Ben Graham

I think Prem Watsa has "cracked it", just like Steve Jobs said that he cracked it. Only Mr. Watsa will use the "crackberry" from RIMM, while Apple will use Apple TV. It seems Microsoft likes what is taught at Waterloo University (Prem Watsa is chancellor), so much so that Microsoft hires more grads from Waterloo than any other North American university. Is it possible that something is brewing that will bring these two together on a device? Also, IBM has a cross license patient sharing agreement with a company that Fairfax has in its portfolio. So, let's toss in Berkshire Hathaway as well, to make it a threesome.

Companies need to roll out devices to their entire sales and service teams, packing them with purpose-built business applications, not just generic email, browsers, and off-the-shelf productivity apps. With cellular connections, so salespeople are always connected, and the app also needs to works offline. RIMM will cater to this business market. While Apple will have their devices cater to walled fluff content that consumers enjoy. RIMM will be about business - Apple walled fun. Prem Watsa is going to have fun building RIMM devices that mean business.This all fits into the end to end global network of connecting things.

Ben Graham, I don't generally like to disclose such information -- not just publicly, but to anyone. I feel that doing so invites push back from people in way that pollutes my own thoughts about IV, particularly because I tend to think of IV within a range of values based on certain key variables and my own assessment of the risks associated with ownership. Also, for me, IV is a moving target that changes when I get new information, so it doesn't make sense for me to say it out loud and face the risk of anchoring myself to my declared IV. [move]* GREAT post! *[/move] Thanks txlaw, I know you don't want to be found guilty of polluting the web 8) : http://kevin.lexblog.com/2008/04/articles/law-firm-marketing/lawyer-marketing-polluting-the-web/

Netflix CEO Reed Hastings said he expects Amazon to significantly expand its video streaming service and offer it at a cheaper price in a bold move to compete directly with his company. The future of streaming online video is the main battleground and Netflix's competitors including everyone from Amazon to Hulu to Vudu to Blockbuster to services that perhaps have not even launched yet are ready to have their content delivered to any screen, any time, any where. ******************************************************************************** Will Amazon Challenge Netflix? By Swanni Washington, D.C. (January 26, 2012) -- http://www.tvpredictions.com/amnet012612.htm

First and foremost, as a value investor, one must ascertain the actual value of a company - the intrinsic value. txlaw, I value your ability to analyze the worth of a business - the true value including all aspects of the business, in terms of both tangible and intangible factors, and potential future earnings. If you would be so kind as to reveal your determined conservative estimate of what the IV is for LVLT, I would truly appreciate it, and any information on your valuation of the business of Level 3 that you could easily just copy & paste. I want this to be an easy one to answer. If you are reluctant to disclose that information publicly, would you maybe do so in a private message? Also, this message applies to anyone else who would like to volunteer what their IV price per share of LVLT is. ******************************************************************************* The Level 3 Communications Network: With the acquisition of Global Crossing, Level 3 now has 100,000 fiber miles, more than 450 core network markets in North America, EMEA, Latin America and Asia, and more than 45 core network countries. In addition, Level 3 serves 170 metro markets with 30,000 metro miles. The company operates a global services platform and owns fiber networks on three continents.

It is very encouraging to see what is being done at the University of Waterloo, where Prem Watsa is chancellor, in regards to wireless communications. All the innovation at Waterloo will help RIMM build a better device. Mr.Watsa is thinking ahead. http://search.uwaterloo.ca/?searchterm=wireless+communications&searchtype=google-uwdir-keyword&x=8&y=12 University of Waterloo: http://uwaterloo.ca/

