So, they take in $96M * 0.65 of capital for business development, yet still manage to run a loss twice as large for revenues twice as large. And its not like the cost-of-goods-sold includes a gigantic investment in development expense. Is the objective to continue to increase revenues until the loss fully matches?
Irrational exhuberance comes to mind. Cygnus Support/Solutions tried this model as well, and while they have made money, I wouldn't underwrite the IPO. Remember that underwriters work for the fees (7% of issue), not because of any great belief in the product.
DSL service consists of two parts: the DSL line, which is provided by an incumbant Local Exchange Carrier (LEC) or a competitive LEC (ILECs and CLECs). For example, in the SF Bay Area, the ILEC is PacBell and the CLECs are Covad, Rhythm and BrightStar. When you purchase a DSL line, you're just getting a pipe. If you want service, you need an ISP. In fact, unless you are a corporation buying service for your employees, most of the CLECs won't even talk to you. Instead, you purchase the service you want from a local ISP. They are the groups who put limitations on the service, such as not providing fixed addresses or prohibiting certain types of traffic. However, most of them likely offer the service you want, if you are willing to pay for more than the cheapie service package. Sirius (a SF based ISP) truely rapes you on service pricing (worked out to $125/month for a 384kb line), but with PacBell offering the same, with three addresses and a phone line for $75/month, I don't expect the ISPs to be able to keep the prices that high.
Cable modems are different animal. The two-way cable systems weren't constructed with high bandwidth traffic in mind. Many of them are one big fiber trunk that serves an entire town (this is due to noise concerns), which means that they may not have that much extra bandwidth to spare. Thus, they do things like putting web caches all over the system, and prohibiting the operation of servers. They are learning, however, and since providing digital cable (what a misnomer) is forcing some new thinking on system design, I would expect that one will see some improvements in the long term. Remember, however, that cable companies are capital-poor and move at a snails pace (or slower).
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So, they take in $96M * 0.65 of capital for business development, yet still manage to run a loss twice as large for revenues twice as large. And its not like the cost-of-goods-sold includes a gigantic investment in development expense. Is the objective to continue to increase revenues until the loss fully matches?
Irrational exhuberance comes to mind. Cygnus Support/Solutions tried this model as well, and while they have made money, I wouldn't underwrite the IPO. Remember that underwriters work for the fees (7% of issue), not because of any great belief in the product.
DSL service consists of two parts: the DSL line,
which is provided by an incumbant Local Exchange
Carrier (LEC) or a competitive LEC (ILECs and CLECs). For example, in the SF Bay Area, the
ILEC is PacBell and the CLECs are Covad, Rhythm
and BrightStar. When you purchase a DSL line,
you're just getting a pipe. If you want service,
you need an ISP. In fact, unless you are a
corporation buying service for your employees,
most of the CLECs won't even talk to you. Instead, you purchase the service you want from a local ISP. They are the groups who put limitations on the service, such as not providing fixed addresses or prohibiting certain types of traffic. However, most of them likely offer the service you want, if you are willing to pay for more than the cheapie service package. Sirius (a SF based ISP) truely rapes you on service pricing (worked out to $125/month for a 384kb line), but with PacBell offering the same, with three addresses and a phone line for $75/month, I don't expect the ISPs to be able to keep the prices that high.
Cable modems are different animal. The two-way cable systems weren't constructed with high bandwidth traffic in mind. Many of them are one big fiber trunk that serves an entire town (this is due to noise concerns), which means that they may not have that much extra bandwidth to spare. Thus, they do things like putting web caches all over the system, and prohibiting the operation of servers. They are learning, however, and since providing digital cable (what a misnomer) is forcing some new thinking on system design, I would expect that one will see some improvements in the long term. Remember, however, that cable companies are capital-poor and move at a snails pace (or slower).