CHTR - Charter Communications

[LearningMachine]

If what you say is accurate then why did VZ's previous CEO try and scoop up Charter?  Just because the telecoms say they are coming, doesn't mean they will take share.  And shrinking earnings for cable is so far from reality, I don't want to entertain it (only way that will happen is with heavy handed regulatory changes).  I think you may be missing the fact that cable is already taking millions of wireless customers (charter was fastest growing wireless provider in 3 out of 4 quarters in 2020) and telecoms wireless broadband aspirations are questionable at best.  Did you know that 80% of wireless data already travels over cables infrastructure?  Did you also realize that cable has a massive incremental cost advantage for high speed infrastructure? That means they are the low cost provider or another way to say they can drop prices to the point of bleeding the telecoms dry.  Of course they will not do this because it will hurt their own business but it does mean they can get very creative around their pricing and packaging.  There are strong fundamental reasons why cable is rapidly gaining broadband customers and why it has historically been very difficult to disrupt their business, even with a superior product....think satellite.  I will not claim that wireless is not a threat to watch closely, but I don't know how wise it is to claim that shrinking earnings is just around the corner for cable.  Take a look at the ebitda multiple comparisons between wireless and cable and see how much everyone agrees with your assessment.  My friend, in the VERY long term we will both be dead

 

Verizon is definitely not sending 80% of its wireless data across cable's infrastructure.  They are laying down their own fibre for their base stations, year by year, in priority order of where they are getting the best owner's economics.

 

I feel you have a short fuse that if an idea is not something that is aligned with your current model, you stop analyzing further :-).

 

When Charter is selling all those plans, guess, who is a getting their fair cut?  Verizon :-).  Verizon doesn't feel threatened by them because they know they can always shut them off or charge them higher if needed, but there is no need so far.  Payments are flowing from Charter to Verizon, not Verizon to Charter, my friend :-).  Charter is the one who needs Verizon, not the other way around.  Verizon doesn't need Charter because it can just lay down its own fiber.  Charter needs Verizon because it can't create more licensed spectrum :-).

[vince]

Ok, clearly I have upset you by laying down facts to the point where you are typing nonsense.  Read my earlier post about how much I actually like Verizon and on Verizons board I show how forward returns are likely to be fantastic.  It makes me wonder how upset you would be if I started doing what you are doing....and losing credibility fast.  Reply all you want, I'm done

[LearningMachine]

... you are typing nonsense. 

...I'm done

 

And Im not going to address the rest of your post

 

I don't want to entertain it

 

These are your words that made me think you have a short fuse :-(.

[Spekulatius]

For those interested in how T-Mobile is also coming to the party, their home internet plans to take away market share from cable companies starts @ 2:11:30 at the link below. 

 

https://onlinexperiences.com/Launch/QReg/ShowUUID=6E14EFE8-40B8-400F-90AF-AD15CCF1E47B

 

Fyi, T-Mobile's speeds will be lower than what Verizon will offer because T-Mobile will be using their low-band and mid-band while Verizon will be able to offer higher speeds on mmwave highband and cband, which are higher frequency than T-Mobile's mid-band and low-band.

 

This will be interesting to see how it pans out. C-band is 4GHZ (or 7.5cm) which is similar to wireless which runs at 2.5GHZ and 5GHZ. Those frequencies don’t have great building penetration. Those who played with it know that 5GHZ is worse than 2.5GHZ. It will go through a tree with leaves or branches or even sheetrock, but concrete is pretty much a hard stop. Lower frequencies like 700Mhz will go through concrete.

 

This will make it difficult for Verizon to make their 5G reliable. It will work in some locations but not in others. It will be interesting to see how pans out.

[LearningMachine]

For those interested in how T-Mobile is also coming to the party, their home internet plans to take away market share from cable companies starts @ 2:11:30 at the link below. 

 

https://onlinexperiences.com/Launch/QReg/ShowUUID=6E14EFE8-40B8-400F-90AF-AD15CCF1E47B

 

Fyi, T-Mobile's speeds will be lower than what Verizon will offer because T-Mobile will be using their low-band and mid-band while Verizon will be able to offer higher speeds on mmwave highband and cband, which are higher frequency than T-Mobile's mid-band and low-band.

 

This will be interesting to see how it pans out. C-band is 4GHZ (or 7.5cm) which is similar to wireless which runs at 2.5GHZ and 5GHZ. Those frequencies don’t have great building penetration. Those who played with it know that 5GHZ is worse than 2.5GHZ. It will go through a tree with leaves or branches or even sheetrock, but concrete is pretty much a hard stop. Lower frequencies like 700Mhz will go through concrete.

 

This will make it difficult for Verizon to make their 5G reliable. It will work in some locations but not in others. It will be interesting to see how pans out.

