Tag: MoffettNathanson

Categories
The Industry

Starry Back in the News

I’ve written about Starry several times since they first tried to launch in 2016. Their first market launch was a failure and it seems that the technology of beaming broadband to windows in apartment units never worked as planned. Since then the company has regrouped and now is using a business plan of connecting to the roofs of apartment buildings using millimeter wave radio. This is the same business plan pursued by Webpass, which was purchased by Google, although the technology and spectrum are different.

Starry was founded by Chet Kanojia who was also the founder of Aereo – the company that tried to deliver affordable local programming in cities through a wireless connection. Starry originally launched in Boston but has recently added Los Angeles, New York City, Denver, and Washington, D.C.

Starry is still advertising a simple product set – $50 per month for 200 Mbps symmetrical broadband. There’s a $50 install fee and then no add-ons or extra charges on top of the $50 rate. This easily beats the prices of the big cable companies or of Verizon FiOS. Starry is likely filling a competitive void in New York City where Verizon has still failed to connect broadband to thousands of high rises and millions of potential subscribers.

Starry is advertising ease of use along with low prices. Once a building is added to the Starry network they promise to install a customer at a scheduled time rather than providing a 4-6 hour window like their landline competition. Their web site doesn’t discuss the technology used to reach buildings, but it says they use existing building wiring. G.Fast is likely being used to deliver the technology over telephone wiring inside the building since there is no easy way to share coaxial cable if a customer is still buying cable TV. That would also explain how they can promise fast hook-ups since every unit in a high rise would typically already have telephone wiring.

Starry may be planning for faster speeds in the future since they were one of the largest buyers of spectrum in the 2019 auction for 24 GHz spectrum. Starry still advertises that they use phased-array antennas. This technology allows a single antenna radiator to transmit at different phases of the same frequency. This is one of the easiest ways to ‘steer’ the direction of the signal and Starry uses this technology to accomplish beamforming. What that means in a busy urban environment is that Starry can deliver more bandwidth to a rooftop than a traditional transmitter antenna.

Interestingly, the company doesn’t claim to be delivering 5G, as is every other wireless provider. This should provide a good example, that millimeter wave spectrum does not automatically equate to 5G. Starry says they are still using the simpler and cheaper 802.11 WiFi standards within the broadband path.

MoffettNathanson recently said they were bullish on the Starry model. Even though the company currently has a relatively small number if customers, their goal of chasing 30% of the urban high-rise market seems credible to the analysts. Starry’s technology can deliver broadband all across an urban downtown from one or two big tower transmitters. That contrasts with Verizon’s 5G technology that delivers fast bandwidth from small cells that must be within 1,000 feet of a home. MoffettNathanson did caution that Starry’s business plan is likely not replicable in the suburbs or smaller towns – but there are a lot of potential customers sitting in high rises in the urban centers of the country.

This kind of competition adds a lot of pressure on other ISPs wanting to serve large apartment buildings in downtown areas. Verizon found the gaining entry to buildings was their key stumbling block in gaining access to buildings in Manhattan, which resulted in the company badly violating their agreement with the City to bring FiOS to everybody. A wireless company like Starry can leap over the long list of impediments that make it hard to bring wires into urban high rises – and low prices for good broadband ought to be an interesting competitive alternative for a lot of people.

Categories
The Industry

A Bad Year for the Cable Industry

The traditional cable TV industry had a miserable 2019. Collectively the biggest cable TV providers lost over 5.9 million subscribers during the year, almost 7% of the total customer base. The impacts of COVID-19, along with the already existing trends in the industry spell bad news for the industry in 2020.

I expect that customer losses will accelerate over 2019 levels. The majority of subscribers leaving traditional cable cite cost as the primary reason, and as millions of people lose their jobs, one of the first things they are going to do is to ditch traditional cable for something less expensive. For years, nationwide surveys of subscriber sentiment have shown that as many as 20% of households each year contemplate dropping traditional cable TV, but for a variety of reasons many households don’t get around to doing so. This year a lot of these homes are finally going to make the change.

The industry has also lost its largest advertising draw in sports. MoffettNathanson predicted that just losing the spring and early summer sports could cost the industry as much as $26 billion in advertising. If COVID-19 carries forward through baseball and into football season those numbers will climb much higher. The MoffettNathanson numbers also didn’t include the impact on Comcast of delaying the Olympics for a year, which are a significant piece of corporate earnings. The impact of sports advertising will be uneven throughout the industry because of contractual relationships. Many contracts require networks to continue to pay for sports rights to the various sports leagues even if the games aren’t played, but contracts also require the leagues to compensate networks for lost advertising revenue. That’s going to mean a lot of lawsuits, but the bottom line is that sports leagues and cable networks will both lose a lot of revenue.

Advertising is taking additional hits. Travel-based advertising has already disappeared. It’s also now obvious that a lot of local advertising is drying up as small businesses feel the pinch from this crisis, affecting both local TV stations and newspapers. A number of small newspapers around the country have already folded, and local television and radio stations are likely to follow.

Another big hit for the industry will come as the production of new content has slowed to a crawl. Movie and television studios have put the production of new content on hold. How long will homes remain happy crawling through the old content on Netflix, Amazon Prime, Hulu, etc?

