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Technology Stocks : RCN Corp. (RCNC) - Voice-Video-Internet -- Ignore unavailable to you. Want to Upgrade?

To: MangoBoy who wrote (179)	12/29/1998 5:53:00 PM
From: HVN	Read Replies (1) \| Respond to of 720

Their newer infrastructure enables a lower cost structure than the legacy systems being maintained by the incumbants. That's lower cost. And then their overheads are definitely going to be a LOT lower than AT&T and the likes. Also, selling multiple services through their 1 channel brings down S&M costs. In AT&T and Bell Atlantic's case, for example, they have separate divisions selling wireless, long distance, internet access, cable, etc. That's duplication of cost. Also, they are all struggling with trying to figure out how to sell bundled services. An example: A customer spends $100/mo with AT&T Wireless and $55/mo with TCI and $22/mo on internet access with WorldNet and $25/mo with Bell Atlantic. That's a total of $202/mo. AT&T Wireless may decide it's worth spending $15/mo of this $100/mo rev. to manage the customer. TCI decides it's worth spending $8/mo ...... you get my drift. All these divisions spend about $30/mo on the management of this customer. In the process AT&T has $85/mo ($100-$15) to play around with for other income statement line items...blah, blah for TCI, BA, etc. Now RCN comes along and offers the same bundle for $175 - the customer realizes it's a no brainer and decides to move. RCN how has a $175/mo customer - more valuable than the one the others had, and can afford to throw $25/mo or something in that vicinity at the customer to manage him/her. So, RCN has $150/mo to play around with in their income statement. Now if RCN converts the customer to Cable internet or ADSL (I don't know what they're planning), that's a threshold the customer needs to cross if they decide to switch away from RCN later on. Making the switch the first time to RCN is easy since RCN is enabling a lot of savings. However, when it comes time to switch again, the savings may not be as great and the cost to switch will be high. If AT&T wants to acquire an RCN customer, not only will AT&T have to offer prices lower than RCN's but also maybe pony up the customer's costs of swtiching out cable boxes, etc. And let's face it, "Price is King". Carriers may harp all they want about customer service, etc., but that's not what's going to win the war.