 

Verizon has lower frequencies available as well that they can use to make wireless connection reliable.  Here is a chart that shows Verizon's spectrum ownerships:  https://specmap.sequence-omega.net/.  You can select the operator tab and then Verizon. It claims to be up-to-date to March 11, 20201, but I wouldn't rely on it 100% to be accurate.

 

For stadiums, airports & folks near windows in highrises, they will end up using ultra-high-speed mmwave.  This is inspirational band that they are hoping to become part of the social culture that folks want to look up to.

For those deeper in buildings, phones can rely on lower bands.

This way, they can spread the load over multiple bands.

 

 

[diamondtrap]

Vince has always been a respectful poster. He keeps it factual and pays close attention to potential threats when it comes to Charter. He is very knowledgeable about the whole industry.  He rightly saw it wasn’t useful to continue with Learning Machine as it was getting personal. Follow Vince’s and lead stick to the facts.  He is one of the good ones on here.

[CorpRaider]

How's 5G home broadband going in the nordics (where that ericsson guy came from)?  They rolled it out over there a year or so ago.  I see a lot of complaints online in the english language sources from simple retail, goofle-fu (but of course broadband is probably like an offensive line where you either hear complaining or nothing at all).

[glorysk87]

Verizon doesn't feel threatened by them because they know they can always shut them off or charge them higher if needed, but there is no need so far.

 

They can't shut them off nor charge them higher rates due to the terms of the MVNO agreement

[LearningMachine]

Verizon doesn't feel threatened by them because they know they can always shut them off or charge them higher if needed, but there is no need so far.

 

They can't shut them off nor charge them higher rates due to the terms of the MVNO agreement

 

Of course, I'm sure the MVNO agreement comes up for renewal regularly.

[KJP]

This post is more than two years old, but I still think it's good overview of the cable bull/fixed-wireless-skeptic perspective:  https://yetanothervalueblog.com/2018/12/how-big-of-a-threat-is-5g-fixed-wireless-to-cable-chtr-vz.html  [it also contains the source (or at least a source) of the statement that 80% of data flows over cable networks.]

 

As a cable co shareholder, my concern about fixed wireless is that it's not wrong just early, and my fixed wireless skepticism is really just residue from 2018, not clear thinking about 2023. 

 

Here's another good post by the same author about cable co v. wireless:  https://yetanothervalueblog.com/2020/08/random-thoughts-on-cable-post-q2-earnings.html

 

The essential argument, as I understand it, is that nationwide wireless networks are composed of geographies with very high usage (cities) and geographies with low usage (exurbs and the areas in between them), that perhaps could not be economically built out on their own, but work as part of a unified, "nationwide" service.  The cable co MVNO arrangements give them a structural advantage by allowing them to build out their own networks in high usage areas, thereby internalizing the most used, most valuable part of a nationwide wireless network, while renting via their MVNO the uneconomic parts.  If the cable cos can sign up enough wireless customers in this scenario, then it would be them, not the wireless carriers, that have the leverage in MVNO negotiations (or merger negotiations).  The rise of a 4th nationwide wireless carrier (Dish) would only further help cable cos in this battle.

 

The author, correctly I think, notes that "a huge assumption of this argument is that a wireless network could not cost effectively handle 100% of your data today."  I would extend that assumption to the next 5-10 years; it doesn't matter if a fully built-out 5G network could handle all of your data today; rather, can it handle all of your presumably increasing data over the next decade or more.  In addition, the author speculated that cable cos would be big bidders in the recent CBRS auction to try to put the screws to the wireless companies, but that did not turn out to be the case.  So is offloading most data in key areas still a viable cable co outcome?  Either way, the issues raised in that post are useful to think through for both cable and wireless shareholders.

 

 

 

[glorysk87]

Of course, I'm sure the MVNO agreement comes up for renewal regularly.

 

No, it's a perpetual contract that was struck with the sale of spectrum to VZ back in 2011. The specific terms were "perpetual and irrevocable".

[dwy000]

Of course, I'm sure the MVNO agreement comes up for renewal regularly.

 

No, it's a perpetual contract that was struck with the sale of spectrum to VZ back in 2011. The specific terms were "perpetual and irrevocable".

 

Both companies have sidestepped questions about whether the MVNO covers 5G or that is a negotiated add on.  Either way, there is no way that cable companies can undercut Verizon on wireless pricing given they are renting the Verizon network (unless Verizon is losing money on that deal which seems unlikely).

 

80% of mobile goes thru wifi largely because of speed and cost.  The big question will be when cable companies impose data caps. If you have a fixed wireless 5G home broadband that is competitive with cable it will negate the need to switch to wifi when you get home - or anywhere else.  The wifi will be for laptops and streaming and non-wireless connected devices.

