CES 2008 is best remembered as the year when it became fashionable for the media to question the relevance of this uber-convention, and for many to skip attendance altogether. Given the intense and in-depth media coverage of the show, attendance should no longer be considered mandatory unless you’re trying to tease out the trends and make the observations missed by the mainstream media. This is what we took away from the show and what Nyquist readers will find relevant.
The best session of the Lightreading Ethernet Conference covered Wireless Base Station Backhaul. Patrick Donegan of Heavyreading and the panelists presented cohesive data and their take on which way the market would head. I gained a new perspective on the opportunity wireless backhaul presents.
The fundamental problem wireless carriers face is the underlying shift from voice dominated to data dominated traffic. Voice is growing linearly, while data is likely to grow exponentially. If leased copper T1’s are used for backhaul, their backhaul costs will scale linearly as capacity is added.
The market has allowed Comcast (CMCSA) the luxury of waiting to take out Sprint (S ). But the recent purchase of Alltel has increased outside interest in Sprint, as investors anticipate the company crossing over the event horizon of the private equity black hole. This sets up an interesting situation, as the strategic value of this asset to Cablecos could exceed the private valuations attached to it.
Cablecos need an independent wireless company to partner with as their voice deployments become commoditized. I argue that Sprint is vital to the long term survival of the Cablecos (see “Someone Tell the Cablecos Fixed Line is Dead“). Brian Roberts, CEO of Comcast, is on the record saying he has no interest in Sprint. But what the hell would you expect him to say? “Yes, we need an independent wireless carrier like Sprint to survive and hope to buy it one day!”.
Comcast or a consortium of Cablecos needs to move now in order to avoid having more bidders at the table.
Author is long Sprint and short Comcast
The big deal isn’t the iPhone itself, which is what the mainstream investment, gadget and tech media is focusing on. It’s the way that it will fundamentally challenge how carriers have coupled services with connectivity with a hardware distribution monopoly.
Everyone agrees fixed line is a dying, low margin business. Yet Cablecos like Comcast (CMCSA), Cablevision (CVC), Shaw (SJR), and Time Warner (TWX) are feverishly trying to capture market share in this business. Why?
Businessweek writes about T-mobile and a new service they are rolling out using UMA phones (dual GSM/WiFi). These new mobile phones make use of the WiFi network and broadband connection in a users home to make phone calls off the GSM or cellular network.
Contrary to popular opinion, the real threat to the baby bells residential phone business is not the cableco’s VoIP but wireless substitution. Competition from cell phones was eating away at residential lines long before the cablecos began deploying voice services.
Most baby bells already have a wireless infrastructure. None of the cablecos do. This is why the Baby Bells ultimately have the upper hand over the cableco in the battle for residential subscribers. They can migrate their customers (and their phone numbers) to a wireless infrastructure, and Comcast (CMCSA) / Cablevision (CVC) /Time Warner (TWX) cannot. Comcast can migrate customers to Sprint/Nextel (S ), but without owning the infrastructure they won’t extract maximum value.
Wireless is the commanding heights and the most important infrastructure to own and operate in a voice network. Everything else is a commodity.