Day January 6, 2006
Today’s Wall Street Journal had a cover story on the Telco’s desire to charge consumers extra to download video from Google or a song from iTunes.
Sure, the Telcos might be able to get more money from people who need super fast, six sigma reliability Internet connections. There has always been a business model around super high performance networks.
But this is really just marketing spin. What’s really going on is the CEOs of Verizon, AT&T, Bell South and the other Telcos are looking at their margins going down month after month while the service providers like Apple and Google, who deliver their services to consumers over the Telco’s networks, are watching their margins go up and up.
Jarvis calls the Telcos "robber barons" and Om Malik calls this hairbrained scheme a "chimera". I had to look that up. Om’s either calling this money grubbing scheme a "fire breathing she monster" which sounds about right, or a "creation of the imagination" which it clearly is.
PIMCO’s Bill Gross:
This recovery is different because it was spawned and subsequently nurtured on the back of asset appreciation alone. Greenspan and company have high hopes that investment and then employment will ultimately kick in and work their self-sustaining magic one more time, but jobs and investment these days go to Asia at the margin, and domestic animal spirits have been squelched by the looming inevitability of reduced returns on risk capital in a low interest rate world. I’ll leave the Asian story for another day or let you turn on CNN at 11:00pm EST to get your fill of Lou Dobbs – the Dobbsian spectre of foreign competition on the march is undeniably real. My point in this Outlook will be an extension of the thoughts expressed over the past few months that this recovery is on fragile legs because it is asset-appreciation-based and that future asset appreciation is vulnerable based on the weakening stimulative power of interest rates. Therein lies the potential for a white hot speculative blaze turning into a destructive recessionary fire. Such an analogy inevitably suggests that in future years, Rome, Georgia, may not be on fire, but burning.
While veteran rocker Pete Townshend blames his hearing loss on a lifetime spent using headphones, experts say today’s iPod Generation is storing up trouble for the future by listening to music at high volumes. Is this a crisis in the making?