 

Both companies are looking to provide the same product - phone and broadband.  Verizon is looking to make the product ubiquitous while cable has to combine two products (since they don't have mobile network).  Like everywhere else in the world, the two need to converge and it is likely more of a regulatory hot button than a strategic desire.

[KJP]

 

Both companies have sidestepped questions about whether the MVNO covers 5G or that is a negotiated add on.  Either way, there is no way that cable companies can undercut Verizon on wireless pricing given they are renting the Verizon network (unless Verizon is losing money on that deal which seems unlikely).

 

 

Is that consistent with what is currently happening?  For example, 1 unlimited line on Comcast mobile appears to cost $45 + taxes and fees per month (https://www.xfinity.com/mobile/learn/plan), but Verizon appears to charge at least $70 + taxes and fees per month for 1 unlimited line (https://www.verizon.com/plans).  Is the difference that Comcast mobile is roughly breakeven and bearing the backoffice customer relationship expense when it has the mobile customer, while Verizon wireless is highly profitable even with the customer relationship expense?

 

Note that I used the unlimited data example most favorable to Comcast.  Verizon's cost per line drops substantially as you go up in lines, but Comcast's does not appear to.  That's not surprising given the usage-based economics of an MVNO.

 

Also, going forward, don't the relative economics depend on how much Comcast and Charter can economically offload onto their own networks to avoid the MVNO cost?  Both Comcast and Charter have talked about how their going to target their network CapEx to that end.

 

 

[vince]

Of course, I'm sure the MVNO agreement comes up for renewal regularly.

 

No, it's a perpetual contract that was struck with the sale of spectrum to VZ back in 2011. The specific terms were "perpetual and irrevocable".

 

Both companies have sidestepped questions about whether the MVNO covers 5G or that is a negotiated add on.  Either way, there is no way that cable companies can undercut Verizon on wireless pricing given they are renting the Verizon network (unless Verizon is losing money on that deal which seems unlikely).

 

80% of mobile goes thru wifi largely because of speed and cost.  The big question will be when cable companies impose data caps. If you have a fixed wireless 5G home broadband that is competitive with cable it will negate the need to switch to wifi when you get home - or anywhere else.  The wifi will be for laptops and streaming and non-wireless connected devices.

 

Both companies are looking to provide the same product - phone and broadband.  Verizon is looking to make the product ubiquitous while cable has to combine two products (since they don't have mobile network).  Like everywhere else in the world, the two need to converge and it is likely more of a regulatory hot button than a strategic desire.

 

I can't speak for what the telecoms have claimed but Charter has absolutely 100% said that their MVNO includes 5G.  Do you know for certain that a fixed wireless 5G network can handle all the data travelling over cable's network, which is close to 500 gigs a month and climbing 25-30% annually?  One of the arguments against a broad 5G fixed wireless competitive footprint is that it will not be possible and it's hard to see with the scarcity of wireless spectrum and the fact that current wireless carriers start limiting/throttling/charging more once the user gets to 10-20 gigs a month.  Cable has a massive cost advantage which allows them to get very creative with pricing and packaging of speeds, capacity, wireless service, etc

[vince]

 

Both companies have sidestepped questions about whether the MVNO covers 5G or that is a negotiated add on.  Either way, there is no way that cable companies can undercut Verizon on wireless pricing given they are renting the Verizon network (unless Verizon is losing money on that deal which seems unlikely).

 

 

Is that consistent with what is currently happening?  For example, 1 unlimited line on Comcast mobile appears to cost $45 + taxes and fees per month (https://www.xfinity.com/mobile/learn/plan), but Verizon appears to charge at least $70 + taxes and fees per month for 1 unlimited line (https://www.verizon.com/plans).  Is the difference that Comcast mobile is roughly breakeven and bearing the backoffice customer relationship expense when it has the mobile customer, while Verizon wireless is highly profitable even with the customer relationship expense?

 

Note that I used the unlimited data example most favorable to Comcast.  Verizon's cost per line drops substantially as you go up in lines, but Comcast's does not appear to.  That's not surprising given the usage-based economics of an MVNO.

 

Also, going forward, don't the relative economics depend on how much Comcast and Charter can economically offload onto their own networks to avoid the MVNO cost?  Both Comcast and Charter have talked about how their going to target their network CapEx to that end.

 

It's true that cable wireless economics are not great but they are profitable on a stand alone basis at scale (over 2 million lines) and cash flow positive without the growth.  It is a connectivity tool that increases the perceived value of their broadband service and lowers churn.  If you have one unlimited line and one by the gig line they will save you roughly 700-800 dollars annually on your wireless bill.  The economics get better the more they can offload and they will invest in infrastructure when they see the incremental savings equal a good return on incremental spend.  Note that there has been unlicensed CBRS spectrum distributed recently...this is what Rutledge had to say on this topic recently...“We intend to use those licenses, along with significant unlicensed CBRS spectrum on a targeted 5G small cell site strategy, with our [hybrid fiber-coaxial] network providing power and backhaul,” Rutledge said. “Those small cells, combined with improving WiFi capabilities enable better throughput while driving significantly better economics for Charter. This year, we'll focus on scaling our systems to actively manage traffic on handsets using our MVNO, WiFi and CBRS spectrum. We will also build some targeted 5G small cell sites, which will help us learn how to pace our purely return on investment based CBRS deployment.”

