* Competition for network connectivity
Last time, we talked about how consolidation in the telecom services industry, precipitated by the SBC/AT&T and Verizon/MCI announcements, begs the question: which is more important, the water or the pipe? Today, we’ll continue our thesis about how competition is alive and well for both pipes (network connectivity) and water (content). This time, we’ll look at competition for network connectivity.
Over the last five years, enterprises have become dependent on broadband network connections for both the LAN and the WAN. Users are demanding megabits to their desktop – which means hundreds or thousands of LAN megabits and tens or hundreds of WAN megabits. Traditional wireline service providers offer services like DSL, frame relay, and private lines, and these carry the lion’s share of business WAN traffic.
However, traditional local loop isn’t the only game in town. Local loop can and is being bypassed by competitive local exchange carriers who use their own fiber, or fiber from third parties like utility companies and cable companies. Speaking of cable companies, they are entering the bypass game with their own metro Ethernet and IP VPN services.
Some large corporations are laying their own private fiber or creating a private fiber network that uses a public-private hybrid with fiber from multiple sources.
Finally, wireless providers are building out broadband wireless networks that bypass the need for local loops entirely. While Verizon (with Verizon Wireless) and SBC (with a majority share of Cingular) may be tempted to keep pricing parity between wireless and wireline broadband services, we believe that Sprint/Nextel and T-Mobile will keep the market competitive. And, if all else fails, we’re noticed a growing number of municipalities and construction developers offering broadband wireless competition.
