All, I'm getting a little confused here. I think that it's time for a cold shower, for me at least, since I am getting sidetracked with all of the noise surrounding this play. At the present time I am neither long nor short this stock. I'm simply trying to understand what it is in terms of its operations-related assets and liabilities. In effect, what is ATHM? What does ATHM do? And how will ATHM get there?
I'm hearing a lot of things about what ATHM is, but not enough about what it is not, IMO, which is largely responsible for investors not having a good grasp of the differentiation between it being an ISP, and that of a facilities-based provider.
It's easy to be influenced and taken by all of the bullish [spelling error] hubris here, and by marketing artifact. In contrast, it's also difficult to separate some of the negative remarks that I've read here from reality.
I went to the web site at home.com to find out what ATHM is. Here is some representative language, verbatim:
>>The @Home Service includes everything you need to enjoy the World Wide Web for one low monthly price...It doesn't take long to realize something is different about @Home. Maybe it's the fact that it's up to 100 times faster than pokey telephone modem connections. Or that @Home's sophisticated network architecture delivers the best performance, the best reliability, and the best ease-of-use of any online service. Whatever it is, it feels good. <<
Note the language in the last sentence, which belies the ambiguity of the situation. Whatever it is, indeed. Here we go again: The question of what is meant by "is."
My take is that ATHM is an ISP with robust servers and routers in place at its points of presence (POPs), and a soon-to-be-expanded backbone of its own which will tie together, at the very least, its POPs. This backbone will have the usual router-based gateways to the Public Internet.
However, ATHM is not, IMO, an access company, per se. Although, this point is seldom articulated, rather it portends the abilities of all of its distribution partners which tends to obscure the distinction.
It does not have its own access media [fiber and coax] provisions in place. Therefore, in the distribution arena, at least, it is not a facilities-based provider to end users. Rather, it's an ISP that has subordinate relationships with its owners and partnerships which handle the distribution part of the service for them, under terms and conditions.
From the web site:
[W]ith TCI, Comcast Corporation, Cox Communications, Cablevision Systems Corp., InterMedia Partners, Marcus Cable, Rogers Cablesystems, Shaw Communications, Cogeco, Bresnan Communications, Jones Intercable, Garden State Cable, Insight Communications, Midcontinent Cable Company, and Century Communications provide exclusive access to more than half of all homes passed by cable in North America; additional affiliated cable operator agreements will further increase coverage.
The bolding of "provide exclusive access" was mine. More on this point later.
So, discussion here about using pure fiber optics is premature, I think, since it involves the complicity of many different entities, if fiber (or any other measurable enhancement) is ever going to become a uniformly defined attribute across all of its partners' and owners' distribution networks. Of course, it need not be uniform in delivery or deployment, it could instead be staggered over many months and years - which is what it would take. But then you wind up with lumpiness in performance from one region to the next, creating yet another bone of contention for ATHM and its users to deal with.
The fact that its national backbone will be upgraded to a 2.5 Gbps platform is very promising, considering what they have in place today, but it appears to me that this will mainly account for increases to facilitate its internally-cached offerings. Although, I would guess that this also portends the ability to bypass some of the Internet's national network access points, or NAPs. Indeed, if this is the case, then it would speed things up considerably for its users, for a while. On this point, however, I'm only surmising, for I have seen neither any mention of caching nor NAP bypassing, but both probably are included in their plans, or at least they should be.
If robust caching is a part of the planned upgrades, then all the better, but it doesn't satisfy IMO the growing demands for connectivity to increasingly- real time and streaming non-ATHM end points. This may remain their weakest link, eventually, not only for ATHM, but any ISP that must contend with the vagueness of the public 'net, as well.
And when m-m becomes prevalent, then even the 2.5G will pale in the face of user demands, unless, again, there is sufficient caching of content built into the system in strategic ways.
The 2.5 Gbps framework gesture is what T is most familiar with, but they haven't approached, or come close to, an all-optical networking architecture with it. Rather, they have introduced higher speeds of the SONET envelope hierarchy without the use of ATM and some other traditional implements, ostensibly. [That, too, IMO, remains to be seen.]
And the mere fact that the 2.5 Gbps flows are containerized in a SONET format is not a bad thing, intrinsically, since to go beyond this, i.e., to a pure optical fabric, could conceivably leave them stranded in some ways at the present time. This is due to the fact that whatever they install will need to talk to other embedded elements in a backwards-compatible fashion. Actually, a move to pure would be a good thing, but the pure model has not shown any winners yet in the hardware realm, and T isn't about to bet the farm on a hunch or a whim. Therefore, the SONET rubric of OC-48, operating at 2.5 Gbps.
But the 2.5 will not be enough to enable 'the service' to reach the next plateau of instantaneity that they would have you believe will be possible, once user uptake manifests itself. In these two respects, i.e., multimedia proliferation and user uptake, we haven't seen anything yet.
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ATHM may become all of the things that it states it is and claims it will become, but at what price? That price would be paid in sealing off the rest of the world from its framework, and providing almost everything users could possibly want from within. Almost.
The cost of becoming an independent island of such self-sufficiency has not even been published yet, if, in fact, anyone has even bothered to run the numbers on such a model yet. The marketing folks are moving too fast to realize that this is ever going to be needed, so I would have to think that no one has even unpacked their slide rule on this one yet, save, perhaps a couple of diligent engineering types who are not paid by either the marketing or public relations departments.
I think that it serves us well to keep in mind that ATHM is not the sovereign entity that is entirely free to deliver what it wishes to deliver, due to either the covenants that are built into its charter, or because of potential conflicts of interests that may ensue with its owners and partners. I therefore don't see it, as it is presently constituted, becoming the end-all and be-all of all Internet possibilities, going forward. Not for a while, at least.
This image is further exacerbated by other inevitable factors which will stem from regulatory interference, as well. In the end, it is my belief that cable companies distribution plants and head-ends will become unbundled virtual meshes at the network layer, if not at the lower layers, as well. The acid test will be where VoIP and other enhanced cable services meet PUC definitions of public convenience and necessity, which will open them to other providers of like persuasions, as well. However, in the spirit of competition and pioneering, the powers that be may elect to forbear on this matter for a while, just as they have for VoIP on the PSTN and Public Internet for the time being.
The one area where forbearance may not be shown, however, is when the cable operator succeeds to the point where they become the preferred carrier, or the carrier of last resort, or when they are the eventual exclusive provider in a served area. This could conceivably happen if the technology is highly successful, and where new communities elect to go with a single infrastructure.
All of the above are my opinions and inferences only. Comments and corrections are welcome.
Best Regards, Frank Coluccio |
