"According to leading analysts. . ." For voice, video and data professionals these words possess the classical connotations of experience, expertise and perceptiveness. As such, it is understandable that true analytical traits can be found in only a select few. Analysts are responsible for guiding Wall Street, Congress, the Senate and even the White House. As such, it is of critical importance that their interpretation of information be used as a business tool for ensuring . . .
Smack! This should be the sound of your right hand swiftly being planted firmly alongside your face. It's time to wake up. Smell the coffee, the roses or whatever else it is that kicks your mind into gear. Because there is no better way to start a new century then the way business men did at the beginning of the last century; they studied, analyzed and thought for themselves. But for the couch potato that is still prone to reading 7,000 word dissertations analysts like a business bible in lieu of doing his or her own thinking, the following section is offered as a map to your future.
Excellent Analysis, Einstein
According to some analysts, so long as OPEC keeps oil production up, gasoline prices will stay down. Odd. Production was up last Spring and early Summer, but prices skyrocketed.
According to some analysts, the effects of El Nino and La Nina were over and we were going to have a nice, rainy Summer. The folks in Montana and Wyoming must have missed reading that analysis.
According to some analysts, the stock market is buoyed by the prospect of a technology driven future rather than real dollar earnings, and that this future is just over the next hill. Of course, this would be the same hill where video telephones, electric cars and paperless money are in every home.
According to some analysts, DirecTV is going to redefine private video services in the multi housing industry. While there are a few scattered stories of success, these analysts must have meant to say "will not redefine. . ." Of course, if it is possible to put a man in space, then maybe. . . .
According to some analysts, BellSouth Entertainment with its high-tech, high-dollar wireless digital video system is going to redefine a telephone company's entry into providing the multi housing industry with digital video. There's only one problem. They have stopped all projects cold turkey and are up for sale. Their calculator batteries died while assessing the economics of doing business in the video arena, while at the same time trying to do battle with the cable companies for high speed Internet access. Of course, how was BellSouth to know? The cable companies only began their planned entry into high speed data five years ago. Is there a lesson here for AT&T?
According to some analysts, AT&T Broadband is the company of the future for voice, video and data in the multi dwelling unit (MDU) marketplace. Their network spans the country. They have swapped, bought and sold cable systems unlike any company before them. And yes, the analysts are correct. AT&T is the company of the future, the very far future. Because their recent struggles with trying to simply be a company of today is not leaving much hope for future greatness. They are crumbling under heavy debt, selling off assets wherever possible and laying off hundreds in their broadband service division. In Atlanta alone, leaving some MDU projects standing at the alter in the middle of development, AT&T Broadband has given pink slips to 300 employees. In other areas, the promise of MDU property upgrades for digital video and data are far behind schedule.
According to some analysts, high speed Internet service for the multi housing industry is going to be revolutionized by companies like CAIS, Bricks, Darwin, Reflex, BroadbandNow and others. This is a bold analysis. CAIS has recently delivered a load of pink slips to its MDU division, and the parent company (Covad) is suffering some serious financial ailments. Bricks, who may have quite possibly jinxed themselves by selecting Pete Rose as a spokesperson, fell off the MDU stage faster than they walked onto it. And Darwin, once moving forward with a tremendous pace ended 2000 with a 90 day "hold" on existing projects, leaving some owners to question the company's direction.
According to some analysts, the Time Warner/AOL merger is a slam dunk. At the time this article is being written, this merger is still standing at the Government's altar as it has been for very long time. They are still waiting to hear "I now pronounce you. . ." However, should this go through (and it looks like it will), most analysts do agree they may very well become a model cable company of the future.
Terra Firma
Bring the idea of complicated analysis and business decisions back down to Planet Earth. Conducting your own research and analysis, becoming your own analyst is not difficult. Making an analysis simply involves looking at a fact or circumstance, assessing the issues that surround it and predicting how these will effect your business decisions.
