What to Do with DirecTV?

I honestly have no idea what AT&T might eventually decide, regarding its DirecTV holdings, with one exception. I cannot conceive of AT&T giving away the free cash flow that asset represents. One way of looking at matters is the free cash flow from DirecTV funds 93 percent of AT&T's dividend, for example. 

For that reason, all speculation about AT&T divesting DirecTV has seemed to me a non-starter.  But one way of restructuring, such as combining DirecTV in some way with Dish’s video assets,  

Private equity firm Apollo Global Management has proposed that AT&T spin out DirecTV into a new entity that combines Dish and DirecTV assets and leaves AT&T as the controlling entity. 

At least in principle, that would leave open the ability to use cash flow to support dividend payments, debt reduction or share buybacks, while further deleveraging AT&T. 

There are regulatory and deal risks. Charlie Ergen, Dish chairman, is a notoriously difficult negotiating partner. On the other hand, Dish’s future as an independent entity does hinge on harvesting satellite video while building an entirely new revenue model. So maybe Ergen’s incentive is higher than ever. 

But, all things considered, it seems to be the barriers are high to the status quo. Yes, the linear business is shrinking, so replacement revenue sources are necessary. But AT&T has been through this before, as it harvested its declining long distance calling business to invest in new lines of business. To be sure, that effort might be deemed a failure. After all, AT&T sold itself to what was then SBC, which rebranded itself as AT&T. 

But one might argue that failure was one of execution, timing and perhaps luck. Linear satellite television will go the way of long distance voice, eventually. The issue is how to wring value out of that asset (advertising and support for the streaming business) as that process unfolds. 

Fiddling with the ownership structure, or attempting a big merger with Dish, might make more sense were AT&T not committed to being a force in consumer media services. 

The Next Big Thing Will Have Been Discussed 30 Years Ago

The “next big thing” will have first been talked about roughly 30 years ago, says technologist Greg Satell. IBM coined the term machine learning in 1959, for example.

The S curve describes the way new technologies are adopted. It is related to the product life cycle. Many times, reaping the full benefits of a major new technology can take 20 to 30 years. Alexander Fleming discovered penicillin in 1928, it didn’t arrive on the market until 1945, nearly 20 years later.

Electricity, did not have a measurable impact on the economy until the early 1920s, 40 years after Edison’s plant, it can be argued.

It wasn’t until the late 1990’s, or about 30 years after 1968, that computers had a measurable effect on the US economy, many would note.

source: Wikipedia

The point is that the next big thing will turn out to be an idea first broached decades ago, even if it has not been possible to commercialize that idea.

OTT as Effective Competition

With the widespread adoption of streaming video services, it was inevitable that change would come in the area of video services regulation. The U.S. Federal Communications Commission now will consider whether the AT&T DirecTV Now service is effective competition for standard cable TV linear video service, according to the Telecom Act of 1996. 

In the larger scheme of things, the decision is narrow, and means local franchise authorities in a few locales cannot regulate basic cable rates. That has been true generally, in most U.S. markets, for some time. As this chart by eMarketer shows, the linear streaming alternatives operate in a different segment of the market from the “on demand” streaming services. 

Up to this point, the on-demand services have generated more revenue, but live streaming (linear streaming) is gaining share as well, and is an alternative to standard cable TV or satellite TV packages. 

source: eMarketer

The proposed ruling by the FCC  matters for cable TV companies in general and Charter Communications in particular because local franchise authority rate regulation is not imposed when such competition exists. 

That likely ultimately also would be true of competition from other linear streaming services as well, which might offer scores of “live broadcast” video channels, although the specific finding in this instance is that DirecTV Now is relevant under clauses of the Telecommunications Act of 1996 that seek to promote video competition between telcos and cable TV companies. 

Services focused on “on demand” video, such as Netflix or Amazon Prime, presumably would not qualify, for purposes of determining applicable rate regulation, as they do not offer scores of live TV channels. 

Any determination by the FCC would not have wider implications, as effective competition has been deemed to exist in nearly all U.S. markets for decades. 

source: Grandview Research

Linear Streaming to be Deemed an Effective Substitute for Cable TV

With the widespread adoption of streaming video services, it was inevitable that change would come in the area of video services regulation. The U.S. Federal Communications Commission now will consider whether the AT&T DirecTV Now service is effective competition for standard cable TV linear video service, according to the Telecom Act of 1996. 

In the larger scheme of things, the decision is narrow, and means local franchise authorities in a few locales cannot regulate basic cable rates. That has been true generally, in most U.S. markets, for some time. As this chart by eMarketer shows, the linear streaming alternatives operate in a different segment of the market from the “on demand” streaming services. 

