LBRDA - Liberty Broadband

[jay21]

Depends on how many hotspots you think you can have in a given area - which will depend on how many users you want to serve at what speeds. Wifi also has interference issues (remember Apple keynote a few years ago where their demo had a hitch because there something like 500+ wifi hotspots in the auditorium). There is only a limited frequency band available and the more users you want to serve, the harder it is to give them high bandwidth on that hotspot, even if the pipe from the hotspot itself is very fat.

 

And, of course, unless I misunderstand you, you *do* need the last mile to get to the hotspots because they will have to be installed every 50m or so (more if in a city/a big apartment building ... although there they could act as one cell, so to speak but you'd still need the last mile to that particular building).

 

 

Agree - but I'll clarify my line of thought a little.

 

Completely agree with the *current* technology. I am contemplating things 10+ years from now. The first step is integrating things like Hotspot 2.0, Voice over Wifi, and using MVNOs. Then i think wifi and hotspots become much more critical to the infrastructure and will soak up a lot more investment and some of the problems you mentioned will be solved.

 

Anytime you think about tech 10+ years out, you will be wrong but I think this is highly plausible.

[giofranchi]

Ok, from this very useful conversation I have come to consider the regulatory risk much more plausible than the technological risk...

 

What about initiatives like ConnectHome?

 

http://www.theverge.com/2015/7/15/8969809/google-white-house-obama-broadband

 

Whenever I read the word "free", I get nervous! ;)

 

Gio

[Guest longinvestor]

Depends on how many hotspots you think you can have in a given area - which will depend on how many users you want to serve at what speeds. Wifi also has interference issues (remember Apple keynote a few years ago where their demo had a hitch because there something like 500+ wifi hotspots in the auditorium). There is only a limited frequency band available and the more users you want to serve, the harder it is to give them high bandwidth on that hotspot, even if the pipe from the hotspot itself is very fat.

 

And, of course, unless I misunderstand you, you *do* need the last mile to get to the hotspots because they will have to be installed every 50m or so (more if in a city/a big apartment building ... although there they could act as one cell, so to speak but you'd still need the last mile to that particular building).

 

 

Agree - but I'll clarify my line of thought a little.

 

Completely agree with the *current* technology. I am contemplating things 10+ years from now. The first step is integrating things like Hotspot 2.0, Voice over Wifi, and using MVNOs. Then i think wifi and hotspots become much more critical to the infrastructure and will soak up a lot more investment and some of the problems you mentioned will be solved.

 

Anytime you think about tech 10+ years out, you will be wrong but I think this is highly plausible.

 

Most of the posters on COBF are from NA and EU. The place where wireless broadband is miles ahead is in Japan and Korea. Speed/capacity/price. The best place to read about this, IMO, would be Softbank's website and follow Masayoshi Son's interviews etc. If there is a likely disruptor in global broadband, it is Masayoshi Son. He has already disrupted Japan completely, pushing aside Docomo. It is a "10 years in the past" story versus 10 from now.

[rogermunibond]

Republic Wireless and Google's Project Fi are two existing MVNOs that try to put most of the cell data traffic over Wifi.  Cablecos can try to do this too as I don't think it's that difficult.  Maybe Republic gets bought? 

 

By that point cable cos could be so embedded into mobile that the concept of "last mile" may not exist and they just have to upgrade their wifi networks.

 

Thank you all! Very helpful! :)

 

Jay, could you explain what you mean by "cable cos could be so embedded into mobile"... Do cable cos deal with mobile? Please, be patient with my ignorance! ;)

 

Cheers,

 

Gio

 

They are. I believe Cablevision is currently trying a voice over wifi. Quad play is common in Europe (see Liberty Global). A lot of mobile data is carried over cable's infrastructure. Most cable cos have launched mobile hotspots.

 

I mean if the wifi network gets to be so strong and ubiquitous, why do you need a last mile? Just use the strong wifi signal. (I am sure there is an issue with this; let's see what the cable experts say).

[giofranchi]

The place where wireless broadband is miles ahead is in Japan and Korea. Speed/capacity/price.

 

What I think I have understood is that the barrier to a new technology is not the technology itself, but the huge amount of capex needed to build the infrastructure for that new technology. At least not until the old technology is still cheap and fast enough!