 

Something else that isn't really discussed on this board is that Cable cos already have the backhaul fiber with which they can add some wireless infrastructure (including 5G if it turns out to be advantageous) to supplement their wireline business (in addition to supplementing their wireless business) especially in places where incremental wireline is uneconomical.  Charter has also stated that these supplements will also benefit their small business and enterprise services business.

[dwy000]

Of course, I'm sure the MVNO agreement comes up for renewal regularly.

 

No, it's a perpetual contract that was struck with the sale of spectrum to VZ back in 2011. The specific terms were "perpetual and irrevocable".

 

Both companies have sidestepped questions about whether the MVNO covers 5G or that is a negotiated add on.  Either way, there is no way that cable companies can undercut Verizon on wireless pricing given they are renting the Verizon network (unless Verizon is losing money on that deal which seems unlikely).

 

80% of mobile goes thru wifi largely because of speed and cost.  The big question will be when cable companies impose data caps. If you have a fixed wireless 5G home broadband that is competitive with cable it will negate the need to switch to wifi when you get home - or anywhere else.  The wifi will be for laptops and streaming and non-wireless connected devices.

 

Both companies are looking to provide the same product - phone and broadband.  Verizon is looking to make the product ubiquitous while cable has to combine two products (since they don't have mobile network).  Like everywhere else in the world, the two need to converge and it is likely more of a regulatory hot button than a strategic desire.

 

I can't speak for what the telecoms have claimed but Charter has absolutely 100% said that their MVNO includes 5G.  Do you know for certain that a fixed wireless 5G network can handle all the data travelling over cable's network, which is close to 500 gigs a month and climbing 25-30% annually?  One of the arguments against a broad 5G fixed wireless competitive footprint is that it will not be possible and it's hard to see with the scarcity of wireless spectrum and the fact that current wireless carriers start limiting/throttling/charging more once the user gets to 10-20 gigs a month.  Cable has a massive cost advantage which allows them to get very creative with pricing and packaging of speeds, capacity, wireless service, etc

 

This is very true Vince.  And in fact my family is on Xfinitiy Mobile because it's easier and cheaper than Verizon directly.  I think MVNO's will also be slightly cheaper given that is their only competitive advantage since they don't actually own the product they are selling.  My point was a poorly worded response to the idea that Xfinity or Spectrum could continually squeeze Verizon on pricing to the point of unprofitability.  It will definitely be lower margin than direct customers but as long as Verizon is making money on the wholesale business, those companies aren't in a position to price war.  Neither Xfinity nor Spectrum is profitable yet (Comcast says they'll get there this year) and while it is probably more of a product to retain customer relationships than generate huge returns, it will need to be profitable.  The CFO of Comcast talked about having to "tune up" the MVNO agreement with Verizon last year (possibly to add 5G details??? just my guess) so it's definitely a living agreement as opposed to fixed in stone.

 

On capacity of fixed broadband, Verizon has continually claimed that their mmWave network will not only have speed but easily the capacity to compete.  Now mmWave will not be nationwide for a long time (if ever) but if you live in a big city where they are targeting initially it should be competitive with cable on both speed and capacity. 

 

Again, I'm not a technician but if you step back and look at the big picture, fixed broadband is probably the biggest expansion market being targeted by Verizon and the other wireless companies.  They just spent $80bn on spectrum to help get there.  They speak of 30mn homes with fixed broadband availability in the next few years.  This isn't something they're just playing with, they have bet the company on it being the future now that mobile has become saturated.  They WILL compete with cable and they have the technology, the resources and the customer base to make it a competitive product.  It doesn't mean the cable companies are just going to roll over (I hope not, they are some of my biggest positions) but in 5 years the product suite of Verizon and Charter will be pretty much the same.  They need to merge and not waste the capex that both are spending to overlap each other.

 

 

[vince]

some fun stuff while reading...CABLE NEXT-GEN TECHNOLOGIES & STRATEGIES – Precise product delivery timelines are up to suppliers, but CableLabs expects to see prototypes of DOCSIS 4.0-based cable modems for lab testing surface in less than a year, an exec said at Light Reading's virtual event this week.

 

CableLabs wrapped up the D4.0 specs about six months ago. Meanwhile, word has spread that two key chip suppliers – MaxLinear and Broadcom – are developing silicon for a new platform that will support more capacity on widely deployed hybrid fiber/coax (HFC) networks along with improved latency and security.

