DSL Prime News Briefs

In this week's News Briefs, DSL Prime makes its guess as to who will buy MCI.

by Dave Burstein DSL Prime [July 19, 2004]

e-mail

• "Wegleitner is right: ADSL2+ video is not competitive with cable. HDTV PVR is finally here and will certainly be commonplace in the next five years. As you know, a popular PVR mode is to watch one program while recording another simultaneously. Note that this DOUBLES video bandwidth requirements. So, even if HDTV is compressed to 10 Mbps, HDTV PVR will require 20 Mbps. (Unless some form of network PVR is used but this approach has a lot of DRM baggage.) Upshot: if a telco offers HDTV, competition will certainly drive it to offer HDTV PVR in the near future." I think so also, but people I respect hold contrary opinions, thinking 2 Mbps upstream and 15 down is enough, with clever engineering and good lobbying.
  
  
• On the Ikanos IPO "I am not an Ikanos employee and am not connected to the company. It is true that in 2003, the cost of revenue was almost equal to the revenue itself. However, if you look at 1Q, 2004, you will see that the revenue in this quarter was $14.3 million for a cost of revenue of $11.7 million. This indicates a huge growth in the revenue and an increase in profitability." I wrote "Ikanos' IPO has the momentum to be successful," but that doesn't mean I should ignore the still high cost of goods.
  
  
• A FCC colleague wishes Mike Balmoris well as he moves to SBC. "Your comments about Michael Balmoris leaving the FCC are right on. He's been a straight shooter and has great judgment. The Commission's loss is SBC's gain." The FCC staff overwhelmingly is smart and hardworking, contrary to the many cheap attacks from both right and left.

Briefs

• "The future core product for Verizon is broadband," Eric Rabe tells the Wall Street journal. "You want now to capture that market and want to do that as aggressively as you can, and you certainly don't want to cede it to the cable guys."
  
  
• FastWeb added 41,000 subscribers in Q2, and claims a nine figure EBIDTA margin for the first six months of 2004. They are doing well enough to light a fire under Telecom Italia, which suddenly is extremely interested in improving their DSL services.
  
  
• Yossi Saad of Actelis has cut prices on multiline gear to the low thousands of dollars, and believes carriers will increase orders because the first customer requiring service will cover the equipment buy-in.

Wall Street

• David Barden of BofA has a great chart showing the connections between Leucadia, MCI, Wiltel, Joe Nacchio, Global Crossing, and more. Carlos Slim of Telmex is at the top, and it would make sense for him to work through U.S. agents. Prejudice against Mexicans remains high in the U.S., to our shame. Slim is by far the largest shareholder in SBC. He recently added to his holdings, then resigned from the board. That could be for health reasons, as rumored, but also could have been appropriate if he were about to buy MCI.
  
  
• The highest payout of above-market interest goes to a Bell CEO, the $91 million man, per Equilar's study reported by Bruce Meyerson of AP. I leave the name obscure because I don't want to appear mean-spirited.
  
  
• Making money by following even the best analysts on Wall Street can be hard, especially when they seem to contradict each other. One writes "concerns about Sprint choosing a second source to AFC for its access systems have been way overblown (see our July 2 note, Everything's Up to Date in Kansas City)" while another writes "Sprint will choose a second source for a next-generation digital loop carrier (DLC) RFP. We believe finalists for this business include Calix/Nortel and Entrisphere." Entrisphere's booth at SUPERCOMM was closed to most visitors, including me, and they've been in stealth mode a remarkably long time. Hard to understand why—they've briefed enough potential customers on their products anyone who really wants to know has the information. Is an aura of mystery the latest sales tactic?
  
  
• Similarly, one writes "Verizon may choose a second source FTTP supplier in 2H04. AFC had a major software deliverable milestone in late June relating to the Verizon fiber to the premises (FTTP) contract. Based on discussions with industry contacts, we believe software performance was below Verizon's expectations. We now believe Verizon could choose a second source as early as the 2H04 vs. our earlier expectation of late 1H05." Another analyst "AFC's position within the extremely important Verizon fiber-to-the-premise deployment remains strong." The particulars of these opinions can be reconciled, but the point is making market choices isn't easy even if you have access to the best of analysts. (J.S., please take that as a compliment.)

People

• Dan Gillmor's We the Media is done and O'Reilly is about to release the book. Dan's the most effective tech commentator in the U.S., and practices what he preaches, integrating blogging into his daily journalism routine. I asked Dan what technical people will learn from We the Media, and he replied "I hope folks will understand that the collision of technology and journalism means that all constituencies—journalists, newsmakers (the people and organizations we write about) and the audience (which now has more options and can be a part of the journalism process)—will have to readjust to a new, and I hope more useful, form of media."
  
  
• Mark Peden was back in the SUPERCOMM DSL Forum booth, and it was good to say hello. When he was at Intel, he played a major role growing the organization. "His next challenge will be ...?" I asked, with the answer still to come.
  
  
• Jim Baller, key municipal connection, brings together crucial people in muni broadband August 16 and 17, sponsored by Law Seminars International. Roger Black, whose Utopia will soon do a first stage groundbreaking, Qwest's Charles Ward, and many others will be speaking.

Copyright 2004 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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