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What Happens Next In The US Broadband Market
from the all-depends-on-the-RBOCs dept
Bill Gurley's latest column takes a pretty comprehensive look at battle between cable and DSL providers for the connection into the home in the US. He compares it, briefly, to the situation in Japan and South Korea where much higher speed internet connections have much higher penetration rates. He believes we'll get there in the US as well (not a tough prediction to make), but how will depend on a variety of factors. The cable providers clearly have the lead, and where things go may depend on whether the companies are making strategic or tactical moves in terms of offering other services. The cable providers can already offer the famed "triple play" of video, data and voice while the telecom companies are still struggling to figure out the video component. So far, attempts at doing TV-over-DSL haven't gone all that well, and partnering with satellite companies for video is a weak approximation that doesn't achieve any of the real synergies necessary in the triple play. Gurley suggests that the cable guys would be better off just offering the voice component for free to undercut the telecom providers and beat them while they still have the upper hand. The telecom guys, though, should be investing in next generation networks to leapfrog what cable can do (which actually appears to be Verizon's strategy). While Wall Street still hasn't figured out that voice, on its own, is something of a dead end, the telecom firms can leverage their voice revenue to fund such expansion. There are still regulatory concerns in all of this, and Gurley also makes a compelling argument about preventing the cable companies from favoring certain services over others. All in all, a good read concerning where broadband, telecom and video services are headed in this country.
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What is the Internet Serious Usage Rate?
Japan and South Korea supposedly have higher broadband penetration rates. But how many people there use the internet for serious purposes, other than chatting with friends?
During my recent visits to Tokyo (last few months), people I met thought it was strange to use the internet for anything serious, like buying things, finding out more about a business, or meeting people. They felt that only nerds or other maladjusted people take the internet seriously.
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Missing links
There are a lot of issues that this article does not take into account. For starters, Japan and Korea are much smaller countries than the U.S., so wiring those countries with fat pipes is a lot cheaper than it would be here.
More importantly, Gurley only considers the wired world. What about high-speed wireless? Verizon's 1xEV-DO rollout is just around the corner, and Sprint's 1xEV-DV could be available as early as next year. While these services may not be ideal for video (yet), they certainly seem pretty strong for voice and data, especially considering their how much better their range is than Wi-Fi. These types of services could bring Internet Radio to cars and undercut XM and Sirius severely, or offer an on-the-go alternative to cable modems for laptop users already growing accustomed to Wi-Fi. IMHO, cable companies ignore the power of wireless at their peril.
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