 

The need for D4.0 is still years away as cable operators put DOCSIS 3.1 through the wringer, but suppliers are already "innovating," and initial prototypes are expected to show up at CableLabs' doorstep for testing before this time next year, Doug Jones, principal architect at CableLabs, predicted Wednesday on a panel focused on the industry's broader "10G" initiative.

 

Meanwhile, CableLabs is planning to be ready for DOCSIS 4.0 product certification testing by early 2022. When those products ultimately emerge is up to the vendor community, "but I've got internal schedules," Jones said. Meanwhile, he expects CableLabs to begin some initial interoperability work – a precursor to certification testing – in 2021

 

"My belief is that HFC has all of the capacity [it needs] to get to 10G," he said. "The evolutionary investments in upgrading the HFC network, I believe, will keep it going for another 20 years, at least."

 

The article is a little misleading unless you read it whole and carefully.  Basically, it will probably be 7-8 years before they have true 10G, up and down.  In the meantime, they will make incremental investment (similar to the way they have the last 10 years) and will have incremental progress (able to supply 2-4 gigs before they get to 10) but ultimately have a technical path (probably still theoretical with enough evidence to prematurely call it technical) to 20-25 gig.  If they see product/service innovation that increase demands quicker than anticipated, they could hit their milestones quicker with greater investment.  These announcements are significant because they almost certainly extend their incremental cost advantage and as long as that is the case, the asset will be monetized one way or another. 

[glorysk87]

They just spent $80bn on spectrum to help get there.  They speak of 30mn homes with fixed broadband availability in the next few years.  This isn't something they're just playing with, they have bet the company on it being the future now that mobile has become saturated.  They WILL compete with cable and they have the technology, the resources and the customer base to make it a competitive product.  It doesn't mean the cable companies are just going to roll over (I hope not, they are some of my biggest positions) but in 5 years the product suite of Verizon and Charter will be pretty much the same.  They need to merge and not waste the capex that both are spending to overlap each other.

 

This is kind of an aside - but I'm curious if you have an opinion as to what the incremental ROIC will be on that $80B of spend.

 

To me, there's no question the telecoms will take broadband subs in markets where the 5G FWB technology works. But to me, it's a question of what the incremental ROIC will be on those subs, and how much flexibility cable has to price and package competitively in the markets that are threatened to erode much of that (IMO thin) ROIC.

[vince]

Of course, I'm sure the MVNO agreement comes up for renewal regularly.

 

No, it's a perpetual contract that was struck with the sale of spectrum to VZ back in 2011. The specific terms were "perpetual and irrevocable".

 

Both companies have sidestepped questions about whether the MVNO covers 5G or that is a negotiated add on.  Either way, there is no way that cable companies can undercut Verizon on wireless pricing given they are renting the Verizon network (unless Verizon is losing money on that deal which seems unlikely).

 

80% of mobile goes thru wifi largely because of speed and cost.  The big question will be when cable companies impose data caps. If you have a fixed wireless 5G home broadband that is competitive with cable it will negate the need to switch to wifi when you get home - or anywhere else.  The wifi will be for laptops and streaming and non-wireless connected devices.

 

Both companies are looking to provide the same product - phone and broadband.  Verizon is looking to make the product ubiquitous while cable has to combine two products (since they don't have mobile network).  Like everywhere else in the world, the two need to converge and it is likely more of a regulatory hot button than a strategic desire.

 

I can't speak for what the telecoms have claimed but Charter has absolutely 100% said that their MVNO includes 5G.  Do you know for certain that a fixed wireless 5G network can handle all the data travelling over cable's network, which is close to 500 gigs a month and climbing 25-30% annually?  One of the arguments against a broad 5G fixed wireless competitive footprint is that it will not be possible and it's hard to see with the scarcity of wireless spectrum and the fact that current wireless carriers start limiting/throttling/charging more once the user gets to 10-20 gigs a month.  Cable has a massive cost advantage which allows them to get very creative with pricing and packaging of speeds, capacity, wireless service, etc

 

This is very true Vince.  And in fact my family is on Xfinitiy Mobile because it's easier and cheaper than Verizon directly.  I think MVNO's will also be slightly cheaper given that is their only competitive advantage since they don't actually own the product they are selling.  My point was a poorly worded response to the idea that Xfinity or Spectrum could continually squeeze Verizon on pricing to the point of unprofitability.  It will definitely be lower margin than direct customers but as long as Verizon is making money on the wholesale business, those companies aren't in a position to price war.  Neither Xfinity nor Spectrum is profitable yet (Comcast says they'll get there this year) and while it is probably more of a product to retain customer relationships than generate huge returns, it will need to be profitable.  The CFO of Comcast talked about having to "tune up" the MVNO agreement with Verizon last year (possibly to add 5G details??? just my guess) so it's definitely a living agreement as opposed to fixed in stone.