[move]The Trend is Level 3"s friend.[/move] * The rising demand for bandwidth on next-generation networks is certainly what will take Level 3 into a new age of profitability. * The need for bandwidth is higher than even water or air. * Bandwidth demand is becoming global and it is driven by people’s need to interact more visually, rather than with their ears as has been the case historically Interview with Sunit Patel, CFO and EVP, Level 3 Communications 11 January 2012 http://www.capacitymagazine.com/Article/2959616/Search/Interview-with-Sunit-Patel-CFO-and-EVP-Level-3.html?Keywords=Consolidating+Big+Business * * * * * It is not a question of "if" but "when" Level 3 will generate huge huge free cash flow streams with no taxes. http://www.longleafpartners.com/media%20files/050510-10.wma * * * * * The end users demand for live HD streaming video over the Internet will become insatiable with the ability to have content available any time, any where, on any screen. The trick is to accommodate all this demand. For Level 3 it is no problem, we are waiting, twiddling our thumbs, while the wireless guys are trying to figure out how to best use their radio frequencies to handle the bandwidth that Level 3 hands over to them from their fiber optic network to then be transmitted wirelessly via radio frequencies, to any screen. So, the owners and producers/creators of HD video content are all waiting for the last mile to do it's job. Verizon is getting it. So much so, that they spent 69 million dollars on hooking up the super bowl for the wireless hand over to Level 3's backbone to be delivered flawlessly to any screen around the globe!

So that means that in eight years every man woman and child on the planet will have 6.6 devices that require streaming for that stat to hold true. I'm calling BS on that. Let's revise this and consider that in eight years it's unlikely that the entire world population will be out of poverty and will be able to afford 6 $100+ devices with their associated data contracts. So let's say that 50% of the world will be able to afford them, so that means 12 devices per person. This stat shows how meaningless linear projections are. Twelve devices...give me a break, I'd need a murse to carry all that crap... That was pretty awesome! I especially liked the "murse" touch...very funny. Cheers! By 2020, there will be 50 billion 'things' connected to the Internet - everything from your body, car, alarm clock and even cows. You forgot to add the COWS! http://www.readwriteweb.com/archives/cisco_50_billion_things_on_the_internet_by_2020.php

Is this turning into a yahoo board? Attacking Prem Watsa with dog comments. That is not very nice.

Ericsson CEO Predicts 50 Billion Internet Connected Devices by 2020 Already, the carriers are salivating at the prospect of providing cellular connections to these products and have set up divisions dedicated to machine-to-machine connectivity http://gigaom.com/2010/04/14/ericsson-sees-the-internet-of-things-by-2020/ Cisco: 50 Billion Things on the Internet by 2020 [infographic] http://www.readwriteweb.com/archives/cisco_50_billion_things_on_the_internet_by_2020.php

My fellow value investors, It is a great privilege to be privy to the information shared on this message board. It appears to me that Prem Watsa, with his newly appointed dual role as chancellor of Waterloo and sitting on RIMM's board, has a desire to get involved with the innovation that Level 3 was built for. We need to keep it all in the family, like Microsoft hires more Waterloo grads than any other North American university. There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it. Fairfax (short for "fair, friendly acquisitions") as the name implies will always have the thought in mind to facilitate a merger - consolidate an industry. The family players that I'm aware of are: Pieces to the puzzle Microsoft Berkshire Hathaway (Todd & Ted with DirecTV) Warren with IBM Prem Watsa (RIMM & LVLT) It is time for RIMM & Waterloo to apply all the innovation it has ready for Level (3) to deliver content to all the screens around the globe. Like this: (source brkerguy) How Verizon Prepares for the First 4G LTE Super Bowl in Indianapolis (Video) http://www.gottabemobile.com/2012/01/19/verizon-first-4g-lte-super-bowl-46/ The Super Bowl delivered by LVLT.

‘Video Everywhere’ Gets Another Boost By QUENTIN HARDY | January 18, 2012, Polycom, best known for table top phones in conference rooms, aims to pressure Cisco as the two fight over sales of cheap and easy to use videoconferencing software for small businesses and telephone companies. http://bits.blogs.nytimes.com/2012/01/18/video-everywhere-gets-another-boost/?partner=yahoofinance * * * * * Polycom is the only company that provides scalable HD voice and HD video integration in enterprise and company-to-company environments with Microsoft Unified Communications including Microsoft® Lync™ Server 2010, Microsoft Exchange Server 2010, and Microsoft SharePoint® Server 2010. Polycom website: http://www.polycom.com/partners/strategic_global_alliances/polycom_microsoft_alliance.html

