Some Have Reached The Peak

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Some Have Reached The Peak

I had a conversation yesterday with a friend from UHC. She mentioned that VISA is worried about its profitability on just the $0.24 federal max per debit card transaction. Here's the problem the American economy faces: We Peaked Already.  Period.

Globally, America is in a battle for good jobs, natural resources, oil, and soon clean water. (Georgia and Tennessee are already battling over water rights.) This planet can not sustain 7 billion people, which will be the population this weekend.

The US is a service based economy, the engine of which is consumer spending. As more folks are unemployed and as debt increases, that leaves less discretionary income to spend in the economy. Hence, the economy dries up. We are seeing this now.

VISA and Mastercard had their heyday, enjoying profits as Americans spent, spent, spent their way into average household debt of $15k. Did either company do anything to educate their customers about debt, spending or personal finance? Hell no. There's only one thing left to these companies: a spiral down in revenue and profitability.

Banks hit their peak too. They made all their money on re-financing and mortgage. No brakes on that speeding train either. Now the it all comes home to roost. Banks make money lending. It's very challenging to get a small business loan, a mortgage or a car loan - all of which keeps the economy buzzing. How will the economy turn and the bank make money without loans?

Another industry that has peaked is health insurance. (Auto insurance might be in the same boat). I think we have seen the height of employment. And without employment, there's less people with health insurance. Couple that with Boomers migrating to Medicare and health insurance companies are set to make less revenue going forward.

From personal experience, solopreneurs and freelancers have a tough time finding insurance. I didn't say affordable, I said insurance. They don't want to cover anything. It's peaked.

And lastly, ILEC's, especially the RLEC's. They have seen their golden years; it's all rust going forward. The RLEC's want to continue to do business as they have before: funded by USF. It's broken. As rural LEC customers go cell only or switch to Vonage or cable, the house of cards tumbles.

The ripple effect of the Broadband Stimulus will be a tightening of RUS loans. NFBA and Open Range are probably just the beginning of a string of failures and investigations. This will have far reaching effects.

The ILECs are used to having all the customers in their region. Now they have to split with cable. ILEC's had the most profitable service - voice on plant that was paid for and cheaply maintained. Even when they had to share that copper plant, they still made money, but alas greed. DSL was also highly profitable and didn't require too much construction. But moving to TV has proven to be a challenge. Fiber, head-ends, content distribution rights, set top boxes, ONT's, et al - meant that the ILEC's had to spend big money to make little profit (if at all. See Frontier FiOS TV fiasco). And now we are seeing OTT video and cable cutting due to the economy and consumer dissatisfaction with the content empire.

ILEC's like Windstream, TDS and CenturyLink have made cloud and CLEC acquisitions to chase new revenue while the consumer wireline business decreases. Fairpoint and Frontier still have to figure out their next move. VZ and ATT have a booming cellular business (that has almost peaked for them too).

Sorry for the doom and gloom. This was just some thoughts that I needed to write down. I'm not saying I am 100% right, but it makes sense to me.


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