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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?"
Cost, in a business, are two sorts - capital and operational. What Worldcom have done here is picked a business at a discount compared to the capital expediture they would be required to make to build the same business. A fire sale in other words.
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
Now, the recurring cost will be a bit less for Worldcom compared with Rhythms but not by a huge margin (basically by the amount it takes to service the smaller debt, plus some from economies of scale). So I don't think that this will be a fairly cheap endevour to run. However, as the DSL market is undergoing a shakeout there will be less competition, and this will push user costs up.
The equation is a bit less opex, low capex for the infrastructure, and more revenue generated due to price increases (and, possibly, provision of low cost high margin services to a larger pool of users). Hopefully, opex+capex servicing+investment revenue, or it's goodbye DSL.
To me, Verizon (and SBC) is the Microsoft of the telecommunications business. I spent a few months this year dealing with a DSL fiasco. I'm not one of those people who gets upset about little things, but when they shut off my normal phone service and so forth, I began getting really pissed off.
Verizon (and SBC) have a government-granted monopoly on local phone service. The government says they're the only ones who are allowed to string telephone wire over and under our public streets. A condition of this monopoly which the government has granted, Verizon has to let DSL providers like Covad, Northpoint and Rhythms access to the central office and so forth. Verizon has been breaking the law and not meeting this obligation. In 1999 Covad filed an anti-trust suit against Verizon.
I had Covad as my DSL provider, Verizon is my local Baby Bell Local Exchange Carrier. For people who have ever had to deal with a T-1 which is down, you know how it is maddening as Verizon and Digex (or UUnet, or Sprint, or MCI) just point fingers at each other and say it's not their fault. I am somewhat familiar with central offices and the like so I was able to discern who was at fault in my case - and it was always Verizon's. When I called Verizon to complain that my phone line was dead or at other times that my DSL line was dead they had the gall to ask me why I wasn't using Verizon DSL. Covad kept making appointments to get into my CO but the Verizon people were always no-shows. Hell, they're a monopoly, why should they care.
Verizon is also one of the biggest political contributors in New York state politics, and one of the biggest contributors to national campaigns. This is how they get the government-granted right to be the only ones allowed to string telephone wire over and under our public streets. Once Covad, Northpoint and Rhythms are out of business, they can hike DSL rates up real high.
There is a GLUT of unused bandwidth out there, and even in this economy a demand for DSL. But government-granted mononopolies like Verizon/SBC prevent us the user/consumer from getting to that bandwidth. I keep getting advertisements in my phone bill for Verizon DSL, but I will never use them. I became so mad at Verizon, I did some political work on the campaign to keep them from doing long distance in Massachusetts.
Open up our phone lines to free competition. Get rid of the Verizon/SBC monopoly over phone lines over and under our public streets, which is granted by corrupt politicians who are paid off to maintain that license.