DoTheMath 12/5/2012 | 12:20:44 AM
re: WaveSmith Wins at SBC cc_junk> Hmm, what is your bais for saying AOL minting money on $22 dialup?

Check out AOL cash flow numbers - they are pretty huge. The cash flow margins seem to be in the neighborhood of 40%. The reason why there is talk of AOL spin off is that Time Warner does not see any future beyond dial-up for AOL. In fact, having AOL around is complicating both AOL's and TW's effort at broadband. AOL cannot easily sign up other cable/DSL providers because TW Cable is competition to them, and TW feels hamstrung by a declining AOL (see recent moves to restrict Fortune magazine content to AOL subscribers only).

So the spin-off talk is not because AOL dial-up is unprofitable, but because in the current set up, there is no growth left in that division. Also, the TW folks are pissed off at AOL (and themselves) for the massively overvalued AOL stock they accepted in 2000, so they want revenge. Add to that the former AOL had given a put option to Bertelsmann about AOL Europe that cost the post-merger AOL-TW $8 billion IN CASH to settle. That $8 billion wiped out a couple of years of cash flow from AOL.

rtfm 12/5/2012 | 12:20:47 AM
re: WaveSmith Wins at SBC Re: cost of DSL and the like.

One major cost difference between DSL and dial-up (e.g., AOL implications) is the uplinking (transit/carrier) fees. Bandwidth is some 50-80$/month per megabit for uplinking (someone correct me, please). DSL and cable are already stat muxed, (like dial-up is), but the utilization rate is often higher in peak periods, because of the always on nature and subsequent use of P2P. Opex are more than Capex for DSL and most other technologies.

The other major issue in econnomics is market share (more an issue for shared access technologies like cable modem, wireless, etc.). Still is an issue in DSL, though.

$35 can be profitable (i have lots of analyses/PhD theses to refer to), but under a lot of assumptions. Churn is also increasing, and competition makes it harder. But, I agree, $50 is probably too high for massive deployment. In addition, DSL can't easily do the "triple play."

cc_junk 12/5/2012 | 12:20:49 AM
re: WaveSmith Wins at SBC DoTheMath, post #12:
"The $35 DSL can be very profitable to them. AOL has been minting money on $22 dial-up, and today's DSL equipment costs are not much more than dial-up gear. "

Hmm, what is your bais for saying AOL minting money on $22 dialup? The only financial news for the last couple years out of AOL-Time Warner is complete disaster for the AOL division once the advertisement revenue started drying up. There wouldn't be talk of spinning off the division if were truly "minting money" instead of being a financial drain.

Is any major provider making money on consumer (or business for that matter) Internet access service?
rjmcmahon 12/5/2012 | 12:20:56 AM
re: WaveSmith Wins at SBC If this is the "new SBC", I am impressed.

DoTheMath; Think of it like living without food and water for many days and then suddenly a humanitarian army shows up and throws us some rations. When starved and oppressed, these efforts seems like a lot and can easily be confused as "impressive" instead of what they really are.

We deserve much, much more than these rations. We deserve a democratic, civilized society which not only respects our Bill of Rights, but also creates an environment where the citizens can grow. A prerequisite to that civilized society is an open access, bandwidth abundant communications infrastructure. Unfortunately, SBC/Yahoo is unable to help with that. Maybe the US AID organization can issue an RFP and that will get the job started.
DoTheMath 12/5/2012 | 12:21:03 AM
re: WaveSmith Wins at SBC This is off-topic, but given the posting on SBC survival, I felt it is appropriate. I am not an RBOC fan, in fact have felt these dinosaurs should die, so I should give them credit for my recent positive experience.

I recently got SBC Yahoo DSL here in silicon valley. My wife ordered it when I was out of town - I was thinking of cable modem for a change. I used to have the more expensive SBC DSL (I was one of the early DSL customers) in my previous home. That cost $50 for a static IP connection. This new one costs $35 for a PPPoE dynamic IP connection.

My experience is that in terms of setting it up, pricing and the access speed, the new SBC Yahoo DSL is way better than my previous SBC DSL. I still use my Linksys Wi-Fi box to share this cheap DSL connection with 2 other computers at home, and the speed we get is upwards of 1 Mbps (closer to 1.5 Mbps), while in the previous more expensive DSL connection, I used to get about 500-700 kbps. Granted, location may have something to do with it, but the set up process the first time around took 2-3 technician visits, and this time, they just mailed me the modem and it was a snap to set up.

If this is the "new SBC", I am impressed. May be Yahoo has taught this old dog some new tricks. Granted, Yahoo may not be providing much more than name and "bundle" their site with SBC, but I like to think Yahoo would care to preserve its friendly brand image. The $35/month pricing is also much more reasonable than the $50/month they used to charge me.

Icing on the cake, I called their support once, and it was answered in under 1 minute and the support person was very friendly too. I don't know what has changed at SBC, but whatever it is, I like it. The $35 DSL can be very profitable to them. AOL has been minting money on $22 dial-up, and today's DSL equipment costs are not much more than dial-up gear.
Richard Hatch 12/5/2012 | 12:21:03 AM
re: WaveSmith Wins at SBC Again, with the required price points & footprint, it's not surprising that the big boys with their big boxes lost out.

Does anyone remember the big Cisco-SBC comarketing announcement of a few years ago? I remember thinking what a farce it was at the time and I wonder if SBC ever realized the hundreds of millions of dollars Cisco promised as part of the deal.