 

After all Liberty Broadband could invest in any kind of broadband, right? If Malone considered wireless broadband the place to be right now, why would he invest in cable?

 

Gio

 

[Guest longinvestor]

The place where wireless broadband is miles ahead is in Japan and Korea. Speed/capacity/price.

 

What I think I have understood is that the barrier to a new technology is not the technology itself, but the huge amount of capex needed to build the infrastructure for that new technology. At least not until the old technology still is cheap and fast enough!

 

After all Liberty Broadband could invest in any kind of broadband, right? If Malone considered wireless broadband the place to be right now, why would he invest in cable?

 

Gio

 

Don't want to poop on the party here, but I consider Malone, Roberts (Comcast) plus the big boys at VZ / T etc to be  part of the old guard. Cables/telcos have much to gain from prolonging the status quo for as long as possible. They've a great following in the investing community (including COBF) because of doing well for investors dividending away their earnings etc..

 

Yet at the same time with everything going the internet way (from youtube to Netflix to ...) there is groundswell of discontent in the consumer world thanks to speed/capacity/price (all poor - thanks to incumbent driven inertia) and the incumbents are seen more or less as villains. Netflix keeps growing only because it is $8 per month versus $80 of cable. In the recent FCC spat over Net Neutrality, there were 4 million petitions from consumers basically summed up by John Oliver as "cable industry fuckery". Masayoshi Son has this exact position and has invested plenty of capex over the past 10 years in Japan and Asia to get to where he is. So, no, it is not about technology but about disruptive capital allocation. He bought Sprint with this very purpose in mind.  Google is trying to do the same in the US as well.

 

I know, I know, Malone has got to have all this all figured out. 

 

 

[giofranchi]

I know, I know, Malone has got to have all this all figured out.

 

Well, of course I cannot say if Malone has figured this out or not… But I wouldn’t call him “old guard”… Look at Sirius XM, would you label that company of the old guard? Or look at the companies held by Liberty Ventures: I would not define them as old guard…

If he still believes cable might generate lots of cash for some time, I think it is because he still sees a competitive advantage there, which is basically very low capex.

 

Gio

[giofranchi]

Netflix keeps growing only because it is $8 per month versus $80 of cable.

 

I still don’t understand: those who use Netflix need cable, or they don’t? ???

 

Gio

 

[oakforest]

For what its worth, I've been using the google Fi phone service for a few weeks and have been really impressed. Google Fi uses wifi for most calls and then uses Sprint's and T-Mobile's spectrum when wifi isn't avaliable. I'm really shocked how well its been working. I was with Verizon before and paying $117 a month now I'm paying $63 for google fi.  This made me realize the opportunity for the cable companies is huge to steal some customers/revenue from the wireless companies. 

[ni-co]

For what its worth, I've been using the google Fi phone service for a few weeks and have been really impressed. Google Fi uses wifi for most calls and then uses Sprint's and T-Mobile's spectrum when wifi isn't avaliable. I'm really shocked how well its been working. I was with Verizon before and paying $117 a month now I'm paying $63 for google fi.  This made me realize the opportunity for the cable companies is huge to steal some customers/revenue from the wireless companies.

 

… which gives you the reasoning behind Vodafone's cable asset buying spree. At the latest shareholder meeting the "Old Man" Malone also explained his theory of mobile and terrestrial services converging to cope with ever increasing demand for data.

[oddballstocks]

Netflix keeps growing only because it is $8 per month versus $80 of cable.

 

I still don’t understand: those who use Netflix need cable, or they don’t? ???

 

Gio

 

I have fiber from Verizon (called FIOS).  Cable reliability and quality is terrible for data.  I would willingly pay more for fiber that's reliable compared to some experiences I've had with cable. 

 

The cable infrastructure I've used (in Ohio) was flaky at best.  It would drop packets like crazy and at times would suddenly disconnect. 

 

There's another problem with cable, the shared bandwidth issue.  Cable shares the same trunk lines, so at 7-10pm at night speeds are much slower than 2pm in the afternoon.  People are used to this.  I've heard friends comment "the internet's slow, must be a lot of people using it in the neighborhood"

 

Fiber doesn't have this issue, although I'm not sure they're still running fiber in the US.  Hopefully Google fiber will roll out nationwide.  I've been very satisfied with FIOS, have had it since 2005.

