According to Stop The Cap, GM Is Financially Sound

I've been participating in a discussion on stopthecap.com where a common anti-cable company talking point was brought up: Time Warner Cable (TWC) made $1.1B last year from high speed data (HSD). The argument is that they're greedy as hell because that $1.1B isn't being used to lower prices or reinvest in the network.

Now, I'm not going to try to argue the price point itself (I feel like it's too high). Why? Because the core of the argument is fundamentally flawed.

They point to TWC's 10-K filing wherein it states clearly that HSD revenues are $1.1B. Oh, they really got TWC this time! Except that they don't understand that revenue is different from profit.

GM's revenues in Q1'09 are $22.4B. My goodness! $22.4B and they're asking for a handout from the Government?! 

For those who aren't aware, revenues are total income from products or services sold. Profit, on the other hand, is revenue minus costs. When you factor in GM's costs, they are operating at a $6B deficit for Q1'09. That means they spent $6B more than they brought in.

TWC's 10-K filing doesn't break down profit and loss on a per product basis. But you can take a quick look at their total revenues and compare them to Operating Income Before Depreciation and Amortization (OIBDA) to get a better picture. Revenues were $4.36B and OIBDA is $1.46B. That means that $3B of their revenues went to stuff other than operating income. In other words, they're not raking it in quite as much as that revenue figure shows.

But maybe the Stop the Cap folks can work out a new way for a business to succeed on revenue alone....

Look to Electric Service for the Future of HSD

Time Warner Cable, my former employer, has been experimenting with usage caps on their high-speed internet service. There's plenty of information out on the web about this, so I won't go into detail about how they're doing it. But, subscribers are very angry about it.

At its core, usage caps and other such bandwidth limiting means are a form of pay-by-the-byte. When broadband became available by cable and the telcos it was considered a value-add for their existing services. Therefore, they offered unlimited service to entice customers. Now, however, this all-you-can-eat approach has started to cost big dollars.

The more paranoid people out there will tell you that the providers are worried about losing their core video customers to online providers such as Hulu, or Netflix. While this may be a concern to some extent, the truth comes down to the cost of transferring data. As more and more users are using more and more data, there are greater costs involved in upgrading the network to handle this data.

Inexplicably, the users do not see it this way. They don't seem to understand that larger files cost more to transfer. 

Yet, we don't have a problem paying for kilowatt hours on our electrical service. In fact, we don't have a problem with having our electrical service capped. Even more than that, we don't have a problem with paying for greater caps as the technology evolves.

The average house in the 1940s had a 30-Amp service. At the time that was more than sufficient for their electrical needs. A few light bulbs, a refrigerator, and maybe an electric range or some fans. If every device in the house was turned on then the total amperage drawn would be in the neighborhood of 20A.

With the advent of washers/dryers, dishwashers, and heat pumps the 30A service was very inadequate. So, customers paid to upgrade their house to 100A, or they bought a new property with 100A service. 

Nowadays houses have 200A service installed due to the massive increase in electronic devices. This means you can use as much electricity as you want up to 200 amps. Although you pay by the kilowatt hour, your pricing is basically determined by the service available at your house.

Now, if you want to set up that great big Tesla coil in the back yard, or perhaps run a three-phase motor, you will need special service from the power company. As a customer you are not entitled to this special service.

The problem is that broadband customers feel they are entitled to unlimited data because the providers initially offered unlimited data. This is necessarily a mistake, but it does contribute to these current issues.

But ask any of the anti-cap people why they don't mind having a cap on their electrical service. I doubt they will be able to answer you.

- Mike

Where Is Our Stuff Going?

Most likely, you are reading this text on a computer screen. In fact, if you’re reading this, then most of the information you get is transmitted to you via emitted photons from that computer screen. You go to Google, Wikipedia, YouTube, etc., and you read or watch content every day. You probably haven’t realized it yet, but you are participating in one of the biggest changes that mankind has ever experienced:

Information is no longer tangible.

You don’t have to grab a book of Wikipedia off the shelf. You don’t pick up a phone to call someone at Google to ask for a phone number. All of this information is being created, stored, and delivered electronically.

But business has not yet adapted to this paradigm. I’m not talking about the paperless office, or other such concepts. I’m talking about the idea of work.

If you’re reading this your work is probably not using a socket wrench on a bolt, nor is it using a plow to turn a field. Your work is conveyed through an electronic medium in the form of articles, journals, publications, reports, spreadsheets, graphics, websites, etc. This is now the case for the vast majority of people, and yet, we still think of only tangible objects as having value—as being something that represents the effort of an individual.

We are entering a more open and free era where intellectual property is no longer tied to a physical object. Right now, IP is becoming associated with software versions of the applications in which they were created (e.g., Word 95 or InDesign CS4). Eventually, with the evolution of XML or other such languages, even that will become obsolete. 

More on this later....

Introducing....

Hi,

I've decided to start writing a 2nd blog in addition to my normal personal blog. This will focus more on business and my particular interests: Knowledge, Process, and Workflow. Okay, those don't need to be in title case, but it seems fancier that way.

This idea was suggested by my friend, Gabe Garms. You can read about him here: http://m.twitter.com/gabegarms. The premise is to use a blog as a self-marketing tool.

Well, let's see if that works, or if I just end up being the self-promoting tool.

- Mike