Abstract
M.Comm.
The successful delivery of broadband communication services to the mass
market is a critical factor in the technological advancement of modern society.
As broadband transitions from a nascent technology for the early adopter into a
mass market platform that will reach tens of millions of customers over the
coming years, the market outlook suggests fast but manageable growth and very
solid returns for broadband investors.
In the United States of America, a number of companies are racing to deliver
broadband services to consumer and small businesses using various different
technologies. Among these companies, Broadband Cable Operators have
emerged as new entrants, utilizing the latest network technology available to
build new high-speed, two-way communication networks. But the emerging
broadband providers have shown weak operating performance, characterized by
excessive net losses and negative cash flow, causing significant delays in
reaching breakeven and turning profitable. The primary problem is whether the
broadband business model, in its current form, can generate adequate gross and
net profit margins to realize an acceptable risk adjusted return on investment.
its obsolescence in the next decade. Financially, the latent demand for
broadband services will allow subscriber growth and pricing to grow revenue and
generate positive cash flow from the fourth year of operations. The capital
expenditure and operational costs can be controlled to enable an adequate risk
adjusted return on investment
On the downside, the payback period extends into the gth year of operation, an
indication of the level of financial risk involved. The profitability of the venture is
able to outperform the required risk adjusted return on capital, but the terminal
value, although estimated conservatively, represents a significant portion of the
value of the venture. The risk of technological obsolescence could have a
significant impact on the venture a decade from today.