Intrinsic value is all the cash that can be taken out of a business over its life and discounted back to the present. Take a look at the chart below and is cash coming out of LVLT or being sucked in by LVLT? http://financials.morningstar.com/ratios/r.html?t=LVLT&region=USA&culture=en-US OK fine & dandy - that chart shows the past. Let's think ahead! I know you have a great deal of respect for O. Mason Hawkins. In this audio he says Level 3 will generate huge huge free cash flow streams. And with the NOL's there will be no taxes. http://www.longleafpartners.com/media%20files/050510-10.wma

Level 3 has done nothing but grow the intrinsic value of the business. It is Mr. Market who has been so destructive on incorrectly placing a price on the worth of the business. Building the most advanced IP fiber optic network in the world is no easy task. Now the next stage is to deliver the content or goods, by hooking up the ends. The Super Bowl streamed live online is a prime example. Live streaming HD video over the Internet will bring in the big bucks. The demand and trend is in LVLT's favor. All content and communications will be delivered over the Internet. This is not not like placing an order for a steak burger with fries. * * * * * Why does FAIRFAX FINANCIAL HOLDINGS LTD/ CAN hold so many shares of Level 3 Communications? http://www.nasdaq.com/quotes/institutional-portfolio/fairfax-financial-holdings-ltd-can-11605/increased * * * * * ragnarisapirate Hero Member ***** Posts: 505 Re: New Steak'n Shake Prototype Store « Reply #8 on: January 11, 2012, 10:44:28 AM » Quote I guess that you can kind of see it here... http://nyctmc.org/google_popup.php?cid=421 It is really freaky that you can do stuff like that... If they ever go HD, it's just a matter of time til we are all employed as online traffic counters. ;)

Parsad, Thank you for blessing LVLT! For anyone not following Level 3 closely, this great press release came out today also. Streamworks Selects Level 3's CDN Services to Enhance Global Delivery of Associated Press Television News Direct NEW YORK, Jan. 18, 2012 /PRNewswire via COMTEX/ -- Following the company's debut at CES, Streamworks, the global streaming company that uses proprietary technology and end-to-end service to help news, sports and entertainment brands deliver better streaming experiences, today announced it has signed an agreement with Level 3 Communications, Inc. to employ its expansive content delivery network (CDN). Leveraging Level 3's far-reaching global footprint and its network reliability, Streamworks will be able to deliver live, uncut video news feeds to digital publishers across its premium breaking news video service, Associated Press Television News (APTN) Direct. The Associated Press introduced live broadcasting via satellite in 2003 when it covered the invasion of Iraq in real-time, and today it delivers breaking news video to nearly 200 broadcasters worldwide. In October 2011, AP partnered with Streamworks to utilize its proprietary encoding technology to deliver unrivaled picture quality to online, mobile and tablet devices to meet the growing demand for live content from digital platforms. Streamworks' Universal Delivery Network (uDN) is an all-encompassing delivery solution that utilizes all of the major CDNs and ISPs to achieve the high global network penetration necessary to ensure an exceptional viewer experience. "Streamworks is making great strides in online video experiences to bring live news and events to digital publishers around the world, and our scalable, global CDN is the ideal platform to support their objectives and growth," said James Heard, regional president of the EMEA region for Level 3. "Using Level 3's content delivery system, Streamworks will be well-positioned to accommodate increasing global demand for APTN's online streaming services as viewers around the world continue to rely on the Internet -- mobile or fixed -- to remain informed of world news as it happens." "As digital publishers turn to APTN Direct for live, uncut news, they will have greater flexibility to provide an immersive news experience for their audiences with high-quality viewing across a variety of devices to engage with them on social platforms," said Ray Mia, CEO of Streamworks. "The addition of Level 3's CDN provides the bandwidth, worldwide connectivity, security, and control to help monetize customers' content." Streamworks is part of the Black Ocean group of companies. Black Ocean is a digital media company that invests in, builds and operates technology businesses around the world. About Streamworks Streamworks is a global streaming company that delivers unrivaled live streaming experiences across any network, to any device. It is the streaming partner of choice to the world's leading front line news organizations, and its patented technology enables rights holders and brands to consistently set records for online and mobile engagement. Streamworks' 24/7 fully managed service is embedded into the world's largest broadcast facilities and data networks, saving its customers on average 30 percent bandwidth; with social tools and interactive web environments that bring people closer to the action, it enhances the live video anywhere experience; as a one-stop solution for vCommerce, Streamworks increases brands' video consumption and drives monetization. http://www.marketwatch.com/story/streamworks-selects-level-3s-cdn-services-to-enhance-global-delivery-of-associated-press-television-news-direct-2012-01-18