 

On capacity of fixed broadband, Verizon has continually claimed that their mmWave network will not only have speed but easily the capacity to compete.  Now mmWave will not be nationwide for a long time (if ever) but if you live in a big city where they are targeting initially it should be competitive with cable on both speed and capacity. 

 

Again, I'm not a technician but if you step back and look at the big picture, fixed broadband is probably the biggest expansion market being targeted by Verizon and the other wireless companies.  They just spent $80bn on spectrum to help get there.  They speak of 30mn homes with fixed broadband availability in the next few years.  This isn't something they're just playing with, they have bet the company on it being the future now that mobile has become saturated.  They WILL compete with cable and they have the technology, the resources and the customer base to make it a competitive product.  It doesn't mean the cable companies are just going to roll over (I hope not, they are some of my biggest positions) but in 5 years the product suite of Verizon and Charter will be pretty much the same.  They need to merge and not waste the capex that both are spending to overlap each other.

 

I absolutely agree that cable cos cannot undercut Verizon on wireless pricing, I think that's well known.  However, they are in a position now to offer better pricing on the wireless, using their broadband superior profitability which is why cable is CURRENTLY advantaged. The real question is, who is better positioned across the 3 (or 4 if you include landline phone) major services in 5-10-20 years from now.  Obviously Cable's low cost position in data transfer will continue to be a big factor in that future, but not the only factor.  We can debate about the future but there is no debating who is leading this race right now....public markets and private transactions are the proof. 

I came across Comcasts statement that they are putting more focus on their wireless business, I assumed that it wasn't performing to their expectations once they hit 2 million subscribers.  I didn't take it to mean that their MVNO was negotiable....it may be living in the sense that they can alter it with give and take by both sides but it certainly doesn't mean that unilaterally they can decide they don't like it anymore and alter it.

 

When I look at the big picture I don't see VZ betting the farm on fixed wireless.  They clearly state that their investment will depend on the wireless business in terms of how much to allocate, which locations, pricing and packaging, etc.  I believe they are serious about expanding their capabilities in fixed wireless but I think they are skeptical of their ultimate ability to seriously disrupt cable with their current infrastructure roadmap.  Their fixed wireless plans include 4G in those availability numbers and 4G isn't going to do anything but make potential customers upset that they aren't even getting a DSL substitute.  And I'm not so sure their wireless business has run out of steam, my take is that they have a renewed focus on innovating on top of that asset and that's where the potential lies IMO, and why I hold some VZ stock.  That asset is their moat...they have the scale and a lead with their wireless network which means they are best positioned to take advantage of wireless's future.  It might include Fixed but I don't believe it will be within their 5 year plan.  Even when you look at their revenue growth rates and their projections on fixed wireless customers, it's pretty clear to me that they are not modeling or depending on fixed wireless to move the needle.  Lastly, I agree that the economics will basically force consolidation.  Cable will not be a major substitute for wireless and vice versa for fixed and thats why neither of them are committing massive capital to those businesses.  They are focusing on their core asset and incrementally trying to get some scale in the others business with success based investments, which is exactly what they should be doing.  I wouldn't invest in either if they woke up one day and decided to take on the other with 10's of billions of investment.  There is just no way either one is going to get sufficient returns...it will help their core asset incrementally and it will give them some leverage when negotiating their multiples.  Lastly, I want to say that I am not an expert, these are just my thoughts after studying these topics so feel free to rip my ideas apart, I love new ideas and learning from others.

[vince]

They just spent $80bn on spectrum to help get there.  They speak of 30mn homes with fixed broadband availability in the next few years.  This isn't something they're just playing with, they have bet the company on it being the future now that mobile has become saturated.  They WILL compete with cable and they have the technology, the resources and the customer base to make it a competitive product.  It doesn't mean the cable companies are just going to roll over (I hope not, they are some of my biggest positions) but in 5 years the product suite of Verizon and Charter will be pretty much the same.  They need to merge and not waste the capex that both are spending to overlap each other.

 

This is kind of an aside - but I'm curious if you have an opinion as to what the incremental ROIC will be on that $80B of spend.

 

To me, there's no question the telecoms will take broadband subs in markets where the 5G FWB technology works. But to me, it's a question of what the incremental ROIC will be on those subs, and how much flexibility cable has to price and package competitively in the markets that are threatened to erode much of that (IMO thin) ROIC.