Up to this point, the on-demand services have generated more revenue, but live streaming (linear streaming) is gaining share as well, and is an alternative to standard cable TV or satellite TV packages. 

https://www.emarketer.com/content/us-subscription-video-landscape-2019

The proposed ruling by the FCC  matters for cable TV companies in general and Charter Communications in particular because local franchise authority rate regulation is not imposed when such competition exists. 

That likely ultimately also would be true of competition from other linear streaming services as well, which might offer scores of “live broadcast” video channels, although the specific finding in this instance is that DirecTV Now is relevant under clauses of the Telecommunications Act of 1996 that seek to promote video competition between telcos and cable TV companies. 

Services focused on “on demand” video, such as Netflix or Amazon Prime, presumably would not qualify, for purposes of determining applicable rate regulation, as they do not offer scores of live TV channels. 

Any determination by the FCC would not have wider implications, as effective competition has been deemed to exist in nearly all U.S. markets for decades. 

source: Grandview Research

How Important is Internet Access? More than Partner or Pet?

Okay, this is sort of light-hearted, but a survey suggests about half of U.K. residents think a reliable internet access connetion is more imporrtant than their significant other. About 70 percent believe reliable internet is more important than the family pet. 

Mobile Operators Get Into Single Sign-On with ZenKey

Single sign-on is a feature lots of consumers routinely use, in part because password management now is so difficult. U.S. mobile operators, though arguably late to the game, now plan to launch their own single sign-on service, called ZenKey. To be sure, the carriers tout the advantages of multi-factor authentication, including sources such as phone number, account type, user credentials, account tenure and subscriber identity module details. 

On the other hand, ZenKey will have to compete with Apple, Google, Facebook, Twitter and LinkedIn as providers of single sign-on features. On the other hand, ZenKey is among the most-logical ways to use data stores mobile operators possess. 

The Mobile Authentication Taskforce--AT&T, Sprint, T-Mobile and Verizon--will announce the ZenKey in October 2019. 

The foray into password management might hinge on whether it is as easy to use as the other single sign-on services, or perhaps easier, if that is possible. Whether consumers believe the story about multi-factor advantages is another obvious issue. Also, we might get a test of how much trust consumers have in their mobile service providers, compared to the other big brand names in the space. 

source: Techtarget

DirecTV Funds 93% of AT&T Interest Payments

Cash flow is the issue and the rationale for the original purchase of DirecTV by AT&T. That remains the case, despite subscriber losses across the linear video ecosystem and the satellite delivery segment. Some might prefer that AT&T divest DirecTV assets, but there are big cash flow implications. And that, in the end, is the crux of the matter. 

AT&T has huge free cash flow requirements, to support its dividend and reduce debt loads. It was never clear to me what else AT&T might have done--instead of acquiring DirecTV--to grow its cash flow fast. 

The big attraction for any sale of the DirecTV assets is lower debt, but at the cost of lost cash flow. DirecTV might throw off about $6.3 billion in annual free cash flow, assuming DirecTV U.S. revenues of $27.5 billion and profit margins of 23 percent, translating into an EBITDA (cash flow) of about $6.3 billion.

Keep in mind that AT&T’s total interest obligations annually are about $6.8 billion. In other words, DirecTV cash flow funds abut 93 percent of AT&T’s total interest payments.  

source: Forbes

How Attractive is 5G Fixed Wireless?

How attractive is 5G fixed wireless as a substitute product for existing fixed network internet access? Substantial, according to a new Parks Associates survey. 

According to Craig Leslie, Parks Associates senior research analyst, "once the technology is explained to them, almost half are interested in replacing their fixed-line internet service with 5G home services."

As always, consumers say they will take certain actions, and then do not; or say they will not do some things, and then do them. So it is difficult to make too-certain predictions about consumer behavior related to 5G fixed wireless, when consumers are not required to consider price, retail packaging and other elements of service. 

On the other hand, substituting 5G fixed wireless for fixed network service does not require, as does 5G mobile phone service, investing in new handsets with substantial costs. In all likelihood, the effective cost of switching fixed internet access service should be minimal, if, as expected, ISPs make customer premises gear available at low recurring charges, at subsidized prices and in ways familiar to consumers. 

Demand for mobile 5G service likewise seems relatively high, with the caveat that respondents likely were not told they would have to buy new smartphones to use 5G, and in various price ranges possibly up to $1000 or more. 

