CHTR - Charter Communications

[Spekulatius]

How can anyone know the IRR for an evolving technology that is still in a the testing stage. I don’t think the CFO’s if the company involved know the answer. Folks should get a grip here, time would be better spent opening a cold one. Happy Friday afternoon !

[undervalued]

I guess an easier answer to ponder is which one takes more capital, that is for cable companies to setup tower or phone companies to layout fiber? Which one of the two require more CAPEX and who can do it faster? What is the benefit of being the first to reach that goal? Since most phone companies have great concentration in big cities, they'll have superior advantage. They have less of it in suburbs. I think telco and cable need each other to make 5G available to everyone.

[Munger_Disciple]

 

Also, false accusations? Not following what statement you're referencing.

 

You were saying in an earlier post that "assuming the Verizon CEO is lying is a dangerous thesis." It certainly wasn't my thesis (though I am somewhat skeptical of marketing videos in general) and you should not imply otherwise. Anyway it is pointless for me to prolong this back and forth with you.

[jmp8822]

 

Also, false accusations? Not following what statement you're referencing.

 

You were saying in an earlier post that "assuming the Verizon CEO is lying is a dangerous thesis." It certainly wasn't my thesis (though I am somewhat skeptical of marketing videos in general) and you should not imply otherwise. Anyway it is pointless for me to prolong this back and forth with you.

 

You said that 5G has a 100 meter range. The Verizon CEO said 5G has a 2,000 foot range.  Those are at odds - I shouldn't have suggested that you actually believe 5G has a 100 meter range, maybe you were just saying other people think that. I find the fact that 5G could have a 2,000+ foot range to be an existential risk to cable internet.

[Munger_Disciple]

time would be better spent opening a cold one. Happy Friday afternoon !

 

You are 100% correct and I am going to follow this advice. 

[vinod1]

Once you have 5G on mobile devices, I would think that usage can shoot up 100x current levels. Many people might be willing to pay up for unlimited wireless downloads.

 

Can 5G meet the needs of mobile users if usage does increase 100x and still have enough bandwidth to meet wireless internet to customers?

 

Vinod

[cameronfen]

One way to test the success of 5G wireless broadband, is to listen to asian telecos conference calls.  I have read in places that asia is the first place this will be rolled out to public.  High population density plus integrated (ie fiber plus mobile) telecos mean that I think people are already rolling out 5g to customers.  I think listening in on the china unicom, china telecom, china mobile (as well as maybe the japanese telecos but less sure what their timeline is) will allow people to see how sucessful 5g is (as its rolled out but before it hits US) and the existential risks to charter. 

[cameronfen]

Once you have 5G on mobile devices, I would think that usage can shoot up 100x current levels. Many people might be willing to pay up for unlimited wireless downloads.

 

Can 5G meet the needs of mobile users if usage does increase 100x and still have enough bandwidth to meet wireless internet to customers?

 

Vinod

 

I dont know.  When I hear of increasing bandwith 100x, I think to myself the Clayton Christensen idea of how established players often over innovate in an area where customers needs are already fully satiated.  I think most people can't find use for the bandwidth that they already have. 

[vinod1]

Once you have 5G on mobile devices, I would think that usage can shoot up 100x current levels. Many people might be willing to pay up for unlimited wireless downloads.

 

Can 5G meet the needs of mobile users if usage does increase 100x and still have enough bandwidth to meet wireless internet to customers?

 

Vinod

 

I dont know.  When I hear of increasing bandwith 100x, I think to myself the Clayton Christensen idea of how established players often over innovate in an area where customers needs are already fully satiated.  I think most people can't find use for the bandwidth that they already have.

 

Let me explain what I was trying to get at.

 

Currently most people have about 1 or 2 GB data limit  per device on their mobile plans (roughly a 8 GB plan for 4 devices in family). But people use up 200 GB to 500 GB per family on their Internet service.

