Posts tagged ‘Time-Warner’
Who benefits the most from the recently announced Sprint/Clearwire deal? It may not be who you think.
This massive ($3.2B) infusion of money seems like a lot, but it’s just the beginning for this boondoggle. WiMax is a nice technology that works in some circumstances, with the right business model. But then so will WiFi, and it’s much cheaper. Besides, the mobile providers have a huge head start. Why buy new cards and sign a new contract when I already have what I need from my cell phone (or hotspot) provider?
In terms of becoming a successful business, WiMax is vying for the “most hyped” award with social networks. Expect more bags of money to be tossed into the trough before long.
So who gets what?
Sprint (S) – Removes one monkey from the back of CEO Dan Hesse as he is now free to focus on why Sprint has been shedding customers for so long. Also distracts everyone from noticing the delays in its own WiMax buildout.
Intel (INTC) – Intel has been peddling WiMax like a desperate streetwalker to anyone with an open car window. And its been seen hanging around the Clearwire convertible before. Intel wants to be the undisputed standard for WiMax chips, a role it failed to capture in WiFi. Not to mention selling lots of new processors for next generation laptops and smart phones.
Google (GOOG) – Yes, critical mass for Android will help extend its search and advertising dominance into mobile. And this network might turn out to be actually open. Despite Google’s game playing at the FCC auction, the “open” spectrum Verizon won will–in practice–be anything but. Fundamentally, Google has become a VC firm. A billion here, a billion there, something just might stick. All it takes is one 10-bagger to make it work. This ain’t it.
Time Warner Cable (TWC), Comcast (CMCSA) – the Rosencrantz and Guildenstern of mobile will be exactly as successful here as they were with Pilot, the failed MVNO venture with Sprint. And for the same reasons.
Clearwire (CLWR) – Now we’re getting somewhere. Big cash infusion, lots of media attention. The rights to resell Sprint 3G will allow it to grow its top line, giving it time to progress on the buildout. In the end, though, even with a working network it won’t be enough to either satisfy consumers or to make it a viable competitor to the telecableco ISPs. ( And I’m not alone in my thinking, here.)
McCaw has a history of promote, build, and sell. Usually at the top. And always with someone else’s money. He’s going to extract himself from this before long, and come out smelling like a rose.
Or a crisp thousand-dollar bill.
Regardless of what happens, whether the network succeeds, whether or not anyone else makes any money, you can be sure of one thing: McCaw has this all mapped out. There’s your winner.
Disclosure: I hold no position in any of the stocks mentioned here.
Startup Sezmi is beginning to get some notice–in a short piece on NewTeeVee, and a longer one on Forbes. Sezmi is aiming to become a new video distribution platform, combining over-the-air broadcast and internet delivery. While their strategy is ambitious, I have some doubts.
What it gets right:
- Video on Demand. These guys seem to get the transition from channels (called “nothing more than playlists for shows” by Sezmi co-founder Phillip Wiser) to VoD.
- Storage vs. Delivery. Storage is still cheaper, and Sezmi will “pre-load” it’s Terabyte box with some content, based on the results of a predictive software algorithm.
- Navigation. Sezmi is developing a viewing guide that will combine traditional TV fare with internet content, in customized “channels” that automagically group content by category.
What it doesn’t:
- Content. None announced yet, and Sezmi is attempting to extract per-sub pricing from the networks that’s identical to what the telecablecos pay. Good luck with that.
- Pareto’s Rule. The model relies on the fact that only a few shows account for most of the viewing at a given time. True enough. But take away the option for (or even impede) viewing that occasional odd show, and you’re D.O.A.
- Inertia. Such a new paradigm will create difficulty with viewers who are more interested in plopping down in front of the tube than in learning a new technology, box, and way of viewing TV. Certainly not impossible, but not easy either. At least with TiVo (TIVO), consumers could always default back to their old habits if they wanted–Sezmi will require jumping in with both feet.
- Cost Structure. This is where the wheels fall off, I think. Sezmi claims it can deliver TV for half the cost of cable, not having to pay for physical pipes. But it must pay to lease extra local broadcast spectrum. And it piggybacks on telecableco internet pipes that are largely cross-subsidized by the very content distribution it aims to disrupt. Let’s see how long that lasts. Not to mention beaucoup marketing and subscriber acquisition costs just to get off the ground–investments that incumbents like Comcast (CMCSA) and Time Warner Cable (TWC) have largely made.
My bet is that this will get lots of press, a few rollouts, and ultimately fail. If Sezmi is able to get some of its predictive algorithms right and create a useful way to combine internet and TV programming into a single guide structure, someone will buy it eventually–at a price disappointing to its VCs–for that technology alone.
Otherwise, Sezmi simply becomes Sezyu.
Disclosure: I hold no position in any of the stocks mentioned here.
The Wall Street Journal reports this morning (article, paid subscription required) on talks between Comcast (CMCSA) and BitTorrent, Inc. to make nice over Comcast’s admitted blocking–excuse me, “delaying”–of bittorrent generated traffic.
At first glance it seems a rather ham-handed attempt to mollify Comcast critics. The WSJ and others are reporting it as a fairly straight up development, if something of a backpedal by Comcast. But these miss the point, I think, sidetracked by conspiratorial discussions of “net neutrality” and how the big bad telecablecos are angling to limit our choices, take over the world, and generally do evil.
Do I believe the big ISPs want to control content (or access to it) as well as the pipes? Absolutely. There’s gold in them thar hills! None of them want to be limited to connectivity or bit delivery services. But will they succeed? Is the above fictional ad to be our broadband future? I doubt it. Anyway, it’s beside the point.
There’s another motive for ISPs to manage bandwidth on their networks–it’s a finite resource. No, Virginia, there is no unlimited bandwidth. You can talk all you want about Moore’s Law, etc. Bandwidth ought to be cheap. In a perfect world–or Asia–it is cheap. But not here, not without real competition.
The telecablecos have promised this always-on, flat-rate, high-speed internet access. It was a fiction created by the need for market share, and by consumer demand for a broadband salad bar. All-you-can-eat, with a fixed price. Sounds wonderful. But it could never have lasted since the infrastructure is largely shared and was built on the expectation that demand would be low (or at least intermittent).
Now the growth of video is stealing the condiments, and file sharers are sneezing in the salad.
There’s no free lunch. So you do one of two things. Limit how many trips each patron can make for salad. Or charge them for each trip. Comcast has tried the former. My bet is on the latter.
You believe it’s a fantasy? That no one will go for tiered or bit-based pricing? Think again–Time Warner (TWX) is already trialing it. And the more successful we are at regulating the ISPs to ensure net neutrality (in the absence of competition), the more likely it is we’ll see pricing by the byte.