LMCA - Liberty Media

[val740]

Malone said on the Liberty Media call that Tom Wheeler is a reasonable man and that he thought the issue would be worked out.

 

Malone has ended up on the wrong side of government regulation a lot of times.

 

*I own LBRDA and will gladly add on major dips.

 

Good point. In this instance it seems that his thoughts are in alignment with what I am reading regarding how this will play out.

[Fat Pitch]

I am biased, but:

 

- Notwithstanding the current state of our infrastructure and roads, I don't think the analogy is appropriate. And even if it was, then volume based pricing would make sense as that would analogous to tolls. I also wouldn't want to subsidize someone dl'ing and uploading movies 24/7.

 

- I don't believe that our internet is much slower than the rest of the world when you control for density and other factors.

 

You really want these monopolists to determine what internet traffic gets priority? This will kill startups since they cannot offer ransoms to the ISP. This will only further entrench Facebook, Google, etc. Take a look at Hong Kong, you got like 20+ ISP in some locations. The pipes are like roads, you make the initial outlay cost once and routine maintenance every decade or so. Of course the costs should be bore by the public. The losers will be the cable co investors, but I’m sure no one will shed a tear for them.

[Guest wellmont]

They should just force the pipes to be open to any ISP that wants to enter the market and become competitive. The internet is no different than public roads and it’s time for the government to enter this space. The economy is being more leveraged on the internet and it’s in the country’s best interest that this shouldn't be controlled by 2-3 for profit players. Take a look at other countries and notice how much faster bandwidths they have at the fraction of the cost.

 

they can do that now. only trouble is it's expensive, hard to justfy roi, and nobody but verizon att and google are really attempting it at scale. of course the gov could subsidize it like they do with Solar and we will have many more solyndras on our hands.

[Ross812]

Holding LMCA vs SIRI. Is the ~$8 of other assets (nols, braves, live nation, etc..) the reason to hold LMCA?

 

I was looking at the option spread again today and I misspoke on Friday.

 

The $3-$4 call spread captures a move in LMCA up to $41.15 (LMCA price with SIRI @ 4.14 (not $5 like I stated earlier)) and limits your downside to LMCA $29.80 (LMCA price with SIRI @ $2.74).

 

I was anticipating a bid for SIRI from Liberty again with the exchange thinking Malone wouldn't offer much over $4 for SIRI and the discount on LMCA would widen with an all stock offer.

 

 

[txlaw]

They should just force the pipes to be open to any ISP that wants to enter the market and become competitive. The internet is no different than public roads and it’s time for the government to enter this space. The economy is being more leveraged on the internet and it’s in the country’s best interest that this shouldn't be controlled by 2-3 for profit players. Take a look at other countries and notice how much faster bandwidths they have at the fraction of the cost.

 

they can do that now. only trouble is it's expensive, hard to justfy roi, and nobody but verizon att and google are really attempting it at scale. of course the gov could subsidize it like they do with Solar and we will have many more solyndras on our hands.

 

I think he's referring to opening up cable infrastructure for non-facilities-based providers.  Similar to what happened with ILECs and their copper.

 

That would not be good for the cablecos because I doubt a cost-based rate requirement would allow them to charge what they are going to attempt to charge for broadband access.

[Liberty]

Wheeler:

 

http://www.fcc.gov/document/chairman-wheelers-stmt-president-obamas-stmt-open-internet

[Guest wellmont]

They should just force the pipes to be open to any ISP that wants to enter the market and become competitive. The internet is no different than public roads and it’s time for the government to enter this space. The economy is being more leveraged on the internet and it’s in the country’s best interest that this shouldn't be controlled by 2-3 for profit players. Take a look at other countries and notice how much faster bandwidths they have at the fraction of the cost.

 

they can do that now. only trouble is it's expensive, hard to justfy roi, and nobody but verizon att and google are really attempting it at scale. of course the gov could subsidize it like they do with Solar and we will have many more solyndras on our hands.

 

I think he's referring to opening up cable infrastructure for non-facilities-based providers.  Similar to what happened with ILECs and their copper.

