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"Panasonic tells how a typical Japanese multinational learned to restructure itself according to this flexible "American" approach while preserving some essential Japanese attributes. Panasonic is the main brand name for Matsushita Electric Industrial Company; author Francis McInerney consulted for Matsushita's American subsidiary in the late 1990s—when the firm's troubles became most apparent."
Carriers' battle with cable to be costly Yet fiber rollout could be key to keeping customers
Dow Jones Marketwatch.com, December 3, 2004
Jeffrey Bartash
Behind the strategy
"Rewiring America is such a staggering job," said Francis McInerney, managing director of the high-tech consulting firm North River Ventures.
Not everyone is convinced the phone companies ought to lay all that fiber. McInerney, who's long viewed the Bells' traditional copper networks as a money pit, suggests that improving wireless technology could ultimately prove a much cheaper way to connect customers to super-fast connections.
There's always the danger, he said, of another large company exploiting wireless as a means to deliver video and other communications -- an approach that could quickly endanger both the phone and cable industries.
"I am not convinced fiber is a good answer. It is an answer, but an expensive one," said McInerney, noting the increasing popularity of cell phones, "Wi-Fi" networks, satellite TV and now satellite radio. "Quite a few of the pieces are in place for an all-wireless world."
He said fiber deployment might make sense in some portions of the Bells' territories as a way to retain their best customers. UBS, for its part, has drawn the same conclusion. "The real strategy is to protect the high-end homes," lead author John Hodulik told clients in a conference call on Thursday.
In five years, he figures SBC and Verizon could gain 15 percent to 25 percent of pay-TV customers in markets where they deploy fiber -- about 5 million of 34 million homes.
Under the UBS forecast, Verizon would retain 12 percent of the residential customers it would otherwise lose with no fiber strategy. And SBC, offering a lower-bandwidth alternative, would manage to hang on to 6 percent of customers it potentially could lose.
Those numbers might not seem to justify billions of dollars in added expenses, but as Hodulik points out, the Bells derive as much as 60 percent of wireline phone profits from just 25 percent of customers.
Just as important, the "Telco-TV" strategy could reverse an expected long-term decline in the Bells' ability to generate cash. That's a critical objective if the Bells want to preserve their high dividend payouts.
If the Bells didn't do anything, UBS said, cash flow would continue its downward spiral and the companies would be "unable to support current stock prices."
