OK, I have to be careful here because I'm the solutions manager on this
account, but I couldn't resist.
The play is not broadband, per se. The play is services. The play is
Ma Bell as a Competitive Local Exchange Carrier, once again delivering
dialtone et cetera to the homes of some of the most dense residential
areas in North America. The Cablemodem is one of the devices that can
be used, via Voice-Over-Internet-Protocol, to bring this dialtone in
all its glory to the end customer.
AT&T has focused their aim on being a vertical carrier once again, this
time in a competitive market. The play is vertical and horizontal
integration, and the interaction of services which are presently
distinct, because they are delivered by different companies with
different business objectives and different cultures.
The costs of buying up Cable MSOs are negligible compared to the cost
of rolling wire into the house from scratch. Cable companies have by
far the most advanced Hybrid-Fiber/Coax networks in the game, and those
networks are very well-distributed. The costs to improve the infra-
structure are not really very high. In brand new dense residential
developments you run fiber all the way to the EO and break it out into
ethernet, phonewire, and coax. In single-family dwellings you splice
the coax, bolt an IP Telephony cablemodem to the side of the house,
power it externally, and bless the home phonewire with ethernet and vox
services.
True, it will take at least 2 years before these deals begin to realize
substantive returns -- but one year from now, you will start to see
some really cool services that just are not possible with separate
voice and entertainment infrastructures. These will be market diff-
erentiators for which the RBOCs and ILECs will have no response
whatsoever.
It's all a question of who gets to piss in whose yard. The Cable MSOs,
thanks to Voice-Over-IP, get to piss all over the residential voice
market. The RBOCs, on the other hand, are still trying to figure out
how they can squeeze 512 channels down a DSL loop.
Why else do you think I quit the phone company? :)
-Ian.
I Find Karma wrote:
>
> At first I thought AT&T buying TCI and now MediaOne was a brilliant
> move, but now I'm not so sure. There are some formidable challenges
> ahead if Ma Bell ever hopes these acquisitions to be profitable...
>
> http://www.nytimes.com/library/tech/99/05/biztech/articles/07tech.html
>
> > ...It will probably take years for most people, even those in AT&T's
> > cable markets, to see tangible results of the company's ambitions.
>
> Which illustrates the point that "AT&T Personal Network" may very well
> be strictly a marketing triumph and *not* a technology coup.
>
> I've run across widespread confusion by media journalists as to whether
> the emergence of newer arrivals to broadband -- Qwest, IXC, Williams,
> Frontier, Global Crossing, Level3 -- present a challenge to the former
> triumverate of AT&T, MCI Worldcom, and Sprint.
>
> Is it that demand for broadband will continue to rise to meet the
> ever-expanding supply -- in which case, controlling the cable pipes into
> one's home seems like a bad move because the costs to improve the
> infrastructure are so high?
>
> Or is it that the ever-expanding broadband supply, coupled with
> technology improvements in laser, fiber, satellite transmission, and
> software, will produce a tremendous bandwidth glut, in which there
> simply isn't enough traffic to fill all of these pipes, and in the grab
> for market share there'll be a ruinous price war?
>
> Either way, sneaking into the home through the cable lines doesn't seem
> as appealing to me as it once did. Why *are* Bill Gates, Paul Allen,
> Warren Buffett, Craig McCaw, and Michael Armstrong spending money on
> broadband infrastructure? Is this a public good that they figure
> *someone* has to ante up the bucks for -- and they're plotting their
> next moves *given* a world of cheap bandwidth? Or is there a way to
> profit off the coming bandwidth glut, and I'm just not seeing it?
>
> > ...But even once a cable system has been adapted to send and receive
> > data, voice and television signals, it is still not ready for the
> > digital future. To offer high-speed Internet service, huge investments
> > must be made in high-speed Internet switches that can route millions,
> > even billions of bits of digital information every second. Even more
> > daunting is the prospect of offering telephone service.
>
> The costs of ramping up the infrastructure may be tremendous to AT&T.
> Clearly the market has bought into AT&T's "vision" -- bidding up the
> market cap of AT&T to over $200 billion while punishing AOL's market
> cap to roughly half its size, presumably for the *lack* of broadband
> strategy. Before the MediaOne deal was announced, by market cap alone
> AOL was a bigger company than AT&T -- and that was just a month ago.
>
> It's also interesting to think how far-reaching the AT&T empire goes.
> Without even considering the recent Microsoft deal... AT&T owns at least
> two-thirds (maybe more? hard to tell) of @Home, which itself is merging
> with Excite. Thanks to the TCI deal, AT&T owns Liberty Media -- and I
> don't think I'll ever fully grasp how ownership in the cable industry
> works except that it puts AT&T in roughly the same category as a
> News Corp or a Time Warner. And John Malone's latest take-under was
> Liberty Media's acquisition of TCI Music by transferring some of
> Liberty's assets to TCI Music in exchange for 94% of the shares. You
> want to see a messed up stock chart, look at the chart for TCI Music's
> tracking stock, TUNE, before and after the Malone deal was announced
> in April:
>
> http://www.quicken.com/investments/charts/?symbol=tune&period=1YEAR
>
> > ...To match the reliability of standard phone service using cable
> > systems requires big investments of money and ingenuity in complicated
> > power generation systems....All of these technical challenges are just
> > to offer phone service using conventional telephone technology, known as
> > circuit switching, albeit over cable wires. To offer phone service over
> > cable lines using Internet technology is even more complicated. In fact,
> > the technology to do so reliably does not even exist yet. Armstrong said
> > that he does not anticipate using Internet phone systems until 2001.
>
> And @Home doesn't plan to break even until 2002. What will be
> interesting to watch is whether our observation that money has attention
> deficit will derail AT&T's plans simply because no one in this day and
> age has the patience to wait out an investment 2-3 years.
>
> > ...The upshot for AT&T is that all of the billions of dollars and
> > millions of hours it will spend on the obvious technical challenges may
> > pale beside the time, effort and money it will spend revamping its
> > organization and deploying the anonymous "back office" computer systems
> > that are the backbone of any modern business.
>
> Michael Armstrong is taking a stab at reinventing AT&T, and I gotta
> admire his willingness to try. But I'm not sure how good his chances
> for success are.
>
> As long as the broadband technologies remain sustaining technologies,
> then through some combination of marketing and momentum AT&T will
> probably secure a place on top. But if a truly disruptive technology
> comes along and undermines the profit motivate before AT&T is able to
> ramp up to speed... well, then all this effort of theirs could very well
> be tantamount to flushing billions of dollars down the toilet.
>
> ----
> adam@cs.caltech.edu
>
> No. There is another.
> -- Yoda
--
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