 

The problem cable has is the same as the problem copper has, they are metal wires trying to carry a signal.  The signal degrades the further you are from the hub or repeater.  There are also environmental factors that can influence connection issues.  Other signals interfere with copper, this isn't true with fiber.  Fiber is light pulses through glass strands.  There is no interference, can carry higher data loads, and can have much longer runs without a repeater.

 

Fiber is the way forward for bandwidth.  We just have legacy cable assets so we're using them.  It wouldn't surprise me if in 50 years the only way people receive data is wirelessly or via fiber.  And wireless is fiber.  Towers are connected via fiber runs.

[ni-co]

Cables/telcos have much to gain from prolonging the status quo for as long as possible. They've a great following in the investing community (including COBF) because of doing well for investors dividending away their earnings etc..

 

Yet at the same time with everything going the internet way (from youtube to Netflix to ...) there is groundswell of discontent in the consumer world thanks to speed/capacity/price (all poor - thanks to incumbent driven inertia) and the incumbents are seen more or less as villains. Netflix keeps growing only because it is $8 per month versus $80 of cable. In the recent FCC spat over Net Neutrality, there were 4 million petitions from consumers basically summed up by John Oliver as "cable industry fuckery".

 

There is so much confusion going on in this whole cord cutting discussion.

 

By the way: Do you know why the cable bill is $80 a month? Mostly because of content cost. Do you know that ESPN is being payed +$20 per household by the cable cos and only 20% of the people would be willing to pay this amount If they had a choice?

 

Pure broadband has better margins. Of course earning lower margins with cable TV is better than earning nothing. This is why cable cos try to keep the bundle. But cord cutters are a much smaller threat to cable companies than most people think (and a much greater threat to content companies like Disney).

[oddballstocks]

Cables/telcos have much to gain from prolonging the status quo for as long as possible. They've a great following in the investing community (including COBF) because of doing well for investors dividending away their earnings etc..

 

Yet at the same time with everything going the internet way (from youtube to Netflix to ...) there is groundswell of discontent in the consumer world thanks to speed/capacity/price (all poor - thanks to incumbent driven inertia) and the incumbents are seen more or less as villains. Netflix keeps growing only because it is $8 per month versus $80 of cable. In the recent FCC spat over Net Neutrality, there were 4 million petitions from consumers basically summed up by John Oliver as "cable industry fuckery".

 

There is so much confusion going on in this whole cord cutting discussion.

 

By the way: Do you know why the cable bill is $80 a month? Mostly because of content cost. Do you know that ESPN is being payed +$20 per household by the cable cos and only 20% of the people would be willing to pay this amount If they had a choice?

 

Pure broadband has better margins. Of course earning lower margins with cable TV is better than earning nothing. This is why cable cos try to keep the bundle. But cord cutters are a much smaller threat to cable companies than most people think (and a much greater threat to content companies like Disney).

 

I think the biggest threat is if these companies are viewed as utilities and other cities catch on like Chattanooga.  Chattanooga is offering gig fiber connections to all residents for $70/mo.  I pay $60/mo for 50 Mbps in Pittsburgh.  I would love to see the local government offer fiber to all residents at lower cost.  I think people are going to start to view broadband the same way they view water or electricity. 

[jay21]

Cables/telcos have much to gain from prolonging the status quo for as long as possible. They've a great following in the investing community (including COBF) because of doing well for investors dividending away their earnings etc..

 

Yet at the same time with everything going the internet way (from youtube to Netflix to ...) there is groundswell of discontent in the consumer world thanks to speed/capacity/price (all poor - thanks to incumbent driven inertia) and the incumbents are seen more or less as villains. Netflix keeps growing only because it is $8 per month versus $80 of cable. In the recent FCC spat over Net Neutrality, there were 4 million petitions from consumers basically summed up by John Oliver as "cable industry fuckery".

 

There is so much confusion going on in this whole cord cutting discussion.

 

By the way: Do you know why the cable bill is $80 a month? Mostly because of content cost. Do you know that ESPN is being payed +$20 per household by the cable cos and only 20% of the people would be willing to pay this amount If they had a choice?