 

This is a fantastic post imo, basically summarizes much of what I posted.  I read it after though because I was typing when it came in.  Excellent

[vince]

here is another clip from the same paper.  The person quoted is the same one further up in the article that downplayed cables ability to have real 10G in a few years.  He said they will have it in the trunk but not to each sub, that will take longer. Cable labs, biased for cable obviously are the ones that make every new technology look easy, quick uptake and underestimate costs.  It makes no sense to be that industry experts would purposefully be bias and make everything sound better than it is.  Doesn't everyone already know they are full of shit?  Anyway, the following clip looks like it comes from an unbiased source.....5G on lower-band spectrum won't compete head-on, capacity-wise, with a wireline network, but millimeter wave spectrum can do the job where there's good line of sight and the radios are close to the customer, said Robert Conger, CTO, Americas and head of product management and solutions marketing at Adtran.

 

While Volpe said cable should keep an eye on 5G as a potential competitive threat, Broadhurst sees 5G and its fixed backhaul needs as a major opportunity for MSOs.

 

"If you go down any street, the only guy that's got a big broadband pipe and power is the cableco. Nobody else has got it," Broadhurst said.

 

He's basically saying that 5G will be a net positive for cable and maybe advantage them even further compared to telecoms. 

[dwy000]

They just spent $80bn on spectrum to help get there.  They speak of 30mn homes with fixed broadband availability in the next few years.  This isn't something they're just playing with, they have bet the company on it being the future now that mobile has become saturated.  They WILL compete with cable and they have the technology, the resources and the customer base to make it a competitive product.  It doesn't mean the cable companies are just going to roll over (I hope not, they are some of my biggest positions) but in 5 years the product suite of Verizon and Charter will be pretty much the same.  They need to merge and not waste the capex that both are spending to overlap each other.

 

This is kind of an aside - but I'm curious if you have an opinion as to what the incremental ROIC will be on that $80B of spend.

 

To me, there's no question the telecoms will take broadband subs in markets where the 5G FWB technology works. But to me, it's a question of what the incremental ROIC will be on those subs, and how much flexibility cable has to price and package competitively in the markets that are threatened to erode much of that (IMO thin) ROIC.

 

That's absolutely the right question to ask if you are invested in Verizon.  But as a cable investor its may be a little bit moot.  The industry has committed $80bn in this auction and probably another $30bn+ to clear the spectrum and get it humming.  The commitment has been made and the money will be spent.  Once that happens its a matter of maximizing traffic on it (just like cable cos laying fiber).  The variable margin will be like 90%,

 

I think they also justify the spend because they literally have to in order to remain competitive on the existing products.  Its not just the new products and customers it will attract it is also a case of how many customers you will lose if you don't do it.

[vince]

They just spent $80bn on spectrum to help get there.  They speak of 30mn homes with fixed broadband availability in the next few years.  This isn't something they're just playing with, they have bet the company on it being the future now that mobile has become saturated.  They WILL compete with cable and they have the technology, the resources and the customer base to make it a competitive product.  It doesn't mean the cable companies are just going to roll over (I hope not, they are some of my biggest positions) but in 5 years the product suite of Verizon and Charter will be pretty much the same.  They need to merge and not waste the capex that both are spending to overlap each other.

 

This is kind of an aside - but I'm curious if you have an opinion as to what the incremental ROIC will be on that $80B of spend.

 

To me, there's no question the telecoms will take broadband subs in markets where the 5G FWB technology works. But to me, it's a question of what the incremental ROIC will be on those subs, and how much flexibility cable has to price and package competitively in the markets that are threatened to erode much of that (IMO thin) ROIC.

 

That's absolutely the right question to ask if you are invested in Verizon.  But as a cable investor its may be a little bit moot.  The industry has committed $80bn in this auction and probably another $30bn+ to clear the spectrum and get it humming.  The commitment has been made and the money will be spent.  Once that happens its a matter of maximizing traffic on it (just like cable cos laying fiber).  The variable margin will be like 90%,

 

I think they also justify the spend because they literally have to in order to remain competitive on the existing products.  Its not just the new products and customers it will attract it is also a case of how many customers you will lose if you don't do it.

 

Large scale 5G fixed wireless, one that has speeds that are comparable to what cable can provide now, is going to cost a hell of a lot more in addition to what they would have to spend if it was only a wireless product.  There are reasons why the telecoms talked negatively about 5G's fixed wireless returns.  They all knew they would be deploying 5G for their wireless network and they still clearly claimed that the economics do not work.  Why do you think every industry expert has been debating the ROI on 5G fixed?  Mixed in VZ's presentation is 4G fixed and low and medium band 5G.  Most of this will not be a competitive substitute to what cable offers now.

[vince]

Did anyone else watch the verizon presentation?  About half way through, and at the end of the CFO's talk, when he refers to company revenues in 2024 and beyond, he states that.....Wireless broadband will have "well over a billion dollars of revenue".  Obviously the statement is vague but I just cannot see how that number jives with their wireless broadband (WB) footprint predictions for those same years.  Maybe someone else can point out something I may be missing?  I want to repeat that I think Verizon can deliver fantastic returns going forward combined with extreme safety.  This is not easy to find in this environment.  But I wouldn't count on them (nor do they need to) disrupting cable's business within 5-7 years.  They can capture some industry profit without hurting cable's investment thesis IMO

 

Hi Vince, I've watched it a few times :-). 

