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To: Geoff who wrote (2859)	5/4/1998 7:10:00 PM
From: dougjn	Respond to of 10852

Readware on Ellipso: (Geoff, I have no desire to supplant your excellent and reliable copying of Readware here, but this is a topic I've been chomping on the bit about.) Subject: Re: Ellipso Date: Mon, May 4, 1998 18:25 EDT From: Readware Message-id: <1998050422255400.SAA21924@ladder01.news.aol.com> Ellipso is to be congratulated. There was a lot of talk that it was not going to get the financing. Very interesting. Hughes said with the ICO system that 10MEOs (they are building them) was not going to be enough to meet ICO's market, and you may remember that I had posted that ICO received offers totalling $500 million more than it could statutorily accept. Boeing apparently has seen a market demand for telephony, which is what we have said all along exists. G2, as I had noted will cost about 40% less than G1, or $1.8 billion. About price competition: one of the problems with Wall Street's claims that prices will drop is that as prices drop capacity is going to strained. G* could offer calls at $.25/minute wholesale. And they would realize a profit-- the cash flow would be very strong. But the system would be strained. The $.47/minute charge was not devised to generate just cash flow. Marketing economics indicated that this charge would keep capacity within manageable bounds. We have said all along that prices would be firm till 2002, if you read the past posts on that. And then that prices would decline some 11%/year for three years. This fits in precisely, it appears, with the G* 2 roll out. That still looks like the way to go as far as wholesaling is concerned. 2002 though is a bit in the future. What has become interesting now is that the other current system besides G* now faces a problem, one that G* does not: because its capacity is 1/6th that of G, it is going to have to be concerned as it rolls out its second generation as to costs/call. It is not going to be able to charge the rates it plans for generation one. What is more of a problem for that system is that with G 2 coming on line at about the same time, the spread between efficiencies in G's favor will expand. So, I see Ellipso today as more of a concern for the second generation of G's competitor. I will tell you that I did not think Ellipso was going to get the financing. Cheers to them that they did. -----snip----- Doug