The Grand Master is Bullish on America Warren Buffett

This link shows some of his paintings, they are master pieces. He is only 25 years old and not until the age of 17 did he really get started painting. http://www.pxleyes.com/blog/2011/12/portrait-paintings/

O. Mason Hawkins gives lectures at The Richard Ivey School of Business and at The Heibrunn Center for Graham & Dodd Investing at Columbia Business School. * * * * * LONGLEAF PARTNERS FUNDS SEMI-ANNUAL REPORT at June 30,2002 Partners Fund - MANAGEMENT DISCUSSION by Mason Hawkins, Staley Cates, and John Buford After the close of the quarter, the Partners Fund, together with Berkshire Hathaway, Legg Mason, and Longleaf Partners Small-Cap Fund, completed a private placement in Level 3 convertible notes. Although typically we neither own corporate bonds nor do private placements, this was a compelling opportunity that the Fund's flexible policies allowed us to pursue and that we did not want to forego. The ten-year notes position Longleaf ahead of the common equity, pay a 9% cash coupon, and are convertible at any time to common equity at $3.41 per share - a price that is under the stock's current level, and is far below the company's growing intrinsic value. Level 3 owns the best fiber telecommunications network in the industry. Importantly, most of its competitors struggle with huge debt levels and further significant capital expenditure requirements. Many are now in bankruptcy. Customers are universally worried about their service providers' reliability, financial integrity, and ability to provision future needs. Level 3's superior network infrastructure, its servicing capabilities, and its capital resources position the company to become the clear industry winner. As we said in the press release announcing the placement, We invested in Level 3 to take advantage of consolidation opportunities in the telecommunications arena. We believe these opportunities are substantial. Level 3 is uniquely and competitively positioned, and its management team, led by Jim Crowe, is most able. * * * * *

DIVERSIFICATION IS A CONSEQUENCE, NOT A GOAL Always keep in mind that wealth isn't static. An individual is either making decisions that will make them wealthier or less wealthy in the future. Both action and inaction are decisions - either have the ability to create and destroy wealth. This brings me to why I dislike mutual funds. Aside from their ridiculous fees, I cannot trust the fund manager to do the right thing (which is often nothing). Fund managers are incentivized to always 'do' which has a high chance of ensuring absolute mediocrity if not outright disaster. The idea of diversification is sold to the public as a goal. It goes like this: in order to minimize the risk of one asset collapsing in price, an individual should buy a wide variety of assets. In the event that one asset class falls in price, it will be offset by another that rises in price. The shoe also fits on the other foot: in the event that one asset class rises in price, it will be offset by another that falls in price. However, for some reason this other shoe is rarely mentioned by the companies that promote diversification. This idea is very harmful to your wealth. Diversification is a consequence, not a goal, of investing. What does this mean? A value investor will always look to asset classes that have fallen in price. Over time a number of different asset classes will be amassed in an investor’s portfolio – stocks, real estate, royalties, bonds, etc. When another individual looks from the outside in, all they see is a well-to-do individual with a bunch of different assets. Unfortunately most will then jump to the incorrect conclusion that rabid diversification must have been responsible for the investor’s success. Another side product of the mass marketing of diversification is something call asset allocation. The idea is that an individual should allocate their capital based on their age, tolerance for risk, yadda, yadda. This is a terrible idea. The glaring problem with this is that not all assets are good investments at the same time. Just because an investor has cash now doesn’t mean that they should start allocating a certain percentage to bonds, stocks, etc. In short, if you have a strong desire to underperform, then diversification and asset allocation are your tickets to mediocrity. http://www.ticonline.com/

Since we are talking about the ecomomic recovery, I'd like to include some insights from the World Economic Forum on how economic opportunities with the Internet and personal data can be monetized. http://www.youtube.com/watch?v=KYdaJ1TI44s&feature=uploademail

U.S. Economic Recovery Gains, But Headwinds Persist http://www.ibtimes.com/articles/277239/20120105/u-s-economic-recovery-gaining-momentum-gdp.htm Economic Analysis: One of the best commerce and credit minds of our time, PIMCO's Bill Gross, who leads the world's largest bond fund, has forecast a new era -- a "capitalism with limits" that will feature lower return-on-equity, lower GDP growth and smaller job creation. He's not the only one forecasting a U-shaped, or mild, economic recovery.