Sports networks are in big trouble since they have no live content to share. Watching ESPN right now is downright sad for a sports fan. Sports fans might watch old playoff games on ESPN, FS1 and other networks for a few weeks, but that’s going to get quickly lose its appeal.

The programmers have already baked future rate increases into their future contracts with cable providers. With sports programming and new content both dwindling, I expect a lot of small telcos and cable companies will decide that this is a good time to ditch the cable product entirely. Half of my clients that offer cable TV have already been having internal discussions about if and when to walk away from cable – this year might provide the impetus to do so.

If there is any silver lining for the industry, it’s that this is an election year and there promises to be a lot of political advertising between now and November – at least in states with close races for President or with a heavily contested Senate race.

The cable industry was already under stress and this year ought to push it closer to the brink where the traditional cable model breaks. The industry isn’t to that brink yet and over 60% of homes are still subscribing to traditional cable TV. But as that number drops, many of the industry paradigms are going to break and the industry will either have to reinvent itself or undergo the slow death that we saw with residential landlines.

Categories
Regulation - What is it Good For?

Looking Back at the Net Neutrality Order

Chairman Ajit Pai used three arguments to justify ending net neutrality. First, he claimed that the net neutrality rules in effect were a disincentive for big ISPs to make investments and that ending net neutrality would lead to a boom in broadband investment. He also argued that ending net neutrality would free the big ISPs to make broadband investments in rural parts of the US that were underserved. Finally, he argued that the end of net neutrality would spark the growth of telecom jobs. It’s been two years since he used those arguments to justify the repeal net neutrality and it’s easy to see that none of those things have come to pass.

The investment claim is easy to check. The big ISPs are starting to release their 2018 financial results and it looks like capital spending in 2018 – the first year after the end of net neutrality – are lower than in 2017. We’ve already heard from Comcast and Charter and that capital spending was down in 2018 over 2017. The industry analyst MoffettNathanson has already predicted that capital spending for the four biggest cable companies – Comcast, Charter, Altice, and CableONE is expected to drop by 5.8% more in 2019. Anybody who watches the cable companies understands that they all just made big investments in upgrading to DOCSIS 3.1 and that capital spending ought to drop significantly for the next several years.

MoffettNathanson also predicts that wireline capital spending for Verizon and AT&T will drop from $20.3 billion in 2018 to $19.6 billion in 2019. The press is also full of articles lamenting that investments in 5G by these companies is far smaller than hoped for by industry vendors. It seems that net neutrality had no impact on telecom spending (as anybody who has spent time at an ISP could have told you). It’s virtually unheard of for regulation to drive capital spending.

The jobs claim was a ludicrous one because the big companies have been downsizing for years and have continued to do so after net neutrality was repealed. The biggest layoff came from Verizon in October 2018 when the company announced that it was eliminating 44,000 jobs and transferring another 2,500 to India. This layoff is an astronomical 30% of its workforce. AT&T just announced on January 25 that it would eliminate 4,600 jobs, the first part of a 3-year plan to eliminate 10,000 positions. While the numbers are smaller for Comcast, they laid off 500 employees on January 4 and also announced the close of a facility with 405 employees in Atlanta.

Pai’s claim that net neutrality was stopping the big ISPs from investing in underserved areas might be the most blatantly false claim the Chairman has made since he took the Chairman position. The big ISPs haven’t made investments in rural America in the last decade. They have been spending money in rural America in the last few years – but only funds handed to them by the FCC through the CAF II program to expand rural broadband and the FCC’s Mobility Fund to expand rural cellular coverage. I’ve been hearing rumors all over the industry that most of the big ISPs aren’t even spending a lot of the money from those two programs – something I think will soon surface as a scandal. There is no regulatory policy that is going to get the big ISPs to invest in rural America and it was incredibly unfair to rural America for the Chairman to imply they ever would.

Chairman Pai’s arguments for repealing net neutrality were all false and industry insiders knew it at the time. I probably wrote a dozen blog posts about the obvious falsehoods being peddled. The Chairman took over the FCC with the goal of eliminating net neutrality at the top of his wish list and he adopted these three talking points because they were the same ones being suggested by big ISP lobbyists.

What bothers me is this is not how regulation is supposed to work. Federal and state regulatory agencies are supposed to gather the facts on both sides of a regulatory issue, and once they choose a direction they are expected to explain why. The orders published by the FCC and other regulatory bodies act similar to court orders in that the language in these orders are then part of the ongoing record that is used later to understand the ‘why’ behind an order. In later years courts rely on the discussion in regulatory orders to evaluate disputes based upon the new rules. The order that repeals net neutrality sadly repeats these same falsehoods that were used to justify the repeal.

There are always two sides for every regulatory issue and there are arguments that could be made against net neutrality. However, the Chairman and the big ISPs didn’t want to publicly make the logical arguments against net neutrality because they knew these arguments would be unpopular. For example, there is a legitimate argument to made for allowing ISPs to discriminate against certain kinds of web traffic – any network engineer will tell you that it’s nearly mandatory to give priority to some bits over others. But the ISPs know that making that argument makes it sound like they want the right to shuttle customers into the ’slow lane’, and that’s a PR battle they didn’t want to fight. Instead, telecom lobbyists cooked up the false narrative peddled by Chairman Pai. The hoped the public would swallow these false arguments rather than argue for the end of net neutrality on its merits.

Exit mobile version