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The Importance of Broadband

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By LuxSit
April 11, 2001

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Looks like Jeff drew a broader picture of Broadband this time: The need (want) of it, the current level of use, and the future of Broadband. Here's my two cents:

By Jeff Fischer (TMF Jeff)
April 9, 2001

Last Monday's column on broadband Internet generated such a large response on the discussion boards and in email that I need a broadband connection just to read it all.


Ah ha! TMF Jeff needs Broadband! I suspect that most of us do.

Yet, last week I argued that broadband is not yet a necessity in the eyes of most Americans, judging from adoption rates. My argument met with disagreement from broadband users...

The problem with judging demand from adoption rates is that is does not take into account the supply problems. Broadband is not available to many people that would likely take advantage of it...myself included.

Jeff goes on to say:

Fewer than 4% of homes in the United States have broadband Internet, so Rule Breaker readers are ahead of the curve.

and:

I believe that broadband use will continue to grow by several-fold, until broadband is a mass-market service used by the majority, and far overshadowing dial-up users. I believe that broadband will prove essential in bringing the Internet to a new level of utility, and with that, it will bring the Internet to millions of additional users who wouldn't otherwise be online at all. Therefore, broadband is the important next wave in the Internet's advancement.

and:

broadband adoption is growing at a rate comparable to the adoption of the Internet itself in the mid-1990s, and that's impressive.

Which brings us to the reason that most of us are here in the first place:

Investing in broadband
Most investors recognize the importance of broadband Internet. They also realize that broadband providers should be able to develop strong recurring revenues.


So now we have identified the potential of Broadband. But where to invest to take advantage of this future potential? I'd suggest that you look to invest in the leaders in the industry. Currently I have investments in AOL, AT&T and ATHM. I think that these three companies will likely be in the mix of companies that will profit from Broadband Internet, communications and entertainment. Is it a lock? Heck no! There is no such thing as a "lock" in investing or otherwise. But reflect on this:

1. At present Broadband use is low.

2. Broadband adoption is similar to the growth of Internet adoption.

3. Most people agree that Broadband is the future of the Internet.

From the above it would appear that there is an investment opportunity in Broadband. When would have been the best time to invest in AOL? Back when 4% of the population used the Internet, or today with 20 million subscribers and a merger with Time Warner? I guess the argument could be made that an early investment in AOL was a great growth opportunity, and that a late investment in AOL would be considered a blue chip investment, where value of the assets and revenues outweighs the growth potential.

I see ATHM as a growth investment. They are the leader in providing Broadband Internet. They have substantial infrastructure in place, strong relationships with their MSO partners, including majority ownership by the largest Cable company in the US, AT&T. They are well positioned to have 20 million Broadband subscribers within the next 5 years.

Long on ATHM, AT&T and AOL, because I believe that Broadband is the future.

Good Luck,
LuxSit