 

Often people wait until they have a Wi-Fi connection to watch videos, etc. that require high bandwidth. If 5G enables mobile carriers to offer very high data limits, then it is likely that people would be using up a whole lot more data.

 

So using up 50 GB to 100 GB data per month on a mobile device is not really that big of a leap. Hence my question.

 

Thanks

 

Vinod

 

[undervalued]

Once you have 5G on mobile devices, I would think that usage can shoot up 100x current levels. Many people might be willing to pay up for unlimited wireless downloads.

 

Can 5G meet the needs of mobile users if usage does increase 100x and still have enough bandwidth to meet wireless internet to customers?

 

Vinod

 

I dont know.  When I hear of increasing bandwith 100x, I think to myself the Clayton Christensen idea of how established players often over innovate in an area where customers needs are already fully satiated.  I think most people can't find use for the bandwidth that they already have.

 

I think you underestimate how much bandwidth people will use. Maybe try to see how much people are using between the move from 1G to 2G, and 2G to 3G, and then 3G to 4G. As of right now, 4K streaming is only possible for those people with fibers. When 4K streaming is possible, who knows what kind of technology will be created. Game streaming is a sure thing. IoT will only be using and producing more and more data.

[Liberty]

I frequently see people complaining about Comcast's 1-terabyte/month caps, so some people use a lot of bandwidth. I'm guessing houses with parents and teenagers all streaming Netflix/Youtube/Amazon Video/Twitch every day, where everybody has multiple devices, game consoles and gaming PCs downloading large games and updates frequently, etc...

[dwy000]

Once you have 5G on mobile devices, I would think that usage can shoot up 100x current levels. Many people might be willing to pay up for unlimited wireless downloads.

 

Can 5G meet the needs of mobile users if usage does increase 100x and still have enough bandwidth to meet wireless internet to customers?

 

Vinod

 

I dont know.  When I hear of increasing bandwith 100x, I think to myself the Clayton Christensen idea of how established players often over innovate in an area where customers needs are already fully satiated.  I think most people can't find use for the bandwidth that they already have.

 

Let me explain what I was trying to get at.

 

Currently most people have about 1 or 2 GB data limit  per device on their mobile plans (roughly a 8 GB plan for 4 devices in family). But people use up 200 GB to 500 GB per family on their Internet service.

 

Often people wait until they have a Wi-Fi connection to watch videos, etc. that require high bandwidth. If 5G enables mobile carriers to offer very high data limits, then it is likely that people would be using up a whole lot more data.

 

So using up 50 GB to 100 GB data per month on a mobile device is not really that big of a leap. Hence my question.

 

Thanks

 

Vinod

 

That might be a Canadian thing.  Unlimited is pretty much the new norm in the US (yes, you can get cheaper limited plans but most of the carriers compete on the basis of unlimited).

[vinod1]

I am in US. :)

 

Unlimited plans are catching on but most of the people I know are still on limited data plans. Limited sample size.

 

Vinod

[scorpioncapital]

What do you think about the strategy of selling puts on GLIBA around $30 to $35 for december? Worst case you get Charter proxy at another 20-25% discount already depressed valuation and base case you get 15-19% return on collateral because put options on low priced stocks tend to be lower collateral vs cost..plus if you get put it's easier to buy shares at $35 then Charter at $208? I've only seen this opportunity available on stocks like LBTYA, GLIBA, DISCK, maybe a reason Malone keeps the share price so low? You also have significant buybacks. Already at $330+, 12% of Charter float was retired over the last year. At $215 to $270 I would imagine they would want to retire another 15% this year. At this rate, I cannot imagine the share price won't be sustained since in 5 years 100% of the shares will be repurchased!

 

 

[Spekulatius]

t $215 to $270 I would imagine they would want to retire another 15% this year. At this rate, I cannot imagine the share price won't be sustained since in 5 years 100% of the shares will be repurchased

 

Wrong math. If CHTR retires 15% of their nshares avery year, they end up with 0.85^7 or ~32% of their shares left after 7 years. The law of smaller numbers 8).

