Somewhere on Wall Street, the the ivy league spreadsheet kids are having a hissy fit. The big dumb pipe they have warned the telcos and cable guys to avoid has become the only growth business outside of wireless. The difference is that fixed line broadband is infinitely more profitable than wireless and very modest investments can yield even more profitable service tiers. As stand alone services on a captive network, voice and cable TV are dying.
Whether it’s needed for Wi-Fi for your iPhone ( s aapl) or you simply like to watch streaming Netflix, the demand for broadband connections was on an upswing according to research firm the Leichtman Group. During the third quarter of 2010, top U.S. cable and phone companies added about 818,000 new connections, up sharply from a mere 350,000 connections added during the second quarter of 2010. (Gigaom)
Look for one of the spreadsheet kids to discover shareholder value can be advanced by spinning off duopoly content and voice services into separate operating entities. The same case could easily be made for spinning off wireless. The dumb pipe needs to get bigger with a larger range of bandwidth options. By focusing only on bandwidth, profit potential is enormous when unencumbered by the programming, content and legacy voice businesses. Spun off programming would be more free to undertake a TVoIP transformation, and possibly even recapture revenue growth when not confined to a single access providers network. Regardless, the parts are very likely to be worth much more than the conglomerate. When there is a single core business in management’s focus consumers are much more likely to see new technology, get better service, and maybe even a lower price.