Last Friday I said that we'd know the answers to a few strategic questions once the official 700 Mhz auction intent to bid forms were filed at the FCC on Monday. One question, whether cable is going to pursue wireless in a big way, has been answered in the negative...with the exception of Cox.
The other question about whether AT&T will buy DBS provider EchoStar, has also seemingly been answered in the negative. According to the WSJ, both EchoStar and AT&T plan to bid for the spectrum separately. Under the FCC's anti-collusion rules, the two companies can't really talk about much of anything until the auction has ended, which won't occur until late-spring at the earliest.
I seriously doubt if AT&T were interested in buying EchoStar it would wait until then. For one thing, why would it do that? If EchoStar were such a great asset, wouldn't AT&T snap it up before intervening events scuttle the deal?
More importantly, however, a merger between AT&T and its main video partner would spark more than usual antitrust scrutiny and possibly FCC attention. Approvals of the deal would drag on into 2008 when...a Democratic president could likely occupy the White House. Democrats don't usually like media consolidation and any AT&T-EchoStar merger deal would face tough sledding.
Given all this, don't look for an AT&T-EchoStar merger any time soon.
Update: Forbes has this discussion about how puzzling it is that EchoStar would bid in the first place. The ailing DBS provider won't have the capital to build out wireless networks and if the company hopes to gain only a small slice of the spectrum, what would it do with it? Spectrum is valuable and EchoStar could sell it, but it's unlikely that it could happen quickly.
Posted by Cynthia Brumfield at 7:00 PM | Print | Comments (0)I thought it was really weird that Comcast hadn't -- until this afternoon -- issued a press release about its participation in the UBS Media Week confab tomorrow (very silly but I actually thought that this multibillion dollar corporation forget to issue a press release just as I forget to do things...). But, based on the press release that Comcast finally did issue this afternoon after the market closed, I know now that Comcast was sitting on some bad news for as long as it could.
The nation's top cable company is downgrading its earlier projections for 2007. It will far short on revenue generating unit (RGU) growth by about 500,000, meaning that it is either losing more customers in Q4 than it expected or it is failing to gain as many new customers as it had hoped. Comcast had earlier expected to add 6.5 million new RGUs for the year; now it says it will only add 6 million of these individual subscriptions.
As a consequence, cable revenue growth for the year will be 11%, and not the earlier hoped-for 12%, while cable operating cash flow will grow by only 13% instead of 14%. Adding insult to injury, Comcast's capex for the year will come in at $6 billion due to higher set-top costs, 5% higher than expected, squeezing free cash flow, which will end up about 80% of what Comcast generated in 2006, instead of 90%, which the company earlier predicted.
I don't remember a time when Comcast downgraded guidance and I've been following the company for longer than I care to admit. In fact, as late as October 25 when it issued its last earnings report, Comcast reaffirmed its 2007 guidance, although it did note that "the more competitive environment and less-robust economy may have a slight impact on our full year operating results."
Given the company's surprisingly sluggish performance during Q3, the downgrade isn't really a surprise. But there can be no arguing that the cable industry, forever in my mind guaranteed to grow, if not in terms of market share then in terms of financial performance and market cap, has entered a new era of diminishing expectations.
And one other thing the press release mentions. Michael Angelakis, Co-Chief Financial Officer will be speaking at the UBS event tomorrow.
Posted by Cynthia Brumfield at 5:39 PM | Print | Comments (0)Business Week has this piece today that talks about "another sudden shift" at Verizon Wireless: the mobile carrier will support Google's open mobile software platform Android. In fact, as I suspected, Verizon's about-face on open access is not really as sudden as you might think.
While conspiracy theorists see Verizon's new game plan as a clever way to actually rip somebody off (consumers? application developers? regulators?), Verizon Wireless CEO Lowell McAdam simply read the writing on the wall and saw that openness is not only inevitable, but it also makes good business sense. For one thing, the current closed model costs a bundle in capital charges when carriers subsidize the handsets. Going to an open model simply foists the costs of acquiring customers onto other companies or even, as is the case in Europe and Asia, onto consumers.
And Google opened up the Pandora's box anyway with its Android platform. The open train was coming whether Verizon liked it or not. Verizon, however, liked it and appreciated that Android would foster thousands of applications that would otherwise not exist. "Android really facilitated this move,"McAdam says.
It's true that Verizon will probably figure out a way to make a buck with its new open platform that will justify the current skeptics. But openness in the U.S. mobile marketplace has been inevitable for a long time. Verizon is merely accepting the inevitable.
Posted by Cynthia Brumfield at 12:32 PM | Print | Comments (0)WiMax, once a promising technology heavily promoted by Intel as the next big thing, is DOA in the USA. Sprint Nextel, the biggest U.S. telecom proponent of the broadband wireless technology, is quickly unraveling its commitment to WiMax in the wake of former CEO and big WiMax booster Gary Foresee's ouster.
