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Technology Stocks : Voice-on-the-net (VON), VoIP, Internet (IP) Telephony -- Ignore unavailable to you. Want to Upgrade?

To: elk who wrote (368)	3/30/1998 5:36:00 PM
From: Darren DeNunzio	Read Replies (2) \| Respond to of 3178

To everyone, I have been asked how Internet Telephony can be a viable solution until a modern global telecommunications infrastructure consisting of at the very least broadband cable or a hybrid fibre-coaxial network having some switching capability, is made available to potential subscribers. Well most of us understand that current direction of IT will focus on a seamless integration of existing POTS service to the Internet and other private networks. This will enable some one to make a IT connection without even owning a computer. This just goes to show how well companies like NSPK and VOCLF have influenced the general public. Maybe we all should take a step back and view the industry from a different perspective. Where is all of this IT technology leading us. For the global telecommunications infrastructure to become a reality, it is going to require serious investments. I have seen estimates with regards to these investments that would stagger the mind. In Japan, The Ministry of Telecommunications has said that it will take $500 billion(US) to have fibre in the homes of the Japanese, and another $400 billion(US), if they lay the fibre underground. Two things about a global telecommunications infrastructure are evident. It will not be cheap, and is not going to happen overnight but, it will happen. So a question that comes to mind is who will pay for all of this? Will the Telco's fund construction of a cable-fibre network reaching the curb of every subscriber, if they only plan to provide telephone services. The cable-fibre network will be capable of providing a variety of interactive multimedia. Laying the infrastructure is the easy part. The hard part would be providing the digital content for which a subscriber would be willing to pay extra. To justify the cost of providing the infrastructure, a provider will want to see a sufficient rate of payback. From this one might come to these conclusions: It may be in the interests of the Telco to become a supplier, or packager, of content. If the Telco aims only to provide the infrastructure, it is unlikely that they would be able repay the necessary investment. It may be in the interests of the Telco to encourage as many other service providers as possible to share the network, and possibly even to share the costs of creating the network. The Telco's probably have the cash available for this type of investment. By contrast, the audio-visual sector as a whole, and the cable TV sector in particular, is in debt. The top 10 firms in the telecommunication sector are almost five times bigger, in terms of revenue, than the top 10 firms in the audio-visual sector. A bigger challenge could come from the computing sector. It is likely that some of the more ambitious plans for constructing national information infrastructures could only be achieved by combining the revenue streams from cable television and the telecommunications sectors. Given the current relations between Telco's and cable television operators, it is unlikely that they would be willing to co-operate to provide services over the same high bandwidth cable. Instead, combined revenue streams will only be realized if acquisitions are permitted (ie; telephone companies would most likely buy cable television operators) or if cross market entry is allowed. The current IT trials which have acted as showcases for the new technology, have been plagued by technical problems and a slower than expected rollout. The case for investment in the extra functionality that would permit interactive services will continue unproven until consumer demands can be tested under actual market conditions. Elsewhere, the cable television sector is an emerging competitor, notably in the UK where cable telephony has been around since the late 80's. Many Telco's are already major players in the cable tv industry, including PTT Telecom, Deutsche Telekom and Telia in Sweden. Encouraged by the European Commission, other countries are considering using their national cable television networks as the basis for a telecommunications infrastructure. Who is in the best position to construct information infrastructures: the telcos or the cable television companies? I guess it all depends on the starting point, and no two countries are starting from exactly the same point. The battle with the Telco's and the cable television providers is likely to be most intense in countries, which already have well-established telephone and cable television networks. This includes the US, Canada and even Taiwan. Rapidly joining them are countries who already have well-established telecommunication networks and are currently installing cable television networks. These countries will have a slight advantage because they are able to lay the newer broadband cable, and will be in a better position to provide telecommunication services and other interactive services rather than with the old generation cable systems prominent in the US. The majority of countries however, will fall into this category: those, which the quantity of telephone and cable tv penetration is low. This includes all of the low and middle-income countries, which is the home for 3/4 of the world's population. It is here that this convergence has most to offer. Where these networks are still undeveloped, most of the options remain open. The technological possibilities of the digital revolution have never been more exciting. Why install a separate TV and telephone network, when one network will do both? Why install a legacy copper-based network when the combined revenues of telephone and TV could justify moving straight to fibre, if not to the home, then at least to the curb. As futures are staked on who will make money in this so-called information age, the old Telco's are holding several aces. They already have years of experience as service providers. Many of the other new players (cable tv, media giants, and computer companies) lack this experience. Telco's are also somewhat cash rich, have a steady cash flow, and are experiencing some of their highest profits in recent years. The Telco's are just completing the process of digitization, which others, notably the television industry, are just beginning the process. So just what are the Telco's goals in the long run. I would appreciate your comments.