 

That would not be good for the cablecos because I doubt a cost-based rate requirement would allow them to charge what they are going to attempt to charge for broadband access.

that turned out to be mostly a disaster for CLECs. I know I was invested at the time. :) you know google was bringing real competition to the cable cos. and now I suspect they are going to pause. fixed wireless is also within 5 years of providing more competition as well. regulatory uncertainty will mean risk takers pause.

[txlaw]

They should just force the pipes to be open to any ISP that wants to enter the market and become competitive. The internet is no different than public roads and it’s time for the government to enter this space. The economy is being more leveraged on the internet and it’s in the country’s best interest that this shouldn't be controlled by 2-3 for profit players. Take a look at other countries and notice how much faster bandwidths they have at the fraction of the cost.

 

they can do that now. only trouble is it's expensive, hard to justfy roi, and nobody but verizon att and google are really attempting it at scale. of course the gov could subsidize it like they do with Solar and we will have many more solyndras on our hands.

 

I think he's referring to opening up cable infrastructure for non-facilities-based providers.  Similar to what happened with ILECs and their copper.

 

That would not be good for the cablecos because I doubt a cost-based rate requirement would allow them to charge what they are going to attempt to charge for broadband access.

that turned out to be mostly a disaster for CLECs. I know I was invested at the time. :) you know google was bringing real competition to the cable cos. and now I suspect they are going to pause. fixed wireless is also within 5 years of providing more competition as well. regulatory uncertainty will mean risk takers pause.

 

I don't think you can necessarily link CLEC problems to local loop unbundling.  There were a lot of other factors involved, including the switch to IP.

 

I doubt there will be a pause by potential fixed wireless providers and companies like GOOG.  The experiment to allow duopolies in exchange for more infrastructure investment has failed end users in the US for the most part.  I think it's a good idea to start treating ISPs like utilities.

[Guest wellmont]

the point is as soon as the gov starts to insinuate itself the whole thing changes anyway. because they are backwards looking. customers were not benefited by CLECs. it was a gigantic mess for everybody. and it became a moot issue because IP began making the copper loop obsolete anyway. just like they did with MSFT, when regulators tied their hands right at the time they needed them to be "free". so they could compete against the massive amount of competition just on the horizon that the bureaucrats failed to anticipate.

[txlaw]

the point is as soon as the gov starts to insinuate itself the whole things changes anyway. because they are backwards looking. customers were not benefited by CLECs. it was a gigantic mess for everybody. and it was moot anyway because IP began making the copper loop obsolete anyway. just like they did with MSFT, they tied their hands right at the time they needed them to be "free" so they could compete against the massive amount of competition the bureaucrats failed to anticipate.

 

It's certainly true that the government can mess things up if they go too far or act too late.  However, when the government fails to act completely, things are even worse.  This is an antitrust issue, after all.

 

I suspect the hybrid approach that the FCC is exploring will have the effect of making things a lot better for consumers, while leaving the development of Internet infrastructure mostly in the hands of the private sector.  The only difference will be that the monopolies in the last mile, who are also being allowed to capture profits via content acquisitions, will be reigned in.  Brian Roberts and Malone have had far too easy a time minting money and hopefully they'll get some real competition coming online through a more comprehensive and less archaic approach by the FCC.

[Guest wellmont]

so now you're google, and you see that us pres and FCC want to allow freeloaders to come in and use the infrastructure already in place. is that going to make google want to continue to invest in greenfield infrastructure projects or not? when it invested in fiber to the home before, it saw one real competitor: cableco. this statement dramatically changes the ROI calculus for goog. I suspect we may see a statement from them soon.

[Fat Pitch]

so now you're google, and you see that us pres and FCC want to allow freeloaders to come in and use the infrastructure already in place. is that going to make google want to continue to invest in greenfield infrastructure projects or not? when it invested in fiber to the home before, it saw one real competitor: cableco. this statement dramatically changes the ROI calculus for goog. I suspect we may see a statement from them soon.

 

Google has an interest in keeping the internet as an ‘all you can eat’ model.  If consumers are restricted on their usage, ad revenue will drop for Google. There’s a huge incentive to install fiber in the most populated areas and have everyone use the internet from Google’s POV.

[Guest wellmont]

again, goog invested under the OLD regulatory regime. it remains to be seen whether they will pause, continue, or cease investment if the regime changes to something like what they did with CLECs. their ROI calculus changes. they aren't just going to build with no ROI.