[cameronfen]

Once you have 5G on mobile devices, I would think that usage can shoot up 100x current levels. Many people might be willing to pay up for unlimited wireless downloads.

 

Can 5G meet the needs of mobile users if usage does increase 100x and still have enough bandwidth to meet wireless internet to customers?

 

Vinod

 

I dont know.  When I hear of increasing bandwith 100x, I think to myself the Clayton Christensen idea of how established players often over innovate in an area where customers needs are already fully satiated.  I think most people can't find use for the bandwidth that they already have.

 

Let me explain what I was trying to get at.

 

Currently most people have about 1 or 2 GB data limit  per device on their mobile plans (roughly a 8 GB plan for 4 devices in family). But people use up 200 GB to 500 GB per family on their Internet service.

 

Often people wait until they have a Wi-Fi connection to watch videos, etc. that require high bandwidth. If 5G enables mobile carriers to offer very high data limits, then it is likely that people would be using up a whole lot more data.

 

So using up 50 GB to 100 GB data per month on a mobile device is not really that big of a leap. Hence my question.

 

Thanks

 

Vinod

 

I thinl you are misunderstanding bandwith.  1 gbps means you get 1/8 gigbytes of download speed per second.  Thus to download 100 GB of information you would only need like 800 seconds or 13 minutes of being online, which is much faster than is necassary to stream even 4k (hulu requires only 15 mbps for streaming one 4k video so you would need 80 streamers on the same line to theoretically max the capcity of 1gbps download speed) .  Now thats the optimal speed and often download speeds are not quite fast, but even if it took you an hour or two to download 100 GB over a whole month that is much more bandwidth than needed. 

 

 

[cameronfen]

So if you are talking about total data caps, I dont think wireless broadband/5g will have that problem.  Bandwidth is proportional to frequency of spectrum divided by number of people using it per cell.  Since the fequency of mmwave is like 50 times larger, and the radius of small cells are 100x smaller at least, this works out 5000x more bandwidth per person.  Because there is so much more bandwidth per person, telecos wont have to ration data nearly as much, permitting 1 Tb of data to be downloaded per month which basically makes it suitible for wireless broadband.  The problem is that 5g while not lacking in bandwidth, may be slow in terms of latency.  Charter says 80% of traffic goes through fiber backhual already so in a sense it seems like latency can be addressed, however America Movil seems to think otherwise. 

[glorysk87]

Lots of talk re: AT&T and their 5G fixed wireless tech. But has anyone done the work? Here is a quote straight from an AT&T transcript:

 

"With regard to the fixed 5G wireless, if you will, our tests have shown it can be done. We can do it. The opportunity there is something that we have to prove out. We're not as excited about the business case. It's not as compelling yet for us as it may be for some. The reason we don't see that, if you will. The question is to get that fixed wireless through to residential, you still have to have backhaul from where the - the 1,000 feet away, the 1,500 feet away, and you still have to have that backhaul infrastructure. So that could be depending upon your ability to successfully pick who's going to buy and how much we're going to need is going to be a very tricky business case."

 

Basically there are two takeaways. First, is that regardless of how well your small cell fixed wireless broadband products perform, you still need a ton of fiber backhaul in order to release a product on a large scale. Second, is that (reading between the lines), AT&T is basically saying the IRR's on 5G FWB are not compelling. This idea is supported by many independent studies. The most optimistic I've seen have negligible positive IRRs on par with fiber to the home. However, most model's I've seen have negative IRR's.

 

As it stands now, 5G as a replacement for cable broadband is not a major threat outside of some select dense urban areas.

[FiveSigma]

glorysk87,

 

Can you point us to any of the studies on 5G FWB IRRs? Or at least name the reports and providers?

