Access Market Changing

Unaccountably, some service providers who are resellers continue to build their businesses on hopes, expectations and dreams that are not supported by reality. There still are some executives who think they always will be able to buy T1 loops, and that T1 or NxT1 is enough bandwidth for a business customer. Others think there's a way to generate reasonable margins on resold access services in a market where access prices keep going down.

So pay attention when a firm such as Covad Communications Group, which traditionally has based its business on resold access lines, acquires the assets of DataFlo Communications, a Chicago-based broadband wireless provider. That's the sixth market where Covad operates its own facilities.

In part, the acquisition helps Covad break the NxT1 bandwidth barrier, and thereby increases Covad's addressable market. Just as importantly, it allows Covad to contain its costs and boost its margins.

Covad now offers broadband wireless in six markets nationwide: Chicago, Los Angeles, San Francisco, San Diego, Orange County, and Las Vegas.

There's still some carping about what regulators will and won't do to force incumbents to open up their networks, but the time for such thinking has passed. Access may be the foundation upon which a business can be built, but it increasingly isn't much of a business in its own right, even for large carriers who own their networks.Keep in mind that Verizon keeps rolling out FiOS connections, at&t is going to do something similar, four wireless carriers push 3G service, and cable modems, Wi-Fi, WiMAX and broadband over powerline services also are available or coming.

All of which means service providers have to figure out what else they can create and deliver that provides fatter margins than simple access or simple voice. And that applies equally to owners and renters of access facilities, though more crucially to renters. Because the neighborhood is goin' condo.