[txlaw]

so now you're google, and you see that us pres and FCC want to allow freeloaders to come in and use the infrastructure already in place. is that going to make google want to continue to invest in greenfield infrastructure projects or not? when it invested in fiber to the home before, it saw one real competitor: cableco. this statement dramatically changes the ROI calculus for goog. I suspect we may see a statement from them soon.

 

I don't think either Obama or the FCC has gone as far as to say that there should be unbundled network elements for cable.  Right now, they're just talking about net neutrality regs being put into place by reclassifying Internet service under Title II.  The key is giving the FCC the power to hammer the MSOs and telcos for what could be violations of the struck down open internet rules. 

 

Obama: "I believe the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act — while at the same time forbearing from rate regulation and other provisions less relevant to broadband services."

 

This is a good thing for consumers, especially since the FCC is foolishly letting the infrastructure providers also own or affiliate themselves with content companies.

[txlaw]

again, goog invested under the OLD regulatory regime. it remains to be seen whether they will pause, continue, or cease investment if the regime changes to something like what they did with CLECs. their ROI calculus changes. they aren't just going to build with no ROI.

 

Even if you believe this, there have been no proposals yet to force unbundling of infrastructure by cable cos and more.  The FCC probably won't go down this route. 

 

They will start imposing net neutrality rules, though.  Notably, the Obama statement talks about possibly applying net neutrality regs to interconnection points, which could be a big deal.  Because Comcast et al are refusing to upgrade interconnection points to drive business to their own CDNs (see, e.g., Netflix and Comcast dispute). 

[Guest wellmont]

^ that's why I am buying "cablecos" today. :)  ^

[Guest wellmont]

so now you're google, and you see that us pres and FCC want to allow freeloaders to come in and use the infrastructure already in place. is that going to make google want to continue to invest in greenfield infrastructure projects or not? when it invested in fiber to the home before, it saw one real competitor: cableco. this statement dramatically changes the ROI calculus for goog. I suspect we may see a statement from them soon.

re-code:

 

AT&T CEO Would Like FCC to Get Its Act Together

The current net neutrality debacle in Washington has given AT&T cause to reconsider its big fiber rollout. This according to CEO Randall Stephenson, who thinks it unwise to undertake that kind of capital expenditure under such a hazy regulatory horizon. “We can’t go out and invest that kind of money deploying fiber to 100 cities not knowing under what rules those investments will be governed,” Stephenson said. “We think it is prudent to just pause and make sure we have line of sight and understanding as to what those rules would look like.”

 

I suspect goog will say the exact same thing.

[txlaw]

so now you're google, and you see that us pres and FCC want to allow freeloaders to come in and use the infrastructure already in place. is that going to make google want to continue to invest in greenfield infrastructure projects or not? when it invested in fiber to the home before, it saw one real competitor: cableco. this statement dramatically changes the ROI calculus for goog. I suspect we may see a statement from them soon.

re-code:

 

AT&T CEO Would Like FCC to Get Its Act Together

The current net neutrality debacle in Washington has given AT&T cause to reconsider its big fiber rollout. This according to CEO Randall Stephenson, who thinks it unwise to undertake that kind of capital expenditure under such a hazy regulatory horizon. “We can’t go out and invest that kind of money deploying fiber to 100 cities not knowing under what rules those investments will be governed,” Stephenson said. “We think it is prudent to just pause and make sure we have line of sight and understanding as to what those rules would look like.”

 

I suspect goog will say the exact same thing.

 

Of course AT&T would say this.  It will be interesting to see what GOOG says.

 

Re: deploying fiber to the premises and ROI, reclassification as Title II service wouldn't mean no return for AT&T.  It's just that the returns would be capped.  So AT&T can claim that they have to stop deploying fiber due to regulatory uncertainty and the effects on ROI.  But that's just a red herring, IMO.  They really just want to make sure that broadband doesn't get reclassified under Title II, which will subject them to more hardcore regulation, and this is the beginning position they will take for the net neutrality fight.

 

The fight is finally ratcheting up, and there will be tons of BS spewed about -- that I can guarantee you.

