Wednesday, October 08, 2008

Color me anxious



Today I attended two very different events in the afternoon, but both shared a common sense of uncertainty and anxiety. The first was a "recruitment event" held at the beautiful Bloomberg offices on Finsbury Square in The City. This is part of Bloomberg's much-appreciated program of extending trial access to redundancy victims for 60 days, and is an interesting example of trying to preserve and enhance legacy customer relationships which telcos would be well-advised to learn from. I went along more out of curiosity than anything else, given my grasp of dynamics in the mainstream banking sector. It was an interesting, but vaguely depressing, event. The interesting part was turning up to find that the entire building had been evacuated for a fire drill, though when I first arrived I naturally thought that the recruitment event had drawn such a throng of participants that they had to be corralled across the street to maintain order. The vaguely depressing bit was that there seemed to be a lot of people there from Lehman Brothers, who had been truly shat upon from a great height, as well as other financial flotsam and jetsam, most of whom seemed to be going to great lengths to put on brave faces - understandably so. I also found it interesting that the queues for seeing the likes of CSFB and RBC were significantly longer than those leading to Citigroup and UBS, perhaps reinforcing the "frying pans and fires" view of the market at present. Finally, it was surreal to see some familiar Bloomberg Television "talking heads" sitting in the square during the fire drill, talking industry trash while we waited for the building to be declared "all clear".

Afterward, I headed over to the Broadband Stakeholder Group's presentation on Analysys-Mason's recent cost analysis of fiber in the UK. Matt Yardley and Steve Liput of Analysys-Mason did an admirable job, in my view, of dealing with some fairly hostile questioning, some of which seemed to me to be poorly informed (many attendees seemed to conflate operating/debt service costs and capital costs, of which the scope of the AM study by design only deals with the latter) and in some cases obsessional (one attendee seemed fixated on the case for greenfield developments in the UK, despite the current housing market ice age and the explicit exclusion of this topic from the scope of the AM study). Overall, it was a lively and interesting discussion, with some intriguing questions unanswered. Among them is the issue of incumbent ducts. In writing the report, Analysys-Mason took a view, in consultation with the BSG Directorate, as to what proportion of BT ducts might be usable in each technology scenario, but they concede that such information is not in the public domain and fairly nebulous. Some in the audience suggested that it is in BT's interest to overplay the scarcity of ductspace. International anecdotal comparisons offer confusing results - a EuroTelcoblog source connected to an FTTx deployment in another European country states that less than 1% of incumbent ducts were usable in its case, while this evening's panel cited the ARCEP duct survey as showing greater-than-expected availability in some cases. The ultimate answer to this mystery could lead to some significant swings in the cost assumptions, probably on a highly localized basis. There was also a lot of very interesting technical discussion which doesn't really merit discussion here, but the entire event was subliminally dominated by the carnage on the financial markets. The panel was asked about the specter of the UK being left behind in broadband development, and whether there was an imperative for government to get involved (with what, you might ask), but the overall view seemed to be, understandably, that, given the current state of the markets, NGA may remain a dream deferred for the foreseeable future. I agree, though it pains me to say it.

Which brings me to the ugly chart of the day: the S&P 500 from the lows of late 2002/early 2003 until the present. Nice "brick wall" formation in evidence in recent sessions, and only another 20% downside before we test support levels around 800. Burn, baby, burn.

1 comment:

Simon Cast said...

Hmmmm...I think that done right (which is the kicker I guess) fibre rollout could be a good investment for governments in this environment.

It would prime the economy for when it starts picking up again and it would bring the development of new services/applications that reduce cost or improve productivity about sooner.

If next generation broadband improves productivity/cost then it will allow companies to survive and continue trading without the same capital requirements/cashflow.

Given the desire for "safe" assets at the moment, a infrastructure trust that owns either the cabling or the ducts, can provide both an equity and bond that is considered "safe" versus CDO/CDS crap that is around. Of course creating these "safe" assets would need to work in conjunction with other initiatives to get the lending going again.