That noted, more than 33 percent of U.S. broadband households (perhaps 80 percent of all homes) cite some level of familiarity with 5G and over 40 percent of U.S. broadband households are interested in 5G, according to Parks Associates. 

Ultimately, 5G will be used by nearly all consumers, as 4G now is. 

source: Parks Associates

Only 13 percent of respondents reported they would pay higher fees for 5G service, which is not a surprising finding, nor necessarily indicative of actual future behavior, once the concrete value propositions are commercial realities. 

And that transition could come fairly rapidly. According to Parks, 20 percent of broadband households bought at least one new smartphone in the first quarter of 2019. At that rate, a substantial opportunity to introduce 5G devices exists, once the networks are more developed, the supply of handsets is diverse and value propositions clearer.

What is DOCSIS 4.0?

Cable TV operators believe their hybrid fiber coax networks can keep increasing bandwidth. DOCSIS 4.0 supports 10 Gbps speeds. 

U.K. Connectivity Service Providers Score Poortly for Customer Service

Telecom service providers tend to score among the worst U.S. industries for customer satisfaction. Apparently, things are similar in the United Kingdom.  U.K. consumer product reviewer Which? Found that three of the five firms ranked worst for customer service in 2019 are connectivity service providers.

Mobile provider 02 did rank in the top half, however. 

source: Which?

What Will be Distinctive about 5G?

In a nutshell, the key to profitable 5G deployment is to invest as though the value is bandwidth reinforcement for 4G, in areas of greatest need, without all the futuristic stuff, so cost is contained. 

That overlay approach would focus 5G investment on cell site coverage areas where there is greatest demand, using dynamic spectrum sharing and other tools to gradually introduce 5G on a network-wide basis. That allows 5G investment to happen largely within existing capital budgets. 

Still, the new platform creates the foundation for distinctive new use cases that are virtually certain to emerge. 

That has been the case for every prior mobile generation. Where the lead app for analog mobile was simply voice “on the go,” for business users and well-heeled consumers, 2G added text messaging. 

source: Qualcomm

The 3G network added mobile web access and mobile email. The distinctive 4G experience is the ability to consume video. It is not clear what might emerge in the 5G era for consumer apps. Most observers believe enterprise apps and internet of things (machines talking to machines) will be distinctive features of 5G.

Jim Keller of Intel Says Moore’s Law is Not Dead

Jim Keller of Intel helped architect Athlon64 and Ryzen processors. And he says Moore's Law can continue.

Maybe Moore's Law is Not Dead

Maybe Moore’s Law is not dead. Jim Keller, an architect of Intel’s Athlon64 and Ryzen chips, believes that Moore's Law has not died. 

He said Intel currently has a plan to stack 50 times more transistors than it currently has in its processors. 

source: Intel

Non-Thermal Effects of Non-Ionizing Energy Have Not been Looked at

Up to this point, most studies of non-ionizing radio signals--either well done or not--have focused on thermal effects, as the specific difference between non-ionizing and ionizing radiation is tissue heating in the former case, potential cell or other damage in the latter case.

Non-ionizing energy can warm tissue, but cannot dislodge electrons from an atom or molecule, potentially causing genetic damage, as ionizing energy from X-rays and so forth can do. 

So far, research on non-ionizing energy has not focused on non-thermal effects. It bears watching, though, as always, it will be difficult to show that correlation is causation, there being no way to isolate the impact of all the various sources of energy exposure. 

All that said, prudent behavior is not a bad idea. Though we do not have conclusive evidence that using mobile phones is a hazard, and even if exposure levels in the mobile era have not increased,  it does not hurt to limit exposure to the extent feasible. 

Also, exposure levels in the real world are not the same as levels in some studies of non-ionizing radiation. Drinking water is essential for life. But drinking too much water can kill a person. The same general rule arguably applies to human exposure to all sources of non-ionizing energy in real life.

Linear TV Growing Everywhere but the Americas

Though linear TV subscriptions are going to keep falling in the U.S. and Canadian markets, subscriptions are growing in other Western Hemisphere markets, and likely will grow in many Eastern Hemisphere markets as well. Include streaming subscriptions and accounts will definitely grow in Asia Pacific markets. 

“Household penetration will continue to increase in all regions but APAC and the Americas, says Eulalia Marín-Sorribes, GlobalData technology analyst.

Still, the trend is clear enough: household linear TV penetration in the Americas is expected to decline from 53 percent in 2018 to 49 percent in 2023, says GlobalData.

In 2018, pay-TV household penetration in Central & Eastern Europe reached 71.2 percent, APAC 67.4 percent and Western Europe 62.5 percent. The global average stood at 55.3 percent.

source: GlobalData