[Guest wellmont]

ATT is not just "saying" it. they are speaking with their $$$. I said that the prez statement would cause confusion and investment to be put on "hold". that's exactly what is happening. getting into the minutia and the grimy details only gets you so far. Here's the big picture: the liberal establishment in DC just put greenfield bb investment in the us on hold. prez just hit the Pause button.

[txlaw]

ATT is not just "saying" it. they are speaking with their $$$. I said that the prez statement would cause confusion and investment to be put on "hold". that's exactly what is happening. getting into the minutia and the grimy details only gets you so far. Here's the big picture: the liberal establishment in DC just put greenfield bb investment in the us on hold. prez just hit the Pause button.

 

Yup, that's how it's going to be played by the telcos and cablecos in the short run. 

 

The thing, though, is that there is no "confusion" or risk of low ROI due to possible reclassification.  This is straight up negotiations between the broadband provider industry and the government (and Internet cos).  The telcos and cablecos are going to make sure that the GOP can say: look, all this regulation is causing underinvestment in broadband. 

 

We're starting on two opposite sides of the spectrum, and there will eventually be a compromise.  Obama is no dummy.  He needs to start way on the opposite side in order to meet the powerful telco/cableco lobby in the middle.

[val740]

ATT is not just "saying" it. they are speaking with their $$$. I said that the prez statement would cause confusion and investment to be put on "hold". that's exactly what is happening. getting into the minutia and the grimy details only gets you so far. Here's the big picture: the liberal establishment in DC just put greenfield bb investment in the us on hold. prez just hit the Pause button.

 

Yup, that's how it's going to be played by the telcos and cablecos in the short run. 

 

The thing, though, is that there is no "confusion" or risk of low ROI due to possible reclassification.  This is straight up negotiations between the broadband provider industry and the government (and Internet cos).  The telcos and cablecos are going to make sure that the GOP can say: look, all this regulation is causing underinvestment in broadband. 

 

We're starting on two opposite sides of the spectrum, and there will eventually be a compromise.  Obama is no dummy.  He needs to start way on the opposite side in order to meet the powerful telco/cableco lobby in the middle.

 

txlaw, what do you think the compromise position will be and how will it affect future ROI of cable businesses?

 

IMO, Malone and Brian Roberts' investment theses are based on an expectation to 1) preserve cable's moat on broadband and 2) pricing power.

 

 

[dwy000]

Maybe something along the lines of what the Verizon CFO theorized - a restriction against paid prioritization but not a full reclassification under Title II?

[ItsAValueTrap]

Isn't paid prioritization and "fast lanes" a good thing?

 

In my opinion, the problem is that the ISPs will be incentivized to extort companies like Netflix.  They will intentionally underinvest in their network so that Netflix will be slow.  If Netflix wants to get around this, it has to pay ISPs to create fast lanes for it.  Netflix will place their servers deep inside the ISP's network.  This reduces the overall infrastructure costs because the virtual distances from a Netflix server to the consumer is smaller.  However, the extortion part is that Netflix has to pay the ISPs money on top of paying for the infrastructure costs.

 

I don't know if there is an elegant way of preventing this extortion and the intentional underinvestment in ISP networks.

 

2- The argument for allowing fast lanes:

- Overall infrastructure costs come down.

- Allows for 4K video in the home.

- Allows for future applications such as better video calls, medical applications, services that require high QoS, live broadcasting over the Internet, etc.

[dwy000]

I think the general theory against it is that it will create fast lanes and prioritization for those who can afford it (ie. Netflix, YouTube, Amazon) to the detriment of all those smaller internet based companies who can't afford to pay for special access and therefore get much slower/spottier reception - which makes it even harder to compete with the big guys.  And you get to a point where the internet is controlled by those with the deepest pockets.

 

The other side of it is that ISP's can select who to prioritize or not and therefore punish or reward those at their discretion - again, giving them too much power and control.

 

But you're absolutely right, by eliminating prioritization you are effectively slowing everyone down to the same speed/quality of delivery so if you're a big Netflix user you might actually want it.

[dwy000]

By the way, now that LBRDA has been spun out, should we start a new thread for this?  I'm just conscious that Liberty Media is now basically Sirius plus some other smalle pieces and doesn't have any cable connection at all.