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Technology Stocks : CAWS - Wireless Cable (New and Improved) -- Ignore unavailable to you. Want to Upgrade?

To: .com who wrote (5457)	7/28/1998 10:43:00 AM
From: WTC	Respond to of 5812

Scott, I continue to be a staunch believer in spectrum valuation based on business case analysis reflecting prospective services and service revenues, appropriate time to market and competitive market share considerations, along with the complete operational cost structure (complete meaning don't forget the promotion and churn costs ...). When there is a new band and new services envisioned, come as close as possible with live proxies, don't play Mhz-POP games -- that math may be easy, but the analysis is worse than a waste of time. As for MDS vs LMDS valuations, there are quite a few moving parts these days. I have a very hard time seeing that there is really capital available for serious runs at wireless digital video services; taking into account the costs of settops and a market structure that loads these costs on the operator. I am not at all bullish on any digital wireless cable operation apart from Bell South's, and I am not bullish on the profitability of their operation. (They may not be either; I notice they are proceeding apace with alternative broadband deployments, but this is the way of the ILECs, isn't it?) I will also be truly amazed if any of the LMDS operators do anything with multichannel video within the next 5 years -- the extent of my forecasting horizon. With a 2-way service rule, MDS looks interesting for high-speed internet access, but the current hands-on experience I am aware of suggests this is still far from a plug-and-play proposition. High levels of operational complexity in the consumer end can really spell trouble for the short-run and long-run economics of internet access. Perhaps the greatest irony is that my clear sense is that CAI is far, far ahead of the rest of their "industry" in this regard -- another reason for disappointment they ran out of time and investor patience. On balance, internet access via 2-way MDS is a MUCH easier technical and economic proposition than via LMDS. LMDS shines when capacity becomes an issue -- if an operator is very successful, in a few years time. If you take this service, internet access, and lay it accross the two bands, the revenue may be similar (coverage disparities may create some minor revenue side distinctions), but the real difference in the business plans would be operational costs and time to market. (I consider near-term internet access service to be primarily a business or SOHO application, so one-way wireless with a telephone return is really not a serious sustainable option.) My net of all this philosophical wandering is that MDS and LMDS will probably be in the market about the same time for 2-way data delivery. I believe the FCC will act on MDS 2-way in time to make this true; and the LMDS options are really still at the stage that individual parts work for point-multipoint but there are still system integration and deployment issues to overcome. The capacity issues are really material only in the end-game, at least a few years out, and by then, technology may again provide additional capacity (smart antennas, etc.) MDS is definately an easier play for market entry, and the system costs are somewhat less than LMDS -- for now. Volumes will be all-important is establishing the eventual unit infrastructure and consumer equipment costs. On the other hand, MDS has virtually no momentum for data services market entry (note Bell South passing on wireless data services entirely -- who does that leave? CS wireless? ATI? You are talking toy systems and uncommitted deployments.) LMDS has no momentum now either, I grant, but I think they will soon (1999) show some activity with data access services -- at least WNP. That could tend to drive prices and lower prices tends to drive deployment. Some of us have been watching CAI so long we might tend to forget that spirals can go UP, too. At the end of the day, licensed spectrum is rationally worth a portion of the value creation it directly enables based on what management can figure out to do with it. Suitability to task is important to engineers, but product management, promotion, and sales are perhaps even more important to the success of a commercial venture.

To: .com who wrote (5457)	7/28/1998 8:55:00 PM
From: Zorro	Read Replies (1) \| Respond to of 5812

Scott, In assessing the overall value of its spectrum, CAI should have employed one or more qualified independent appraisers. Several come to mind: Paul Kagan Company, Hardin & Associates, Daniels & Associates or even GKM. The spectrum valuation should be performed on a market by market basis and, as WTC points out, be based on a business case analysis reflecting prospective services and service revenues, appropriate time to market and competitive market share considerations, along with the complete operational cost structure. I also believe that values established in recent (and perhaps not so recent) transactions thru the sale of spectrum rights in comparable markets should be taken into consideration. But for CAI to do its own spectrum valuation AND use the results of the LMDS auction as a baseline to assess the value of MMDS spectrum is TOTAL BS and an INSULT to all shareholders!!! How could CAI possibly think it could get away with that? And why would JP (who I respect as a fellow engineer) risk his reputation like that? In its analysis, CAI points out the tradeoff between the larger block of LMDS spectrum and the smaller, but more efficient, block of MMDS spectrum. And that's fine... but this is clearly NOT an engineering design issue! What we need is a fair, impartial assessment of the value of the spectrum that will be acceptable to both common shareholders and bondholders. To insist on anything else borders on being criminal. In the interest of a fair reorg plan, CAI's valuation of its most valuable asset, its spectrum rights, MUST be reassessed. WTC said: At the end of the day, licensed spectrum is rationally worth a portion of the value creation it directly enables based on what management can figure out to do with it. Suitability to task is important to engineers, but product management, promotion, and sales are perhaps even more important to the success of a commercial venture. This is exactly right! And only a Chapter 7 liquidation will determine what CAI's channel rights are really worth to anyone at that particular instant. Will the bondholders want to take that chance? Under the proposed reorg plan, the common shareholders would have absolutely nothing more to loose. Zorro (no percentage from the movie)