Analyst: Pay-TV's Edge On Wireless

Over the past several years, the wireless business has produced much of the broader communication  industry's growth, while pay-TV - at least in the traditional sense - is largely seen as past its prime. However, when industry analysts look at the entire communications sector, they note only one thing matters to investors: Are returns higher than costs of capital?

Interestingly enough, the analysis team at Bernstein Research says while consensus may confirm current valuations, hard data often tells a different story...

"The stodgy video business is actually growing slightly faster than the post-paid wireless business (as) video providers generate much (much) better returns on invested capital than their wireless peers," writes Bernstein's Craig Moffett. And "the terrestrial broadband business is better still, with faster growth and even higher returns on invested capital."

In Bernstein's latest investor 'blackbook,' the analyst says the economics of an industry are far more important than an individual management team, and nowhere is this more true than within the communications business. Several factors are in play here, Moffett says, the least of which include the number of competitors in each sector per market (e.g. 3 to 4 in video, 5 to 6 in wireless, and only 2 in broadband). Not to be overlooked are critical expenses, as the analyst notes wired networks are "enormously expensive to build (but) relatively inexpensive to scale," while wireless networks "scale in a much more linear manner, with invested capital continuously rising with incremental usage."

Lastly, Moffett says, technology, simply, matters. Cable operators make money from high bandwidth services (video) while facing risks from competing distribution models... like those of internet streaming services (Netflix et al). Conversely, wireless operators make money from low bandwidth services (voice and text) while facing risks from alternative platforms (Facebook et al). The key point being defending video is "much, much easier" than defending voice and text.

"Understanding these relationships is vital. Considerations like management quality play second fiddle," Moffett says. "After all, it's hard to win if one is dealt a losing hand." •

The (Perceived) Problem in D.C.

When consumers reflect on how business gets done in Washington, D.C., many feel that certain groups wield too much influence in the halls of Congress or the White House. A new survey suggests that as many as nine in 10 Americans believe big business, political lobbyists and financial institutions have too much power in the nation's capital.

According to new Harris Poll results, 86% of Americans say large corporations have too much sway inside the Beltway, while 73% feel the same about Big Media. The research firm says 65% of respondents say TV talk shows have too much power over D.C., while another 57% and 56% of the public see trade associations and labor unions, respectively, with too much influence on policy decisions.

"For years, big business has been at or near the top of this list, being perceived as wielding too much power, while small business, seen as having too little, has sat at the bottom," Harris says. "This is why large Wall Street bonuses and tax breaks for big companies will never sit well with Americans and why railing against big business is an effective campaign tactic for politicians."

Another "rallying cry" Harris identified will be against PACs (political action committees) and lobbyists – "two groups that are always seen with derision outside of the Beltway." •

Etc: FCC Unveils OIAC - Facebook Woes & Vows - Op/Ed: Broadband Policy Broken?

Rules & Regs: The FCC announced several appointments to its newly-created Open Internet Advisory Committee (OIAC) this week including several names from industry players. Among contributors to the Committee include: Neil Hunt, Chief Product Officer, Netflix; Charles Kalmanek, VP of Research, AT&T; Kevin McElearney, SVP for Network Engineering, Comcast; Elaine Paul, SVP, Strategic Planning, Disney; Chip Sharp, Director, Technology Policy and Internet Governance, Cisco; and Marcus Weldon, CTO, Alcatel-Lucent.

Facebook: The news surrounding the social network is ramping up. Here's the latest: 1) Shares plummeted Monday to their lowest yet to below $30; 2) Rumors are swirling that the company wants to develop its own smartphone by next year; 3) Facebook may be eyeing another billion-dollar purchase very soon... that of Norwegian software firm Opera. Why? Either advanced mobile phone tech (see #2) or to create its own web browser. Or both. As news hit the market, Opera shares spiked by as much as 26% Tuesday. And for those interested, NYT has details and photos of Zuckerberg's wedding.

Op/ED: Tech policy analyst Tim Lee says America's broadband regulations are failing as competition that consumers have been promised is non-existent. The problem(s)? 1) A 'hands-off' policy approach, 2) the Verizon/Cable 'truce', 3) the Level3/Comcast dispute, and 4) no '3rd pipe'. arstechnica has the story. --- Jason Gilbert (a.k.a. 'Captain Gadget') calls the Boxee Box "the most well-rounded set-top box" on the market, thanks to the $50 LiveTV tuner add-on. However, with no DVR functionality (and the mid-century dilemma of antenna placement), the STB still has its limitations. Photos and article here.  Of course, knowing the differences among OTA, cable, telco TV and DBS escape many pundits/reporters,.

Service: AT&T has launched a few social TV apps for its U-verse TV service including BuddyTV Guide (personalized recommendations, a customizable TV guide, show reminders and real-time comments); Miso (social sharing); and WayIn (community commenting, photo sharing).

Retrans: Time Warner Cable and Cordillera finally reached an agreement to settle their 200-day, 4-station retrans impasse. The agreement puts KRIS (NBC), KAJA (Telemundo), CW South Texas and KDF (Independent) back on TWC systems in Corpus Christi and surrounding areas. Financial details were undisclosed.

Research: ResearchMoz says set-top box dedicated device markets will increase from $8.7B last year to $15.6B by 2018 driven by next-gen media gateways and cloud computing services.

$$$: Sprint entered into a $1B credit facility with Deutsche Bank and handful of other creditors to finance equipment purchases from Ericsson for its Network Vision. --- Verizon announced a voluntary "odd-lot" stock sale program that allows smaller shareholders to either round up holdings to 100 shares or sell their stake in the company for a minimal fee.

Ratings: Chronicling one of the oldest rivalries in the country's history, the History Channel's miniseries "Hatfields & McCoys" is captivating audiences from coast to coast. New data says the show scored 13.9M viewers Monday night... the second largest audience for a non-sports cable program.

Over, Up, & Under: International reports say Al Jazeera is planning a French news channel in Dakar. --- Karib Cable says it will build a fiber network in Barbados. --- Eurosport is now available on SkyGO.

Labor: Blackberry maker RIM continues to struggle. Latest is the company is set to lay off as many as 6K employees worldwide.

People: AT&T vet Dan York has jumped ship to DIRECTV. The satellite company said Monday it will hire York as its EVP of programming and content, succeeding Derek Chang who is set to step down this year. CableFAX says Jeff Weber has been appointed president of content at AT&T to replace York. --- FCC General Counsel Austin Schlick will step down next month to be replaced by Sean Lev. --- CTHRA announced three recipients of its 2012 Excellence in HR Awards this week: Scripps Networks Interactive HR EVP Chris Powell, Comcast Executive Director of HR Yvette Smetana, and the Human Capital Analysis and Planning (HCAP) team at Time Warner Cable.

Ha!: The DIRECTV folk are at it again. Check out the latest funny commercials about cable being bad for your health.

--- Catch today's media market news in The Evening BRIDGE. •