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WorldCom Bids On Various Rhythms Assets
iamabot writes: "DSL providers are cheap these days. After the AT&T acquisition of NorthPoint assets for 135 million, WorldCom has issued a 40 million dollar bid for various assets of Rhythms. The interesting thing here is after some other providers disconnected their subscribers, WorldCom seem to be interested in operating the existing network. I suspect this will actually be a fairly cheap endeavor, when compared to the capital and recurring expenditures DSL providers faced over the past few years, especially for WorldCom. The majority of the cost associated with lighting up a DSL network nationally involves the capital expenditures to buy the equipment and the huge recurring monthly transport costs for central office aggregation to a node.
Does anyone else see the acquisitions in the past year or so as an opportunity for the DSL industry to rebound?"
There are a couple of issues to think about. A handful of months ago, Scott McNealy of Sun Microsystems fame said in a speech that there are going to be some "third time owned" effects in the marketplace. What he meant was that with the original (new) cost of the equipment it is difficult to make a venture (whether it be telecom or internet) profitable. The second time around is better, but still not good enough. By the time the equipment ends up in it's third set of hands the cost has likely decreased to the point where the service can be offered at the current market rate and yet be profitable.
Whether you apply this to telecom companies (360 Networks) that have buried a tremendous amount of fiber or to internet companies (Webvan and their excellent warehouses and technology or take your pick of high-flying dotcom that bought too many Sun servers) it is not difficult to understand. When you pay 10% of the original price it is easier to be profitable. How surprised would you be if Worldcom DIDN'T cut a deal with the ILECs on long distance in order to get cheaper rates for DSL?