More than four years ago, back in the early days of this site, I dabbled with a naval analogy for the world of network operators. The sector has evolved greatly since then through consolidation and such, so I thought I’d revisit it on this post-Election and post-Sandy Friday. The simple question is: if each US network operator was a warship, which type would they be?
- The Aircraft Carriers — These are the giants with consumer wireless businesses. Their fiber networks are huge, but the captain is thinking about how to use it to enable the fighters on its deck and many people forget about the other firepower it has. They are immense and project power better than anyone, but take years to turn around. AT&T, Verizon, and Sprint.
- The Battleships — These are the fiber operators who have grown very large via consolidation, but don’t directly participate in the air war. They have the scale to really do some damage if they could just get pointed in the right direction before the target moves again. Level 3, CenturyLink, Windstream.
- The Cruisers — Still small enough to be fast, yet with big enough guns to be truly dangerous if the captain is skillful and the target is sufficiently focused. But if not, then it’s easy to wind up going the wrong direction at times. XO, Zayo, Integra, tw telecom.
- The Destroyers — Small but agile and faster than anything else in the water, these guys reach the action first and try to take the prize before the bigger competition is able to shift and take it away from them. Fearless in taking on larger competition, but preferably in close quarters where the other guys can’t focus all their firepower and shallow waters where they can’t be followed at all. Cogent, Sidera, Inteliquent, Lightower, Hurricane Electric, Hibernia Atlantic, Mammoth Networks and many others.
- The Frigates — In the old days a frigate was a clearly identifiable type of warship, but now it’s trying to find an identity. It’s big enough to look dangerous, and who knows maybe it will be — or maybe it’ll still be stuck on convoy duty next year. These are the owners of former CLEC assets looking to become cloud-powered managed service providers. Earthlink, MegaPath, Cbeyond.
- The Submarines — You don’t quite know where they are, or what they’re planning to do next, but for now they aren’t threatening anything new. Specialty players like Spread Networks and NeXXcom, and foreign-based players like America Movil, NTT, Tata, Teliasonera.
- The Coast Guard — Tied to defense of civilian assets, and rarely venturing into battle outside their assigned patrol region. Frontier, Fairpoint, and other rural ILECs.
The list is not comprehensive of course, and just for fun! Any additions? Again, focusing on the US market only – could do the same thing in Europe or Asia I guess, but it gets messy if you try to do the whole world at once since the relationships between incumbents and competitive carriers varies widely across the world. And yes, I’m mixing different asset types in here, with both fiber-light and fiber-heavy operators mixed willy nilly.
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I think it is negative for the industry as a whole that AT&T is going to fiber 1/2 of the buildings in its area. Battleships lose against the aircraft carrier. Surprised you haven’t issued an opinion on that.
They said that? I must have missed it. (Yeah it happens…) Do you have a link?
Nevermind, I found it now that I went looking.
Interesting analogy, but keep pushing/developing it from both the customer and carrier (no pun intended) perspectives : to build a navy, what kind of ships do you need? How often will a sub sink a carrier? From a customer point of view, will a frigate plus a sub and a destroyer or two get you more value than a carrier?
From the provider perspective, maybe telecom is more like a game of Risk: the players who control Asia, Europe and North America always end up winning. . . . .
Appropriate analogy as several of the names listed lose as much money as a small Navy. However, many navies offer better customer service than the telecom industry.
And maybe Sprint is like the new Chinese aircraft carrier that half works (take offs only, no landings).
What ship to akamai and limelight make in this picture? Are they the tugboats guiding all the big ships and helping them quickly maneuver? Or would you have Akamai as a larger class beast, with Limelight as a smaller class vessel fighting in the same arena.
So Intelliquent lost 13mn in mkt cap today. At this pace, the company is gone in 6.5 days. Rob, I think many of us saw TNDM’s downfall but is Tinet worth anything close to this price?
Reviewing what I have read here for reference sake, TNDM paid $112mn to private equity who bought it out of Tiscali for $61mn which is $7mn more than today’s enterprise value. Would CCOI make this bid, seems small for L3 but I assume they looked when Lazard sounded out bids earlier this year.
Cogent? While they’d have no interest in the tandem biz, I suppose it could be reasonable for them to go after the Tinet side in an effort to boost their scale and their presence beyond North America and Europe. But something tells me they won’t.
As for L3, it’s not an ideal target probably, but if the price is right then it’s not entirely out of the question. There would be cost savings both in voice and data.
But IMHO we might want to look elsewhere, e.g. for someone who wants a greater European and US presence without building it from scratch and at a bargain price. I’m thinking Carlos Slim and America Movil or perhaps Tata Communications might be interested.
If this is what is seemingly left in the fiber market for ferreting out value(IQNT), Dan Caruso is slowly but surely becoming a sage in his industry. Kudos to that very rich, savvy man who once sold ICG assets to (3) for a nose bleeding premium which he later stated was not enough! 🙂