The following link from the FCC provides excellent information on spectrum with maps also. http://reboot.fcc.gov/reform/systems/spectrum-dashboard/about

Video from FCC Chairman, Julius Genachowsk. http://www.broadband.gov/plan/

Doesn't free sound great! Box Top's mission is to bring free broadband - "FreeBand" - to households globally by enabling an open and rich ecosystem whereby application providers subsidize the cost of broadband by directly reimbursing the broadband carrier for wireline and cellular connectivity. http://www.boxtop.tv/index.htm

http://www.telco2.net/blog/2010/10/guest_post_future_broadband_fr.html Guest Post: Future Broadband - Free, Funded by Apps? Could ‘free’ broadband connections for the unconnected be funded by a bundle of apps paid for by ‘upstream customers’ - such as banks, supermarkets, etc.? This is a guest post by Thomas Sachson, Founder and CEO of Box Top Solutions, Inc. Background - Can the ‘Digital Divide’ be Bridged? In January 1996, the New York Times published its first article on the “digital divide” and highlighted the pitfalls of a society of two halves - those with online connectivity and those without. Fifteen years later, the divide is still pronounced, which is surprising given the prevalence of communications technologies. But the broadband adoption gap nonetheless exists and should be resolved. As stated by the FCC in their recent National Broadband Plan, the unconnected simply cannot afford connectivity as it is currently offered. And, short of an enormous government subsidy (not likely in the current economic environment), this reality is not going to change. However, there is another model that has just become viable in the digital world - the toll-free online access model - and it could finally connect millions of unconnected homes globally without the need for taxpayer subsidy or expensive new access infrastructure. The ‘Toll-Free’ Online Access Model By way of background, the toll-free model, from when it was introduced in 1967 to the present, became one of the most visible and successful telecommunications strategies for marketing (“1-800”, “freephone”, “provider pays”). It was based on the powerful observation that there was a market-driven, three-way trade possible in the field of telecommunications commerce. A voice carrier would ensure that a caller would not be billed for making a call to a merchant if, in advance of that call, the merchant agreed to pay the carrier for the cost of carriage. As a result, carriers generated many tens of billions in additional revenue, with merchants transacting many hundreds of billions. And nearly every customer on the planet now knows the how, why and consequence of using a “1-800” number and, more importantly, is comfortable using this technology in their daily lives. Nonetheless, this “1-800” provider pays voice model has failed to translate into the field of data communications due to considerable technical and business model limitations. While most users would quickly appreciate how such a toll-free economic model might work once they are introduced to it, the vision and technology to deploy and maintain such a provider pays model has not been possible on a scalable basis. However, these problems now can be overcome by leveraging upon the recent widespread appreciation for and use of discrete applications (“apps”), and in particular Android apps. The result is a new technology platform that has appeal for consumers, online vendors, and carriers. The concept outlined here is described as ‘Toll-Free Online Access’ and not ‘Toll Free Internet Access’ because the ‘free’ component is not unfettered access to the Internet as Telco 2.0 would describe it (see Net Neutrality 2.0). Consumer ‘Freeband’ Proposition The core consumer proposition is a ‘free’ broadband connection to alow-cost toll-free broadband gateway enabled for either 3G or xDSL, which may be connected to a suitably configured set-top box, game console, or other device. The connection would be funded by the ‘upstream’ App providers - merchants who benefit by the consumer getting easier access to their services. Each app would effectively mimic the experience of a bookmark in a browser, and the consumer could also buy packages of pre-paid / pay-as-you-go pure Internet use if they want to access services outside the app bundle. From the perspective of targeting an unconnected end-user, a toll-free app system has important technical advantages over a traditional browser-based surfing model. 1. Apps possess features that make them extremely well-suited to fostering a “provider pays” dynamic that enables an end-user to access content without paying for the connection costs (analogous to the 1-800 voice call). This is possible because apps are excellent at monitoring data flows and therefore can act as “micro broadband metering” engines. 