 

The billion dollar of revenue is mentioned when he is talking about 2022-2023, that is before he starts talking about 2024 :-).

 

He starts talking about their home broadband plans @ 51:43 minutes at https://youtu.be/C0JNCwmCmCg.

 

Here are the figures he mentions regarding home broadband

• Next 12 months (2021): 15 million households covered, including 1-2 million through mmWave.
  
• 2022-2023: 30 million households covered with fixed wireless access.  Fixed wireless access becomes a billion dollar revenue business.
  
• 2024 & beyond: 50 million households covered.
  

 

They are charging $50 for Verizon customers and $70 for non-Verizon customers for 5G Home Internet service at https://www.verizon.com/5g/home/. 

 

Assuming $50 per month, $600 per year, needs only 1.67 million subscribers to hit billion dollars.  Are you saying achieving billion dollars is too high or too little for 2022-2023?

 

My apologies earlier for including the link to https://www.verizon.com/5g/home/ earlier at https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/charter-communications/msg454307/#msg454307 in response to thinking that your point was that Verizon 5g service at those prices was available only for mobile devices, and not available for home broadband when you said "[t]hats for their mobile 5G.  [d]ifferent story for broadband".  Perhaps you had meant something else.

 

So it does look like VZ CFO did say "well over a billion dollars in revenue from Fixed wireless in 2024 and beyond.  This is a copy of a summary I just read on lightreading.......

 

2024 and beyond

 

Verizon intends to cover more than 250 million people with C-band 5G. The delay is partly due to the fact that some of Verizon's C-band spectrum licenses won't be available for commercial use until 2023 because incumbent satellite operators are still working to move their operations off the band.

The operator said it will cover 50 million households with fixed wireless Internet services, generating "well over" $1 billion in revenues.

[LearningMachine]

Did anyone else watch the verizon presentation?  About half way through, and at the end of the CFO's talk, when he refers to company revenues in 2024 and beyond, he states that.....Wireless broadband will have "well over a billion dollars of revenue".  Obviously the statement is vague but I just cannot see how that number jives with their wireless broadband (WB) footprint predictions for those same years.  Maybe someone else can point out something I may be missing?  I want to repeat that I think Verizon can deliver fantastic returns going forward combined with extreme safety.  This is not easy to find in this environment.  But I wouldn't count on them (nor do they need to) disrupting cable's business within 5-7 years.  They can capture some industry profit without hurting cable's investment thesis IMO

 

Hi Vince, I've watched it a few times :-). 

 

The billion dollar of revenue is mentioned when he is talking about 2022-2023, that is before he starts talking about 2024 :-).

 

He starts talking about their home broadband plans @ 51:43 minutes at https://youtu.be/C0JNCwmCmCg.

 

Here are the figures he mentions regarding home broadband

• Next 12 months (2021): 15 million households covered, including 1-2 million through mmWave.
  
• 2022-2023: 30 million households covered with fixed wireless access.  Fixed wireless access becomes a billion dollar revenue business.
  
• 2024 & beyond: 50 million households covered.
  

 

They are charging $50 for Verizon customers and $70 for non-Verizon customers for 5G Home Internet service at https://www.verizon.com/5g/home/. 

 

Assuming $50 per month, $600 per year, needs only 1.67 million subscribers to hit billion dollars.  Are you saying achieving billion dollars is too high or too little for 2022-2023?

 

My apologies earlier for including the link to https://www.verizon.com/5g/home/ earlier at https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/charter-communications/msg454307/#msg454307 in response to thinking that your point was that Verizon 5g service at those prices was available only for mobile devices, and not available for home broadband when you said "[t]hats for their mobile 5G.  [d]ifferent story for broadband".  Perhaps you had meant something else.

 

So it does look like VZ CFO did say "well over a billion dollars in revenue from Fixed wireless in 2024 and beyond.  This is a copy of a summary I just read on lightreading.......

 

2024 and beyond

 

Verizon intends to cover more than 250 million people with C-band 5G. The delay is partly due to the fact that some of Verizon's C-band spectrum licenses won't be available for commercial use until 2023 because incumbent satellite operators are still working to move their operations off the band.

The operator said it will cover 50 million households with fixed wireless Internet services, generating "well over" $1 billion in revenues.

 

Thanks Vince for sharing where you got it from.

 

In case you find it useful, here are the exact time moments I was referring to in the video of the CFO at https://youtu.be/C0JNCwmCmCg:

• 52:45: CFO starts talking about 2022-2023
  
• 53:20: CFO mentions billion dollar business
  
• 53:26: CFO starts talking about 2024 and beyond