Neither Cisco nor Alcatel has innovated on the edge in some time!
alcabash 12/5/2012 | 12:21:17 AM
re: WaveSmith Wins at SBC Alcatel owns the DSL layer at SBC and was not able to sell its ATM switches 7470 and 7670. Cisco owned the ATM and IP at SBC and lost that battle too.
That is a big upset for both incumbents.
allidia 12/5/2012 | 12:21:24 AM
re: WaveSmith Wins at SBC according to a blurb in yesterday's Boston Globe. Assuming 200 sites then $50k per system is about right. Question is what percent does Ciena get? I would guess 30% and that they would provide the support. Not sure how big Wavesmith Customer service is but 200 sites leads me to believe Ciena may have more of a role in this than thought. Either way this is a positive development but also a very rare one.
BobbyMax 12/5/2012 | 12:21:28 AM
re: WaveSmith Wins at SBC Switch for DSL aggregation is a simple device that is likely to be duplicated by hundreds of vendors. So the prices may come down further to the point that the business for for the DSL would go down the tubes. There is nothing to excited about WaveSmith getting some business from DSL.

What is surprising is that SBC is taking such a risk. The future of SBC itself is very dim as it is losing the number of access lines and its customer service is located in India without the knowledge of its customers.

Although the wings of SBC has been clipped its CEO made an obscene amount of money -- ten million dollars. He was entitled to receove this money but the SBC board gave $10 Millions of shareholders money.
Richard Hatch 12/5/2012 | 12:21:29 AM
re: WaveSmith Wins at SBC If this is the application I think it is (I heard about it over a year ago if not more), SBC was looking for a smallish box that fell in the $30-40k price range. I actually thought it would go to a Mainsail/Terayon type box based on those guidelines. Definitely too small & cheap for CBX-500, even at bargain-basement pricing.

I am surprised they got this, but good for them b/c there is hope for other startups now. I am waiting for the return of the days when a rumor about being in the Williams lab would bump your valuation $200+m or so (but not holding breath)!
MaxQoS 12/5/2012 | 12:21:29 AM
re: WaveSmith Wins at SBC Most Wanted,

So another way to restate what you said would be to say that LU can't afford to undermine their legacy business in antique CBX 500's by lowering their gross margin to compete with someone with a next gen edge platform. Having failed to develop any sort of replacement for the CBX, they have to hope that the RBOC's keep buying what they've got while LU tries to figure out how to build a profitable business. Oh, and just for good measure, plant a little FUD that they're selling the Wavesmith boxes at a loss just to get the carrier win not the more likely scenario that the WS box is just cheaper to deploy than the behemoth CBX 500.

Newsflash: LU has been a stunning failure in the profitability department thus far, a lot of people at CTIA wondered how much runway LU has.

Disclaimer: I've never had any relationship with Wavesmith.

optical_man 12/5/2012 | 12:21:29 AM
re: WaveSmith Wins at SBC Author: Most Wanted Number: 4
Subject: Small Deal? Date: 3/27/2003 8:46:52 PM
This is actually a small deal in the big scheme of things. Lucent decided to pass on this rather than drop the price of their CBX 500 plugs by 50%plus. This way LU still makes money selling into their installed base of CBX.

You Sir are a loser on many levels, philosophically, logically, intellectually. (did I spell all those correctly?).
Pull your head out of your axx and celebrate a breakthrough for a nobody who now has a chance to be a bit player in the recovery! These guys may make sub 1 billion/year eventually, which is a joke for legacy players, but more money than I made last year (or even the year before that I think :-))
Not sure if your pooh-poohing of this is because you are under a still hidden rock at Lucent, or you lost this deal at a competitor, or you just hate everything in general, but you are not the type of person who's going to drag us out of the mud to respectable spending, deployment levels where we can make an honest living delivering value.
Geez, a small company announces a national deployment at SBC (in 2003 for gosh sakes!) and you bitch about it?
Go away, or I shall taunt you a Second Time....

rbkoontz 12/5/2012 | 12:21:32 AM
re: WaveSmith Wins at SBC This is actually a small deal in the big scheme of things. Lucent decided to pass on this rather than drop the price of their CBX 500 plugs by 50%plus. This way LU still makes money selling into their installed base of CBX.

The Wavesmith win is for DSLAM aggregation only - probably less than 100 units which will be sold at negative gross margins. However the RBOC win will certainly be huge help to Wavesmith in raising another funding round. It buys Wavesmith some runway to figure out how to actually build a profitble business.

Agreed with WASS - Ciena did nothing to drive this deal. It has been in the works for 18 months. Only SBC would not sign a PO to a startup without a financially viable company to take financial and support responsibility. Think of Ciena as Bank of America without the ATM.
ILikeBirds 12/5/2012 | 12:21:34 AM
re: WaveSmith Wins at SBC I'd like to congratulate everyone over at wavesmith for this accomplishment. Way to go, and keep up the excellent work....
wass 12/5/2012 | 12:21:35 AM
re: WaveSmith Wins at SBC SBC has an unwritten policy to only work with startups that have a "big brother" as a partner. It is likely that Ciena helped just by being there.

puddnhead_wilson 12/5/2012 | 12:21:36 AM
re: WaveSmith Wins at SBC I am wondering what is the exact scenario in which the Ciena relationship would have "played a hand" in getting this contract. Just because Ciena is larger, and the implied stability that brings? I don't see any clear benefits of "contacts," since there is no current customer relationship with Ciena over at SBC that I know of ...
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