Raptech, and All,
I've been following the discussion concerning T's TCI acquisition and its Worldnet
decisions, their pricing change, etc. I have some observations I'd like to post in this and
a couple of subsequent posts for anyone interested. As a disclaimer, I was once an
employee of T, and served as a Liaison between its Long Lines Department and NY
Telephone. My major responsibilities centered on other common carrier coordination and loop services for the Island of Manhattan.
But that was a long time ago, and I have been an independent consultant for 20 years, since.
Whereas I once held a sizable holding due to the employee stock plan in T from a
portfolio perspective, I have none today, but have been looking for reasons and timing
to bring me back in. I've found neither thus far. But that's only my personal assessment.
In post 1520, you ask:
>>Could Armstrong's move into the TCI deal be as dumb as many here seem to
express?<<
I don't think dumb is the right word. Capricious, reckless, are words that come to
mind, however. This is not to suggest that the strategy will not bear fruit, only that it is a
high-risk, and seemingly desperate, approach to satisfying linkage to end users in the
residential market place.
T is betting the farm, based on a conventional wisdom which may soon be (or already
is) an anachronism, IMO. Said wisdom states(ed) that you spend the time and money
over a three to five year investment cycle (platform upgrade) and rewards will follow.
The problems here may be many-fold, but two things jump off the page immediately
that I'd like to address.
(1) We're talking about a universe in which the model for information delivery changes
every one to two years (stretching it, three years), i.e., the access technologies and the
demands placed on them, the content which rides over the new access technologies.
These make certain assumptions as to the capabilities of the end points.
In this instance, they are the set top boxes (STBs), TV sets, and personal appliances
and peripherals, which are all still undergoing rapid changes in their own evolutionary
cycles. In other words, the entertainment appliances and computing models being used
today are not going to freeze in place indefinitely (or for a moment, for that matter) in
order to accommodate the outside plant buildout product that is three to five years out.
This is, however, consistent with the lethargic thinking that characterizes the old Bell
Head model, the very one, ostensibly, that this move is intended to eradicate.
>>And, T still has a heck of a telecom franchise to generate revenue while developing
TCI..<<
True, but lets not forget that it has been steadily eroding since Divestiture One, and
competition has never been so fierce as it is today, and it is about to get a lot fiercer,
perhaps logarithmically, once QWST's, LVLT's, and other platforms are in place in
two years, and once the wireless folks finally get their collective acts together.
(2) And related to (1) above: Tomorrow's all optical model will not be readily
facilitated by the platform currently being contemplated without very costly upgrades,
still. Hence, a built-in, and predictable, level of obsolescence is being implanted into the
distribution plant scheme. If the all optical model meets with any nay-saying by anyone
here, lets not forget the timeframes that T is projecting for the completion of this
upgrade, with some milestones being plotted well into 2002 and 2003.
I don't think that "Armstrong just came out of his cave to make the deal and
take T down" either.
But I do think that he's playing a card that has very high risks involved, and one which
requires that T maintain a certain level of vigilance and surveillance about the
developments in the local markets, and be ready to change their directions on a dime,
lest they build the next white elephant that may have problems surviving the first half of
the first decade of the new millennium. This kind of flexibility is very expensive to
maintain. Bundling notwithstanding, which is an issue I'd like to address at some point.
You say "I doubt he made the deal just for the sake of a deal."
I think it may have been akin to that, or at least it was more reckless than I'd have
hoped it to be. Ten or eleven days at a pow-wow to bang out a deal does not due
diligence make. Unless their claims during the press conferences about a "sudden"
decision to merge or acquire TCI was a lot of hooey. In which case, why would they
make such a claim?
I'd have felt a lot more comfortable if they'd have demonstrated
with real figures and charts that after considerable examination of the books, and
inspecting the goods (TCI's books and ledgers, the major head end locations, other
constructs of TCI's operational infrastructure, the fiduciaries of all of the affiliates which
are now, seemingly, open candidates for joining the party, etc.) were conducted prior
to the ten day bang out sessions. But I heard no mention of those levels of
investigation, and that does not give me a warm fuzzy at all. Would such a set of
disclosures to stock holders have been out of place? I think not. I feel that if such diligence had actually been conducted, the results would have been publicized, spun, or otherwise referenced. But all I heard were platitudes for one another, compliments of past visionary accomplishments, a lot of pointin' and clickin' going on, and the promise of a bright future. What to expect? That'll be up to the future to unveil.
FWIW, and Have a Great Independence Day,
Frank Coluccio
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