There were two large items in the news this week.
The first piece of news was hinted at last week. The FCC is in the process of re-regulating Business Services markets for Wholesale where there is not competition. On top of that Cable MSOs were included in the mix for this. I think this seems to make sense as regulation should be the strongest where competition is the weakest. One thing is that actually very few markets have competition to the level that will exclude them from this regulation. You can imagine it is only in the largest metropolitan areas where this is true. As a consumer, I think that this should be an ongoing signpost about regulation and the Internet. I would predict that in the long term we will be back to a fully regulate set of Internet Services the way that Telephone Companies are regulated. On top of that, technology will not be part of the equation: Cable, Copper or Fiber will all be treated the same. I would say at some point you can add wireless to that mix.
Before folks get hung up on Wireless, I want to point out that we have been spending a lot of money on installing new generations of equipment in a race. Now people are talking about 5G services sometime next year. 2G (the first Digital Technology) became available in the 90s. That means that we will have put 4 Generations of equipment in place over about 30 years. That is a lifespan of 7 years for the technology. Over time this will slow down and technologies will be introduced about 1/2 that rate. Once that kind of stability happens, it might be time to start imposing more regulations. The question in the US for 5G is how will T-Mobile and Sprint do on their roll-out. These roll-outs are expensive and one would think that each generation gets harder to deploy for these companies. Unlike the larger players, they just don’t have the capital base to keep going. In some ways, this seems like the US versus the USSR at the end of Cold War. Spend your competitors out of the market.
In a different kind of story Comcast announced a $3.8B acquisition of Dreamworks. This is in the same direction as Comcast’s purchase of NBC-Universal. It should be noted that Comcast is the only major US ISP with premium content properties like this. The thing that would be worrying would be if Comcast would somehow lock specific content to their network. They are highly unlikely to do so. Comcast is the largest player in the US market but not quite 1/2 the market is held by other players. Comcast would leave a large number of customers hanging if they did not offer their content broadly. This would mean that advertising revenue would decline for those properties. On top of that, Comcast must know that the regulators would slap them down for locking content to their network. This is something to keep your eye on, but is probably not going to change much in the near term.
Have a great weekend!
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