 

Pure broadband has better margins. Of course earning lower margins with cable TV is better than earning nothing. This is why cable cos try to keep the bundle. But cord cutters are a much smaller threat to cable companies than most people think (and a much greater threat to content companies like Disney).

 

I think the biggest threat is if these companies are viewed as utilities and other cities catch on like Chattanooga.  Chattanooga is offering gig fiber connections to all residents for $70/mo.  I pay $60/mo for 50 Mbps in Pittsburgh.  I would love to see the local government offer fiber to all residents at lower cost.  I think people are going to start to view broadband the same way they view water or electricity.

 

I think cable can approach (and potentially exceed) those speeds (~1gb).

[ItsAValueTrap]

In Holland, you can sign up for fibre Internet and the company will install a fibre optic cable to your house (if it isn't there already).  Things are different in Holland because fibre optic Internet is open access from what I remember.  (The US is not open access.  The companies that own the pipes do not have to open up their network to other companies.)

 

Liberty Global expanded in Holland by buying Ziggo, which owns coaxial cables.  Coaxial cable is not open access there, but it has to compete with fibre (open access) and DSL/telephone wires/twisted pair.

[loganc]

I think the biggest threat is if these companies are viewed as utilities and other cities catch on like Chattanooga.  Chattanooga is offering gig fiber connections to all residents for $70/mo.  I pay $60/mo for 50 Mbps in Pittsburgh.  I would love to see the local government offer fiber to all residents at lower cost.  I think people are going to start to view broadband the same way they view water or electricity.

 

Ultimately the question is where do the local governments get the money to overbuild fiber to offer all residents low cost broadband?  If it is being offered at a lower cost, would the local governments be willing to run these networks at a loss?  Are the taxpayers going to be willing to pay for the losses and provide the capital for the network buildouts from higher taxes? 

 

In so far as new CHTR is concerned, I am highly skeptical that will happen over very large parts of their network footprint.  The same is true, in my view, of Google Fiber.  While it is not possible to have knowledge of the economics of Google Fiber, I am very skeptical that the project is generating positive economics at this point.  Does it really make sense for Google to overbuild fiber in the entire US?  I think they have accomplished a significant amount in terms of pressuring cable and telco to make investments to increase speeds by simply overbuilding in parts of Kansas City and Austin.  As I recall, the Provo network was basically already in place and was simply not economic for the city to run.

[ItsAValueTrap]

I have fiber from Verizon (called FIOS).  Cable reliability and quality is terrible for data.  I would willingly pay more for fiber that's reliable compared to some experiences I've had with cable. 

 

The cable infrastructure I've used (in Ohio) was flaky at best.  It would drop packets like crazy and at times would suddenly disconnect. 

 

There's another problem with cable, the shared bandwidth issue.  Cable shares the same trunk lines, so at 7-10pm at night speeds are much slower than 2pm in the afternoon.  People are used to this.  I've heard friends comment "the internet's slow, must be a lot of people using it in the neighborhood"

 

Fiber doesn't have this issue, although I'm not sure they're still running fiber in the US.  Hopefully Google fiber will roll out nationwide.  I've been very satisfied with FIOS, have had it since 2005.

 

The problem cable has is the same as the problem copper has, they are metal wires trying to carry a signal.  The signal degrades the further you are from the hub or repeater.  There are also environmental factors that can influence connection issues.  Other signals interfere with copper, this isn't true with fiber.  Fiber is light pulses through glass strands.  There is no interference, can carry higher data loads, and can have much longer runs without a repeater.

 

Fiber is the way forward for bandwidth.  We just have legacy cable assets so we're using them.  It wouldn't surprise me if in 50 years the only way people receive data is wirelessly or via fiber.  And wireless is fiber.  Towers are connected via fiber runs.

 

Your cable issues may be because:

A- Multiple people share the same co-axial cable going into the head-end.  So if somebody is splitting the cable or wiring it in weird ways, they can introduce noise into the signal.

B- The head-end may need an upgrade.  Congestion during peak hours is likely a sign that the head-end is overloaded.

 

I don't believe signal degradation is a real-world issue with cable.  Yes, the signal does degrade.  But I believe in practice, the lengths are always short enough that it doesn't matter.  Signal degradation is an issue for DSL... speeds are lower depending on the distance between the consumer and the nearest whatever-you-call-it.