For instance, take a look at analyst's predictions that "High speed Internet service for the MDU industry is being revolutionized by specialized service providers such as CAIS, Bricks, Darwin, Reflex, BroadbandNow and others." Taken at its face value, this analysis is persuading some private system operators to not consider bringing high speed Internet service into their business model. Their thoughts are that between these companies, the Baby Bells and local ISPs, they (the private system operator) could not get enough penetration to warrant moving into this service category, in addition to video. However, this reflects the thought pattern of the couch potato thinker.
For those who are willing to become their own analyst, they will look at the facts. The facts are that these companies have limited funding, which is largely from venture capital. Typically, venture capital comes with many strings tied to it. The moment it appears that the return on investment is not the same as once lofty projections, the purse strings are pulled tight. This forces companies to either scale back deployment, then service, then quality of service. In time, they either sell or go bankrupt.
Additionally, if one assesses their costs of deployment (which are not difficult to obtain), the average penetration of their product and the costs associated in providing the service, it becomes evident that the profit margins on this product are narrow, unless they are paralleling it with strong branding and the sale of advertising and content (which is rare today). And of course, one cannot forget to assess the severe impact on their success due to difficulties in accessing cable or telephone wires for deploying their service.
Combine these facts with the knowledge that as a private video system operator, many Internet provider companies will enter into a strategic alliances, allowing you to offer high speed Internet. This clearly relieves the Internet provider of some financial and legal burdens, while at the same time offering the provider the ability to provide a product that if otherwise not offered, spells certain death in the multi housing marketplace.
In the end, your own analysis may conclude that rather than being an enemy, these providers are allies in the battle against franchise cable and the Baby Bells. It is possible to conclude that due to the economics of their business models and the regulatory encumbrances to gaining entry, these companies could not possibly gain enough penetration to warrant your avoiding the provision of high speed Internet service in addition to digital video.
Roll Up Your Sleeves
And what of the analyses involving BellSouth Entertainment, Time Warner/AOL and DirecTV? After getting your hands dirty from lots of research, you will see that BellSouth's exit simply means someone else's entrance, assuming BellSouth's service and easement agreements. At press time, the likely candidate seems to be EchoStar.
With or without the AOL merger, but certainly with, Time Warner is operating some systems with a complete and constantly evolving arsenal of digital video and Road Runner service. In other areas they are looking as ragged as the old TCI. Perhaps, when faced with limited access to capital for deploying services, the private operator who has turned analyst would not worry about Time Warner/AOL at large, but only in those market areas where they deploy flagship systems.
DirecTV. For private system operators, this company has done little to bring digital services to the table for operators in a way that is economically meaningful. Some analysts may conclude this spells DirecTV's demise in the MDU (multi dwelling unit) market. Others may conclude that their delivery of DirecPC however, will make up for the difference. But the new operator turned analyst may see DirecTV as small piece of the digital video puzzle. Some research may show EchoStar as a more formidable and amiable partner. Continued research may show that WSNet and its new play with companies like Motorola, offers a package that neither DirecTV nor EchoStar is bringing to the table. In either case, a newborn analysts conclusion could be that summarily dismissing either of these three companies would be a mistake, just yet.
Conclusions
The end result of research and analysis is to develop a conclusion. But as with most things, it is rare to gain a 100% consensus on any conclusion. This is why taking too much stock in analyst's conclusions and not performing your own research and analysis is dangerous. A difference of opinion can result in financial success or bankruptcy. It only makes sense to create your own conclusions. And if by chance this agrees with the conclusion of analysts, other experts or colleagues, then you can feel more comfortable with your final business decisions.
Final Analysis
Regardless of how serious or aggressive of a posture is taken about rolling up the ol' shirt sleeves and getting those hands dirty, the reward will always be peace of mind. For at the end of every analysis, private system operators should find at least one conclusion remaining consistent; it is easier to turn a fishing boat around than an aircraft carrier.
Franchise cable and the Baby Bells will never be able to respond to the MDU market with new technologies and services as rapidly as private system operators will. Their infrastructure, economics and regulations will always drag an anchor on their efforts. The right private system operator, however, can respond quickly with products and services that provide properties with a much needed competitive edge. But determining the if, when, where and how to do this is the real challenge. A challenge that will be met with victory, so long as you are willing to put in a little elbow grease and become your own analyst. Good luck.