Re: Cringely on "Pirates" and the AOL-Hughes Deal.

Ian Andrew Bell (
Wed, 30 Jun 1999 19:58:14 -0700

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I Find Karma wrote:
> I still don't understand Allen's obsession
> with cable, which still seems like a losing business to me once
> satellite, high-speed wireless, fibre optics, and DSL kick into
> overdrive. Of course, between Gates and Allen, they have all of those
> bases covered, too, but is bandwidth really a way the big guys are gonna
> make any money off we unwashed masses in the future? Or is this a loss
> leader to get us addicted to other forms of the information crack pipe?

Think about it this way (and I've said this before): AT&T likes Cable b/c
it gets them into the home to market other services like data & voice.
Video will always get compressed, sent over cable, and decoded at the
set-top box. Voice will get compressed, sent over IP over cable, and
decoded on the IP Telephony Cable Modem.

Given the facilities required to deliver vox on TDM networks, where is
the margin? Given the additional expense to deliver vox on cable networks,
it's all about margin.

Measure the success or failure of a content piece in cost vs. revenue
per bit. For comparison, here's a chart:

Bandwidth Equipment Cost Revenue*
Voice | Low | High | Medium | ~$55 +
Video | High | High | High | ~$50
Data | Low | Low | Low | ~$35

* Revenue is a best guess per household per month.
+ Includes Long Distance, which is dropping like a stone

The great deal for cable, or for any RF-based broadcast service, is that
they've already solved the expensive problem cheaply and with higher mar-
gins. Now they can go after the relatively easy and cheap services like
voice and data, and if they integrate all three with IP, then they have
extensive service interaction and layering, and therefore customer
stickyness. The basic infrastructure is already paid for -- delivering
more services over that wire is, although not inconsequential, cheaper
than building it from scratch.

Just try shooting Video down TDM (64K?) or even a DSL infrastructure and
you will be disappointed. And when you talk about wireless, satellite, or
fibre then you're talking about people with no revenue, no existing customer
relationship, and none of the problems solved yet. I think it's pretty
clear who will dominate.

Add to the fact that cable companies already have SONET rings that pass
pretty-much all of the Metro areas in N. America already, and moving into
the fibre-to-the-enterprise business is a snap.

My money's on C. Michael Armstrong.

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