentive, a
falloff in participation and enthusiasm among content providers, and
the economy is still creaky. This is not good. For the penultimate
nail in the broadband coffin, look at the recent activities of Mark
Cuban, founder of Broadcast.com (which Yahoo bought for $5 billion)
and now the too-rich, too-zealous owner of the Dallas Mavericks NBA
team. Cuban has started a high-definition television channel over the
DirecTV satellite system. What part of his new business involves the
words Internet or broadband? None of it. Mark Cuban has moved on.
Notice I listed Cuban's new gig as the penultimate—the next-to-last—
reason broadband is dead. The final reason is that broadband, just
like every other failed technical initiative, will be redefined, and
that redefinition has already begun. The simple fact is that we can't
really afford all that bandwidth. Even the cable modem users who are
happy would be unhappy if their providers cut back their bandwidth to
something economic or added enough users to make the service
profitable. Right now, cable modems don't have to be profitable, but
if they became popular enough, they would have to show a profit, and
then that service would suck too. In the March issue, I described
ultra-wideband. There's a new technology that is actually going to
make somebody money—not the people in my Las Vegas audience.
Against this backdrop of mediocrity and decay, hundreds of broadband
companies are simply trying to survive. For the most part, they
won't. They made the mistake of living too far in the future, of
making their businesses 100 percent dependent on the success of
technology that for the most part did not yet exist and that they
didn't control. That's crazy. And it makes the plain old television
industry look dazzling in comparison. In fact, that might be the
lesson for investors. Streaming video, interactive TV, and downloaded
movies may be the future of entertainment, but that future is five,
seven, maybe 10 years away. Until then, plain old TV and radio
stations and cable networks—the very outfits that were supposed to be
put out of business by all this Internet hoo-ha—look like very fine
investments, indeed.
Senior contributing editor Robert X. Cringely is a Silicon Valley
writer and broadcaster.
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