2. Apps are also very secure when compared to a browser (each app is walled-off from other apps), and often much easier to use due to their bespoke design (one need only look at the Android app universe to accept the ease of use thesis). These advantages translate into a “no pain” adoption proposition to an unconnected end-user seeking to get online for the first time, at the lowest price point, with the greatest ease, and with a real functional utility. In practice, an unconnected end-user would assemble or choose a pre-set package of 50 or so apps from various online content providers. The host device would be controlled by a wireless keyboard (or cell phone with keyboard) and output to an HDMI TV. Each app would keep a tally of the bandwidth it consumes over a monthly period and instruct the app creator (let’s say Yahoo!) to pay the carrier for the bandwidth consumed. So long as the cost of the bandwidth is less than the benefit to Yahoo! for acquiring this newly connected user, then the trade makes economic sense and Yahoo! will continue to pick up the access charges for the end-user. And presuming the end-user confines online viewing to content available within this toll-free app ecosystem, then the bandwidth costs associated with these app-enabled online activities would be borne by the parties providing the apps and the affiliated content, resulting in no broadband bill to the end-user. When one considers the amount of time spent by viewers on AOL, Yahoo!, Google, Facebook, Netflix, Amazon, WebMD, Monster.com, etc., one could easily envision the assembly of a fairly comprehensive viewing universe capable of meeting the daily needs of many online users, where the content providers would be willing to pay for the “cost of the call” in order to get access to millions of new end-users: the presently offline, unconnected demographic. Of course, at times the end-user would seek to access web content from a source that does not wish to provide a toll-free app (a typical HTML page). In these cases, the end-user will be allowed to go outside the app ecosystem by purchasing à la carte bandwidth directly from the carrier (pay as you go, pre-pay per hour of bandwidth). So in effect, end-users can customize their online experience to reflect their willingness to pay access fees for certain content and not for others. Content Provider Proposition Online content providers also have much to gain from a toll-free Online Access system - namely those millions of newly connected users who represent true organic growth for their industries. Clearly, not all online content providers will be willing to pay the specific broadband access costs in order to gain a presently unconnected user, but many thousands of merchants and online providers will be interested in paying the access costs. And remember, in this model, the content provider is not paying the whole monthly broadband fee, just the bandwidth costs associated with the new user’s specific use of the app, which is likely to be only pennies per session per app. So, for many content providers, the traditional customer acquisition and maintenance costs associated with securing an online customer are likely to be greater than the cost of paying for the broadband access to that customer (akin to the vendor paying the cost of the 1-800 voice call). Carrier Proposition Lastly, the toll-free Online Access platform introduces two new, organic-growth, recurring, access revenue streams for the carrier, who now collects: (1) a monthly tariff from credit-worthy application providers (for the bandwidth consumed by each toll-free app); and (2) from the end-user whenever they venture outside the ecosystem and purchase additional unrestricted à la carte bandwidth (e.g. pre-pay). As mentioned earlier, both of these revenue streams are easily quantified and managed due to the apps’ ability to monitor data flows. The use of toll-free applications has another considerable benefit for the carriers. Just as each application is capable of monitoring and controlling the flow of broadband access (bytes), it is also capable of monitoring commercial activities associated with the application so used. In this sense, subject to appropriate data permissions and customer relationships etc., each application could be uniquely positioned to act as an “affiliate marketing” engine that can be used by the carriers to generate new, high value, and recurring revenue streams related to commercial activities enabled by the apps. As has so often been pointed out in the past, carriers have been unable to fully leverage their position as the physical broadband conduit to the home, instead having to accept billing models where they seek payment only from the end-users and not the broadband-enabled online merchants. However, where an app also is used as a dedicated affiliate marketing tool, the carrier can finally participate in the actual commerce resulting from the connection between the service end-user and the online vendor, and do so in a manner that increases the utility to the end-user (no broadband fees) and the online vendor (access to a new online customer and organic growth). Under this paradigm, a traditional carrier in a very short period of time could possibly establish itself as a major and permanent affiliate marketer of goods and services. In terms of the carrier investment in such a platform (central office and customer premises), the up-front costs will depend on the type of toll-free connection deployed (e.g., 3G, xDSL) and whether that connectivity is built into a stand-alone device (a stand-alone modem gateway) or integrated into another platform (DVD, DVR, game console), either directly or