In one corner you got Netflix, Level 3 and Cogent. In the other corner you have AT&T, Verizon and Comcast. The fight is getting nastier, and also more entertaining. Reed Hastings is the man. He speaks his mind, and goes all out on anyone, anytime, anyplace. What’s the fight about? Net neutrality, peering, interconnections, getting a free ride at the last mile, open connect, double pay, and on and on.
The vernacular being thrown out there by the so-called experts is inaccurate, confusing, comical, and seems like their speaking in the language of tongues. The bottom line, Netflix doesn’t want to pay for the last mile, and AT&T wants them to pay since they invested billions of dollars to lay fiber and copper in the ground. It’s your typical David and Goliath story. The Small Three are fighting against the Big Three, and the Big Three are worth 14x more than the Small Three.
- Small Three: Netflix, Level 3 and Cogent = $35B Market Cap
- Big Three: AT&T, Verizon and Comcast = $503B Market Cap
Small Three vs Big Three
Netflix, Level 3 and Cogent want to increase their valuation as much as possible, if they can double it, they’re very happy campers. AT&T, Verizon and Comcast want to increase their market valuation to $1 trillion. Money is power, and the Big Three bring $503B to the table. That is an incredible amount of money, power and influence.
Level 3 and Cogent are telecom companies. Therefore, they won’t be able to disrupt the market of the Big Three through innovation. It’s not in their business model. That leaves Netflix all by itself.
AT&T and Verizon are growing by leaps and bounds, surpassing all expectations, through their wireless business. AT&T Wireless and Verizon Wireless are the bread-and-butter growth engine, and profit center for these two giants. The wireless business is making up for the loss of landlines. Therefore, Netflix needs to strike at the bread-and-butter business that AT&T and Verizon cherish so much, the wireless business.
Phase 2 of Wireless Market Disruption
Netflix needs to develop an application for the iPhone/Android App, and mobile device that bypasses the wireless radio tower infrastructure, and instead uses Wifi. The Neftlix mobile app will be Phase 2 disruption of the wireless market, continuing on the innovation of Whatsup. Netflix has the most to lose, and the most to gain. Netflix has Google like engineering talent. It’s time they start with a backup plan in case their voice gets lost with the FCC.