Jump to content

LMCA - Liberty Media

ItsAValueTrap

By ItsAValueTrap
in Investment Ideas

 Share

Recommended Posts

  • Replies 1.3k
  • Created
  • Last Reply

Top Posters In This Topic

Popular Days

Top Posters In This Topic

Popular Days

Posted Images

txlaw Newbie

txlaw

Posted
Posted

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.

 

I no longer have my ears to the ground in these matters, so to be frank, I have no idea what the compromise position might look like.  If anyone is making a bet that will be heavily dependent on what the regulatory framework looks like going forward in the US, they probably need to talk to regulatory counsel or political insiders (or both).  Or partner with sophisticated folks like Malone who have access to those people and will make optimal decisions based on the probabilities.  (Of course, you also have to remember not to pay too high a price, even for Malone.)

 

Having said the above, I'll make some comments. 

 

At first, full blown Title II re-classification seemed unlikely because there didn’t seem to be a desire to do that on the part of the FCC.  Wheeler was actually talking about a “hybrid" solution prior to Obama getting involved, where the consumer side would remain a service not regulated under Title II, but where the edge provider side would be regulated under Title II.  This would have the effect of preventing Comcast-type shenanigans that force app/content providers (like Netflix) into expensive agreements with Comcast that would inherently favor Comcast content/app services over edge providers (by bumping up edge provider costs unnecessarily).  However, the “hybrid" solution would NOT prevent paid prioritization (the so-called “fast lane”), at least in some circumstances. 

 

Which is probably why Obama decided to throw out the bombshell.  He probably wants: (1) to push the hybrid plan further towards the consumer/small biz advocate side; and (2) to stir up an issue that will energize younger voters for the next Presidential election, which is when those people will re-appear to actually vote.  If the hybrid approach is taken by the FCC, I would think that paid prioritization would only be allowed for special cases where the nature of the service requires prioritization for the end user to have a quality level of service. So, for example, video conferencing where very low latency is desirable.  I wouldn’t expect Netflix to be able to prioritize their video content over no-name video provider (at least not directly using the ISP).  That sort of prioritization was on the table until the outcry from the summer was backed up by Obama this week.

 

Note that it’s not entirely clear that the above-described hybrid approach is even permissible under the law, and that there wouldn’t be a number of legal challenges to that approach brought on by the telcos/cablecos (because of the very circumscribed paid prioritization).  So maybe Wheeler and Co will go with the cleaner solution and re-classify everything as Title II services, letting the fight go both to the courts and to Congress.  This would be Obama’s preferred approach, as the GOP will essentially be forced into proposing legislation rolling back “net neutrality” and “government interference."  That roll back would probably look something like the hybrid approach that allows for much broader paid prioritization. It'll cost them politically, though.

 

I bet VZ is now regretting having filed suit to throw out the Open Internet Order rules.  They set the industry up for a real fight now that could result in much more specific (and possibly onerous) rules being promulgated.  This is going to be fun.  I think all you guys can tell which side of the fight I'm on. ;D

Link to comment
Share on other sites
txlaw Newbie

txlaw

Posted
Posted

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.

 

As to how what I said in my last post may affect cableco ROI, I think that what I described could mean that: (1) cablecos won't be able to increase the data transmission costs for OTT video services in a way that makes them less competitive to their own video bundles; and (2) paid prioritization as a revenue stream may be less than they hope.

 

The first part decreases the cable moat re: the video bundle.  For example, Netflix will remain substantially more cost effective with a high quality of service than most cable packages. 

 

The second part means that the cablecos will have to rely even more on pricing power vis a vis consumers, since they won't be able to shift part of the financial burden for broadband service to edge providers.  All things being equal, I think that cable would love to shift some of the financial burden onto edge providers in order to maximize subscriber stickiness.  But now the price increases could fall almost completely on the end user, and nobody really knows what the breaking point is there in terms of creating subscriber loss.

Link to comment
Share on other sites
Liberty Newbie

Liberty

Posted
Posted

Investor day today. Audio will be available later (or you can jump on the stream right now -- depends when you're reading this), but if you want a quick overview, BluegrassCapital has been live-tweeting it:

 

https://twitter.com/BluegrassCap/with_replies

 

Update: Presentation has been uploaded to the site:

 

http://files.shareholder.com/downloads/ABEA-4CW8ZW/3648824773x0x795676/f8abe262-838a-4326-971c-fed7c8a6cdfe/LIBERTY%20MEDIA%20-%20LIBERTY%20BROADBAND%202014%20IR%20SHOW-N.pdf

 

 

Link to comment
Share on other sites
ni-co Newbie

ni-co

Posted
Posted

If you want to download the audio of the investor day presentation, here it is, in all its 2-hour glory:

 

https://www.dropbox.com/s/qvy1rne4g12eh4c/2014-nov-investor-day-LMCA-LBRDA.m4a?dl=0

 

Thank you, Liberty! That is great! :)

 

Gio

+1 Thank you!

 

My favorite moment is right towards the end (around the 1h:55 mark):

 

- Craig Moffett: "If the Comcast deal fell through for some reason, would you resume your pursuit of Time Warner Cable?"

- Malone: "Hell, yes!"

 

Got to love your Dr. Malone.

Link to comment
Share on other sites
Liberty Newbie

Liberty

Posted
Posted

Here's a presentation on the Malone complex by Kevin Byun:

 

http://www.valuewalk.com/2014/05/john-malone-complex-study-financial-brilliance/

 

Would be eternally grateful if someone had just the PDF, out of that horrible Scribd site. There's a link to the 2013 version in there, but not the 2014. TIA.

 

Also, Kevin Byun talks a bit about Malone in this issue of G&D http://t.co/fpNXhlpcaz

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share
Go to topic listing


×
×
  • Create New...