through a device peripheral. However, much of this cost could be offset by having the app providers shoulder some of the device costs in exchange for being pre-loaded onto the device (akin to the trialware model for new computers). Clearly, from the perspective of the app provider, having one’s logo and app appearing immediately and prominently on a living room TV screen is of great value and worth bearing a fractional part of the hardware deployment costs. Carriers also benefit because there is a low risk of cannibalization to their existing customer base, as current customers (unlimited access plan customers) would not likely cancel their existing service in order to access a “toll-free + pre-pay plan” that would be considerably more expensive on a per byte basis for their high level and diversity of Internet use. But there is the very real possibility of the carrier up-selling the toll-free access household to a more comprehensive connectivity package once they have experienced the benefits of broadband in the home for the first time. Obviously, a key requirement will be that the carrier receives enough revenue from “inside the ecosystem” app provider fees coupled with the app users’ “outside the ecosystem” fees (pre-pay) so as to cover the cost of the new line. However, as part of the terms and conditions of this service, the carrier could reasonably specify that the end-user engage with the toll-free apps or purchase à la carte bandwidth often enough to justify the maintenance of the line over a pre-determined period of time. $28Bn of Growth in the US? Lastly, it is worth flagging the potential value of the unconnected market to carriers that need to identify and secure long-term growth in their markets. By way of example in the U.S., presuming that there are 35 million households that could adopt broadband under a toll-free model, and the revenue per household per month was only one-third that of a typical broadband household, this nevertheless implies that the carriers could avail themselves to $28 billion in enterprise valuation growth by bringing these lower revenue households on-line (again, so long as it is done in a manner that did not disrupt their relationships with their existing broadband customers). Furthermore, this value would be achieved not through the deployment of expensive, new infrastructure rollouts, but through the efficient monetization of existing last-mile assets. In other words, the toll-free broadband market represents a disproportionate return on investment opportunity for a carrier seeking to grow rapidly in the near-term and, from a corporate citizenship perspective, to do so by closing the digital divide. Just The Beginning There is, of course, much more to the toll-free model (especially in terms of setting the bandwidth price as between the carrier and the app provider), and that is what my company Box Top and its partners have been working on this past year. We call the platform “FreeBand” and are confident that it is a workable model by which we can “connect the unconnected”. The result will be a new toll-free application ecosystem where service end-users can access much, if not all, of their daily content on a provider pays basis. As with the “1-800” voice market, should the provider of content feel it is worth paying the broadband carriage costs in order to ensure that their content is consumed, then they will do so as a rational economic choice. Moreover, a major improvement with FreeBand will be the diversity and perhaps unlimited nature of the applications offered to the end-users. Taken as a whole, this collection of free access applications can approximate the “browser + bookmarks” experience of today’s web for many end-users as they engage in their daily online experience. To this end, Box Top is already considering the parameters for several localized trials (xDSL and 3G) that are likely to tell us much about the actual use of this platform. The FreeBand model is an easy to understand, high quality means for free broadband where the carriers, merchants, and end-users all benefit in a virtuous cycle, in which each offers something the other values. And, unlike most models for free or subsidized broadband, it is not dependent on overly intrusive ads being foisted upon the end-user or the government (and ultimately taxpayers) paying out more, as the public incentive to fund the broadband bills is provided by the prospect of a net reduction in public services costs. In the end, the carriers, online vendors and the end-users will gravitate towards arms-length commercial arrangements that suit the parties in each given circumstance (sometimes FreeBand, sometimes pre-pay, sometimes an end-user customized mixture of both). As such, the toll-free Online Access model relies wholly on the “invisible hand” of commerce to allow market participants to determine what type of content the online provider should pay for and what type of content the end-user should pay for. FreeBand, and the toll-free Online Access Model, is therefore as powerful as it is novel. It is a technology platform that can make a real difference in connecting the unconnected and eliminating the digital divide once and for all. http://www.telco2.net/blog/2010/10/guest_post_future_broadband_fr.html