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Summary:

Naked Broadband, lurid imagery notwithstanding, is a clear-and-present danger to incumbent telephone companies, according to S&P. It is more troubling that consumer preference for wireless over fixed voice. And even more troubling than the growing popularity of VoIP services like Skype. The article says that the […]

Naked Broadband, lurid imagery notwithstanding, is a clear-and-present danger to incumbent telephone companies, according to S&P. It is more troubling that consumer preference for wireless over fixed voice. And even more troubling than the growing popularity of VoIP services like Skype. The article says that the loss in wireline voice revenues has been made-up with wireline broadband revenues. As naked broadband, (that is just broadband, and not rest of the crud) becomes more popular, the incumbent’s monthly revenue stream will decline by about 40 percent. Here is how the math works out – In UK, for example, consumers pay sixteen euros a month to get a 23-euro-a-month DSL connection. Take away the sixteen euros, British Telecom is left with about 59% of possible total monthly revenues. This explains why all the Bells (with the exception of Qwest) are dragging their feet on the issue of “naked broadband.” SBC promised to start “naked DSL” trials this summer, but no update since then. And the way things are going, Tampa Bay Devil Rays will win a world series before naked broadband is available stateside.

By Om Malik

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  1. I’d file this one under “BFD.”

    We’ve been talking about how telecom is merely in an unsustainable temporary holding pattern until the next (and may I add much larger) collapse begins for years now.

    Look, the telecos are GROSSLY over-capitalized already, but once the inevitable revenue declines accelerate, even the secured bondholders may be at risk. I mean what’s obsolete POTS equipment going to be worth.

    Whats more, is that EVERY wallstreet banker knows this, but they c/wouldn’t say anything lest they lose the final round of fat fees from underwriting and mergers. But dont worry they fully intended to collect cash on the way down. ROTFLMAO.

    A few months ago, I ran some numbers and came to the unpopular conclusion that one of more of the big guys will BK. A big RBOC in BK is going to be very messy, I mean the FCC has done everything in its power to keep the rats on the ship, and the RBOCs have massive piles of dirt on lots of friends/VIPs. Buckle up, I fear the subscribers will get hurt. Look what has already happened wrt copyrights/etc.

    PS. Has anybody noticed that ESPN/Disney may be getting cold feet on its MVNO strategy? The launch is late, and does a non-teleco want to be vulnerable to a very likely much more desperate telecom industry in the next couple of years. Will anybody at Disney push the eject button? Looking back 5yrs from now will Sextel have made more cash off Murdoch’s FoxSports than ESPN? Hmmm.

    I say let the collapse begin, I’m tired of waiting for it.

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  2. Why the incumbants are scared of naked DSL, I’ll never know. Selling naked DSL is just another way to highlight just how good a deal your service bundles really are. It is also a good way to grab back some money from your competitors. In that fashion it is no different than the dial-around services that got so popular at the end of the 90s. 10-10-xxx slowed down the voice revenue decline. Naked DSL will do the same on the data side. As usual, the incumbants will realize this too late and end up wasting a lot of money on advertising to cover their late enterance in the game. I just wonder what will happen to all the poor lobbyists and lawyers once Charlie Sierra’s prediction comes true? I’m guessing the oil companies will probably have a greater need for them than ever.

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  3. I called verizon about their broadband wireless. 2 year minimum contract ($1920) AND cell phone service required to get the lower rate.

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  4. Yeah, i’m getting rid of my phone service, transferring my home PSTN number to lingo.com, and just signed-up for naked DSL through speakeasy/Covad while keeping my earthlink online accounts. Just bought a 5.8Ghz Uniden wireless phone system to cover the whole house, which i’ll just plug into the ATA. blam. Since i’m a sucker for overkill, i also just bought a UPS power backup system. Talk about connected Nirvana.

    I look back on all those little services Verizon/GTE used to charge me for. voicemail. call forwarding. call waiting, etc. All that stuff and more, much much more, comes standard at pretty much all VoIP providers, 100% more flexible, 100% sexier. Even better, i’ll take the ATA with me when i visit the family in France this winter. Send and receive home calls … from France. utter sweetness.

    i used to pay $30/month for bare-bones phone service. Adding power features would get right at $50/month. Add another $20-$30/month to Sprint for long-distance calls. Add on-top of that very very basic DSL connectivity provided by Verizon, which was actually capped at 768Kbps down (instead of more typical 1.5Mbps down) / 128Kbps up, for $50/month ( i didn’t wanna renew a one-year commitment to get the $40/month everyone was getting, was ready for a switch in speeds). So, bird’s eye is $50 for PSTN service (Verizon’s pockets), $30 for long distance (Sprint’s pockets), $50 for DSL connectivity (mostly Verizon’s pockets, small portion to EarthLink) … $130 ?

    Far too much money was getting into Verizon’s pockets.

    F’-that.

    Today, Verizon’s fired. Covad’s hired.

    For under $150/month including tax, i get 6Mbps downstream, 768Kbps upstream … with 8 static IP addresses, shell account and dial-up(courtesy of speakeasy+covad), unlimited calls, anytime, to anywhere in the U.S., Canada, *AND* Western Europe for $20/month courtesy of lingo.com (with all the phone power-ups i could possibly want short of running my own asterisk box at home, which i’m not into doing ;] ), and i get to keep all the earthlink services i’m so fond of (8 email address + web space, SIP addresses, address book synchronization … tied to spam blocking, email-bound virus blocking).

    Verizon ought to be freaking out. That’s probably why they’ve been installing all that fiber in the neighborhood.

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