 

If we had to build infrastructure from scratch, we would lay fibre optic cables and possibly lay zero coaxial.  The only reason new buildings would install twisted copper pair cables is if people want traditional landline service, which is more reliable than VOIP.

 

----

There are various forms of wireless Internet available in some regions.

 

Satellite Internet is slow and highly unreliable.  It does not work when it is raining heavily or snowing.  Latency is high.  People pay crazy amounts of money for satellite Internet because it is their only choice.

 

4G Internet can be somewhat unreliable, but it works.  It can work flawlessly or it can be flaky... due to the physics of wireless communications.

 

Wifi Internet can be somewhat unreliable, but it works.  It can work flawlessly or it can be flaky.

 

Netflix Internet speed stats will sometimes include speeds from wireless Internet providers.

 

----

I think that the demand for bandwidth will slowly hit a wall.

 

In movie theatres, consumers do not care about 4k versus 2k.  (4k has been available in theatres for several years now.  Sony, which makes movie projectors and movies, gave up on trying to market 4k projection to consumers.)  In the home, 4k may be viable but I don't think we will go beyond 4K. 

4K takes ~16mbps of bandwidth, but you need headroom so you actually need 20mbps.

4 streams of 4K would require 80mbps Internet.  Once DSL catches up, cable won't have much of a technical advantage.

 

*Netflix recommends 25mbps Internet for 4k/ ultra HD.  https://help.netflix.com/en/node/306  So maybe consumers with a 4+ person household might want 100mbps Internet.

 

I don't know enough about wireless to understand whether or not that much bandwidth is easily feasible.

[giofranchi]

oddballstocks,

 

Fiber is not the matter here (I guess we all might agree on the fact fiber is superior to cable), the matter is "the laying down of a fiber infrastructure"... Even if you have a slightly better technology, how do you compete in business with people who don't have such a huge cost? Easy answer: you don't.

 

Another thing would be if the government were to pay for the new infrastructure, of course! And that's the regulatory risk we have talked about. Is it going to happen? I think no one knows.

 

Cheers,

 

Gio

[ItsAValueTrap]

Ultimately the question is where do the local governments get the money to overbuild fiber to offer all residents low cost broadband?  If it is being offered at a lower cost, would the local governments be willing to run these networks at a loss?  Are the taxpayers going to be willing to pay for the losses and provide the capital for the network buildouts from higher taxes? 

 

Looking at it differently... Charter with its rural footprint might have significant pricing power.  Some rural residents are willing to pay huge sums of money for Internet (e.g. look at the people paying for satellite Internet).

[giofranchi]

ItsAValueTrap,

I have not understood you view on DSL...

Could you please tell us how you see the strategic positioning of cable vs DSL?

 

Thank you,

 

Gio

[frommi]

I have fiber from Verizon (called FIOS).  Cable reliability and quality is terrible for data.  I would willingly pay more for fiber that's reliable compared to some experiences I've had with cable. 

 

The cable infrastructure I've used (in Ohio) was flaky at best.  It would drop packets like crazy and at times would suddenly disconnect. 

 

There's another problem with cable, the shared bandwidth issue.  Cable shares the same trunk lines, so at 7-10pm at night speeds are much slower than 2pm in the afternoon.  People are used to this.  I've heard friends comment "the internet's slow, must be a lot of people using it in the neighborhood"

 

Fiber doesn't have this issue, although I'm not sure they're still running fiber in the US.  Hopefully Google fiber will roll out nationwide.  I've been very satisfied with FIOS, have had it since 2005.

 

The problem cable has is the same as the problem copper has, they are metal wires trying to carry a signal.  The signal degrades the further you are from the hub or repeater.  There are also environmental factors that can influence connection issues.  Other signals interfere with copper, this isn't true with fiber.  Fiber is light pulses through glass strands.  There is no interference, can carry higher data loads, and can have much longer runs without a repeater.

 

Fiber is the way forward for bandwidth.  We just have legacy cable assets so we're using them.  It wouldn't surprise me if in 50 years the only way people receive data is wirelessly or via fiber.  And wireless is fiber.  Towers are connected via fiber runs.