Last month the company undid a partnership it had with Clearwire to roll out WiMax technology across the U.S. And yesterday, acting CEO Paul Saleh told attendees at UBS' Global Media and Communications Conference (webcast here) it may spin off its WiMax service altogether, finding investors to help foot the $5 billion cost of constructing the new networks.
Are we just a hop, skip and jump away from Sprint ultimately deciding to scrap WiMax altogether? Is the company conditioning Wall Street and the press for an ultimate abandonment of WiMax? I think so. The company says it will announce its WiMax plans early next year.
WiMax isn't dead on a global scale, however. Cisco and Motorola are pursuing the technology for nations that don't already have built-in 3G or 4G mobile infrastructure. In the U.S., however, carriers are opting for other broadband wireless technologies such as long term evolution, or LTE, the choice of Verizon Wireless.
Posted by Cynthia Brumfield at 10:28 AM | Print | Comments (1)Everybody in the media, entertainment and communications world must read this essay by the LA Times' Patrick Goldstein. Goldstein discusses why the Writer's Guild strike has gone on so ridiculously long and it is this: nobody knows the value of anything anymore.
The real problem that keeps the studios and writers from forging a compromise is that the value of intellectual property in general, whether it's music, TV shows, movies, Interent videos or even art, is up for grabs these days. As Sony Pictures Chairman Michael Lynton says
If no one has a clear understanding of what entertainment is worth, then no one really knows what they're negotiating about.
The Internet has undermined "a long-held consensus over the value of information and entertainment" and it's almost impossible to assign reliable values to web-based entertainment efforts. I know this all too well because that's what I do and increasingly it's really, really hard to size the market, make projections or even come up with a coherent framework for calculating anything. It never used to be this difficult.
What's daunting is film producer Michael Shamberg's prediction that there will be "300 different economic models for different kinds of entertainment." That's almost like saying there will be no economic model at all, that the formula for financial success on the Internet is always idiosyncratic, a chaotic state that analysts like me can't analyze.
I don't think that's the case (but I admit I fear it might be). Sooner or later everyone will adapt to the radical new shift in entertainment that the Internet has created. It's just that right now, at this point in time, the world hasn't caught up with the challenges of making money in this new open and uncontrolled landscape.
Posted by Cynthia Brumfield at 9:49 AM | Print | Comments (0)Every year, the Federal Communications Bar Association (FCBA) hosts a charity fundraiser called the Chairman's Dinner, in honor of the sitting FCC Chairman. The FCBA's dinner is slated for tomorrow night and the honoree is Republican Chairman Kevin Martin.
Typically the dinner is a somewhat fun affair for communications policy wonks and lawyers (or at least as fun as these events can get), with the Chairman serving as a good-natured foil for some inside-the-beltway parodies. It's more of a roast than anything else, with the Chairman willing to engage in self-deprecating humor for a good cause.
However, this year Martin might have a more difficult time mustering the bonhomie. Not only is he coming off a brutal, botched and much-delayed Commission meeting last week, his fellow Republicans are ticked off at his attempts to regulate cable and now, it seems, Democrats are angry about how Martin is running the agency.
In preparation for an oversight hearing tomorrow, Rep. John Dingell (D-MI), chairman of the House Energy and Commerce Committee, sent Martin a letter yesterday accusing him of abusing his power and questioning whether his leadership has led to "a breakdown in proper procedure at the FCC." Dingell claims that Martin has been "short-circuiting procedural norms," referring to Martin's attempts to withhold information from fellow commissioners about important FCC agenda items, and asks Martin to commit to procedures that will ensure other commissioners receive adequate and information about important matters.
Dingell sent the letter in part because Congress is always yanking the chain of the FCC Chairman but also because Rep. Bart Stupak (D-MI), who chairs the Commerce Committee's Subcommittee on Oversight and Investigations, claims to have heard complaints about the Chairman. In a statement, Stupak said
I have received several complaints from the public and professionals within the communications industry about how chairman Martin is conducting business at the FCC. It is one thing to be an aggressive leader, but many of the allegations indicate possible abuse of power and an attempt to intentionally keep fellow commissioners in the dark.
Unlike the Republican disillusionment, this latest attack on Martin is not likely spurred by cable industry lobbyists. Dingell and Stupak are not known as friends of the cable industry. Martin, it seems, is just a hated guy.
It's hard to see what Martin will joke about tomorrow night. At last year's dinner, which was held in April 2007 because Martin delayed it by four months, he revived a complicated joke about the "KGB-like atmosphere at the FCC," a poke at himself for being too controlling. Let's hope Martin has hired some good joke writers because this year that bit of humor will surely fall flat.
Posted by Cynthia Brumfield at 7:42 AM | Print | Comments (0)
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