 

I and probably others were looking for some quantitative analysis on how much this will cost.

[scorpioncapital]

What is the difference between fixed wireless broadband and roaming WiFi network of cable providers ? Seems the hype is high but I can't seem to tell the difference.

[cameronfen]

What is the difference between fixed wireless broadband and roaming WiFi network of cable providers ? Seems the hype is high but I can't seem to tell the difference.

 

They use different spectrum.  For that reason and certainly bc of power of microcells vs routers range is typically longer for wireless broadband.  Wifi spectrum is also free to use, so telecos can't ensure there is enough bandwidth if they use wifi spectrum to give you internet. 

[glorysk87]

glorysk87,

 

Can you point us to any of the studies on 5G FWB IRRs? Or at least name the reports and providers?

 

I and probably others were looking for some quantitative analysis on how much this will cost.

 

SCTE/ISBE wrote a 46 page paper/study on 5G, part of which was devoted to the economics of building it out. Bernstein also has a decent note where they did their own IRR calcs.

[FiveSigma]

I found the SCTE piece:

 

https://www.fiercewireless.com/5g/editor-s-corner-cable-industry-tested-fixed-5g-and-it-came-up-a-bit-short

http://assets.fiercemarkets.net/public/007-Telecom%2Farris-cablelabs.pdf

 

 

[Liberty]

I found the SCTE piece:

 

https://www.fiercewireless.com/5g/editor-s-corner-cable-industry-tested-fixed-5g-and-it-came-up-a-bit-short

http://assets.fiercemarkets.net/public/007-Telecom%2Farris-cablelabs.pdf

 

Thank you.

[WayWardCloud]

Here is another way to think about it.

 

Internet at home:

There are ~125M homes in the US. Charter passes ~50M of them and Comcast ~55M with little overlap. Pretty much all of them will be Gigabit ready by year end, which is WAY more bandwidth than 95% of people need anyway. There is virtually no extra cost: the cables are laid down already.

Given this starting situation, why would any rational competitor decide to embark in a several-years-long roll-out to invest billions in building 5G towers + the whole new fiber-to-the-tower network needed to power them, just to then see cable lower their broadband price to match or undercut them in those specific areas - which they can do very easily since their own broadband offering is mostly pure margin?

 

Now, maybe for those undeserved ~20M homes it can make sense but then it's not a threat to cable, just telcos picking up the crumbs where there was no good IRR for their technology, most likely rural and/or poorer areas.

Again, we're talking about billions of dollars and many years of aggravated capex for telcos to carry through that path.

 

Internet on your phone:

Thanks to the forced MVNO agreement, Comcast and Charter can use Verizon's 4G network if it pleases them to offer mobile. Mobile can be a nice side addition to them since it tends to reduce churn but not an absolute need at all, it's like they're just replacing the phone landline option that's declining in their bundle. So basically all upside/optionality, little additional expenditures needed, no fundamental threat.

 

Internet of Things:

low-latency 5G in the streets for autonomous connected cars and other futuristic connected-city applications. A whole other type of "5G" waves if I understand correctly. Everything is yet to be built and the business is pretty much unknown. Will telcos take it, cable cos, Elon Musk's satellites, Google or Facebook's weather balloons, you name it - and what will the IRR be? Hard to tell, much too far away. At least 10+ years until 5G IOT is a meaningful market since we don't even have a need/use for it today, change is slow.

 

Conclusions:

This explains why telcos have been trying to buy cables cos and not the other way around. It is not surprising that Verizon's CEO has been so promotional lately, spreading the "5G is a threat to cable" narrative. If this fear successfully drives Charter and Comcast's share price lower (it has) he will have a stronger seat at the table when another round of M&A negotiations happens in some months. Remember the very same people posting videos about 5G going wonderfully through foliage, buildings, rain, birds, airplanes, tanks and mother-in-laws were trying to buy Charter at $5xx less than a year ago.