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Dana Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
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Moore’s Law defines the history of technology. It held that the number of circuits etched on a given piece of silicon could double every 18 months as far as its author, Intel co-founder Gordon Moore, could see. Moore’s Law has spawned constant revolutions since then, not just in computing but in communications, in science, in a host of areas. Moore’s Law applies to radios, and to optical fiber, but there are some areas where it doesn’t apply. In this blog we’ll take a daily look at new implications of Moore’s Law in real time, as it rolls forward to create our future.
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February 09, 2006

The Superbowl's Most Important Ad

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Posted by Dana Blankenhorn

The funniest Super Bowl ad was probably the FedEx bit with the caveman saying "it's not my problem" FedEx hadn't been invented and the other caveman's package got stomped by the dinosaur. (Although my 14 year old son howled at the Diet Pepsi Jackie Chan set-up, with a Diet Coke getting squished as a "stunt double.")

The most important ad, however, came at the end. It was a fairly straight ad, although (like everything else about the game) horribly overdone. In it a man with a cellphone walks through a world populated by sports of all kinds -- baseball, football, basketball, NASCAR and track all going on around him.

It was a house ad, really. It was for Mobile ESPN. ESPN is owned by Disney, which also owns ABC, which ran yesterday's game.

So why was it important? It was important because neither ESPN, nor ABC, nor even Disney owns any cellular assets. They don't hold frequencies, or towers, or run networks. They are re-selling.

Richard Branson's Virgin Mobile has already created billions of dollars in equity value through cellular wholesaling. Others want into the business. It's a good business, good for the wholesaler, and good for the network (usually Sprint) doing the wholesaling.

Yet this is the business the Bell companies have spent the last decade destroying when it comes to Internet access. They ignored the promises of the 1996 Telecommunications Act. They killed all the CLECs, claimed they didn't have to wholesale on "new builds," made everything a new build (even cutting copper to guarantee it) and topped it off by getting governments on the state and federal level to sign-off on the scheme.

Wholesaling should be a good business. It was a good business, until the Bells killed it. It can be again. So why won't the Bells allow it?

You don't need me to tell you the answer to that one. So they can dictate the price, the terms, the conditions, so they can turn the bit stream of the Internet into "services" they bill for separately, so they can make money off both sides of every Internet transaction.

And they promise, if you let them do this, that they will finally, finally meet their 10-year old promise to deliver fiber to your neighborhood.

Even if the promise were real (in most cases it's a pie crust promise) the deal is not worth it.

Comments (1) + TrackBacks (0) | Category: Business Models | Consumer Electronics | Telecommunications | cellular | computer interfaces | e-commerce | marketing


1. Jesse Kopelman on February 9, 2006 04:52 PM writes...

It's always funny when a Bell/cableco or one of their appologists makes the argument that the only way a network owner can recoup the cost of new infrastructure is if they control the retail channel. Now, anyone familiar with economics should know that, in a competative market, wholesaling can often be more profitable than retailing (less cost for both advertising and support since the retailers take over most of this side of the business) and certainly provides a steadier revenue stream. In a monopoly/oligopoly situation wholesaling does not make sense. So, clearly either broadband is a competative market and the network owners shouldn't mind wholesaling or it is not a competative market and we need regulation. You can't have it both ways, guys.

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