 

I was a unitymedia/Liberty Global customer in germany with digital cable for some years and i can tell that all you posted may have been true for analog cable, but digital cable is like fiber. I had 64 (up to 100 MBit now available)MBit nonstop every time i tested and had 0 disconnects in ~5 years. Its a lot better and faster than DSL. I can`t see how that is not enough bandwidth for the coming decades.

[oddballstocks]

Cables/telcos have much to gain from prolonging the status quo for as long as possible. They've a great following in the investing community (including COBF) because of doing well for investors dividending away their earnings etc..

 

Yet at the same time with everything going the internet way (from youtube to Netflix to ...) there is groundswell of discontent in the consumer world thanks to speed/capacity/price (all poor - thanks to incumbent driven inertia) and the incumbents are seen more or less as villains. Netflix keeps growing only because it is $8 per month versus $80 of cable. In the recent FCC spat over Net Neutrality, there were 4 million petitions from consumers basically summed up by John Oliver as "cable industry fuckery".

 

There is so much confusion going on in this whole cord cutting discussion.

 

By the way: Do you know why the cable bill is $80 a month? Mostly because of content cost. Do you know that ESPN is being payed +$20 per household by the cable cos and only 20% of the people would be willing to pay this amount If they had a choice?

 

Pure broadband has better margins. Of course earning lower margins with cable TV is better than earning nothing. This is why cable cos try to keep the bundle. But cord cutters are a much smaller threat to cable companies than most people think (and a much greater threat to content companies like Disney).

 

I think the biggest threat is if these companies are viewed as utilities and other cities catch on like Chattanooga.  Chattanooga is offering gig fiber connections to all residents for $70/mo.  I pay $60/mo for 50 Mbps in Pittsburgh.  I would love to see the local government offer fiber to all residents at lower cost.  I think people are going to start to view broadband the same way they view water or electricity.

 

I think cable can approach (and potentially exceed) those speeds (~1gb).

 

Where I'm at Verizon offers 500/500 as their max, Comcast offers 150/50 as their top offering. 

 

A simple Google search revealed this: Cable maxes out at 10 Gbps, no one knows the top limit of fiber, it hasn't been reached yet.

 

Seems crazy that we'd ever need more than 15 Gbps, but then again 15 years ago most of the country was satisfied with DSL at 768Kbps as well.  Now most customers are demanding internet 25-50x faster.  If the trend holds we'll be demanding internet at 1.2Gbps to 2.5Gbps in 15 years.

 

As someone else noted the value is in the pipes, I would be concerned if I owned a content creation company.  That's who gets hurt when customers cut the cord.

[oddballstocks]

Over a single fiber 255 terabits: http://www.extremetech.com/extreme/192929-255tbps-worlds-fastest-network-could-carry-all-the-internet-traffic-single-fiber

[dwy000]

There's no question that fiber is much better than cable.  The real question is who is willing to pay to lay new fiber to the home.  Google did it in a couple of cities where they had municipal support but has since slowed down deployment.  AT&T has effectively slowed down their rollout.  Verizon has finished their rollout.

 

The irony is that when the FCC classified internet under Title II it was under the guise of promoting competition and net neutrality.  But it also gives FCC the ability to regulate service and price.  What company is going to risk spending billions to lay new fiber to customers with the risk that the FCC turns around and limits the price they can charge or requires them to share the network with competitors in the name of competition?  By promoting competition, the FCC may have done the opposite in the long run. 

[ItsAValueTrap]

ItsAValueTrap,

I have not understood you view on DSL...

Could you please tell us how you see the strategic positioning of cable vs DSL?

 

Thank you,

 

Gio

 

I think most consumers will be satisfied with 100mbps Internet.  Right now, there isn't anything that needs more bandwidth.  Once we hit that point (many ISPs already offer 100mbps Internet), prices and profitability will come down.  Anything that is transistor-based will likely follow Moore's Law and see its price drop in half every 2 years or so. 

 

The cost of installing cables will still be high (digging, labour, etc. don't involve transistors or computer chips).  Cable might have economics similar to railroads.  Other companies can come in and overbuild your infrastructure and compete with you; however, it mostly doesn't make sense to do so unless your profitability is too high.  (Also Verizon is currently doing this with fiber.)

 

Here's an old blog post of mine on what happens when technology is good enough:

https://glennchan.wordpress.com/2014/10/04/what-happens-when-technology-is-good-enough/