FCC Moves on Frontier and the Internet

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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

FCC Moves on Frontier and the Internet

So the FCC set the clock on the Charter-TWC merger. Part of the order explains how confidential information will be handled. (This is not the first merger with confidential company info.) The two Republican Commissioners on the FCC are complaining loudly -- as they have over every order passed by this Commission. FCC Commish Ajit Pai is often belittling the FCC CHair and his decisions publicly.

"O'Reilly said that the FCC's decision "creates vast exposure for communications providers' market sensitive information, including pricing and other contractual terms," writes the cable news site MultiChannel.

We live in a pretty transparent world, where privacy is a fancy notion. Pricing and contracts -- even those signed in blood under NDAs -- are known by those that care to find out. There isn't much secrecy. The AT&T-DirecTV merger had as much secret info about content deals as TWC.

In the end this is just another case of inside baseball, where the DC Republicans will make noise about every Dem move- and vice versa. It is just noise, followed by lawyers keeping themselves busy. Annoying really. They should all be sent home without pay - wipe the slate clean - and pick new people.

"The Federal Communications Commission (FCC) has granted approval to Frontier Communications to go through with its acquisition of Verizon's local wireline, broadband and video operations in California, Florida and Texas." [cwa]

Meanwhile "Frontier Using $6.6 Billion in Junk Bonds to Fund Verizon Deal". Rob Powell declares it "expensive money" as Frontier bonds are paying between 8.875% and 11%. Where can you get that return?

The big worry is the leverage. An increasing amount of debt - expensive debt - does not pair well with flat revenue. Frontier's market cap is $6B -- what they are paying VZ for 3 states, after paying $2B for Connecticut. With just $5B in revenue and already almost $10B in debt, can you say over-leveraged?

Broadband is the key for the Duopoly. The copper lines are declining revenue for most ILECs, although Frontier does offer some unique value to its landline customers with SMS and other benefits. Will there be enough CAPEX to compete for broadband and commercial services?

Cablecos offer faster broadband speeds. People think that means everything. In pockets of every network are customers who can't get reliable service or the advertised speeds. In CT, where Frontier acquired AT&T's old SNET assets, Comcast's network is no great shakes according friends and family in CT.

In an interview, Frontier's CEO said that TV would be the fourth pillar to grow on. After this latest merger they will have 1.5 million TV customers. That is TINY! VZ will be left with about 4 million -- and that is on the small end. AT&T with DTV has about 27mill, which makes them comparable to Comcast. Tough to leverage just 1.5m subs in TV.

Like every other RLEC, Frontier is banking on a shift to broadband and commercial accounts. We will see how that plays out.

Another FCC hot potato is the Title II Internet Regulation, that the court will hear arguments in December. The opposition talks about stalled investment due to these regulations. Well, having been a watcher of the FCC policies since 2000, they say that every time and even when the rulings are favorable, there isn't a bumper crop of investment either.

If the RLECs and ILECs spend the CAF money as promised, millions of more homes will have broadband access available. (It won't mean that they will buy it.) And there are a number of ISPs of all flavors putting fiber in the ground for FTTH; fiber to the MDU (apartment buildings, condos, etc, especially in NYC, like Stealth Networks, and on the Gulf Coast, like Wavefly, MaxxSouth, C Spire and others are doing); and fiber-to-the -business in the form of multi-tenant buildings. Most of this fiber going in the ground is bootstrapped!!! Most ISPs are not using government funds to do it. Sothat poo-poos that whole argument.

Side Note: TDS is hitting 25% of its markets with fiber. Google announced more cities.

This isn't 2000. It is 2015 where putting fiber in is down to $700 per home passed according to the finance folks at Verizon. So why would investment be an issue?

Also, the cablecos are shifting away from video, as these companies finally acknowledge that cord cutting is real and their current business model is going to blow up soon.

The RLECs had to shift with USF Refrom. It is broadband that the USF (and CAF) care about now; not voice or access lines.

The rural MSOs had a wake up call in the form of the satellite guys cherry picking the top TV subs which made upgrading the network very difficult.

Most households just want ultra-fast, reliable broadband to power the tablets, gaming consoles, smartphones, Rokus, Apple TVs and Amazon Echo. Netflix, Hulu and other streaming services are replacing cable TV. It is all about Internet. Investment will have to follow because it is a race for broadband customers and revenue.

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