Tuesday, July 30, 2002

Chanos: Cable Choking..

 


Fortune runs the same type story as Forbes did recently (see below), based on comments by the same fellow, except Cable is a big part of the Time/AOL/ Fortune empire....They're not gunna get there, they both conclude.

=============================

Broadband Bust-Up Cable companies are choking. Shares are off an average 68% in the past year.

FORTUNE Monday, August 12, 2002 By Julie Creswell

During the mid-1990s, the cable industry wanted nothing more than to be just like the telecom sector. That's one wish it would love to take back.

Like those of the telcos, cable shares have foundered, falling an average 68% in the past year. Cable companies have burned through more than $40 billion since 1998 to upgrade their networks for broadband services that customers have yet to embrace. The industry even has its own WorldCom, with one of its biggest operators, Adelphia, mired in an accounting scandal. (See The Adelphia Story.) Still, cable is different from telecom in one respect: In the past two decades, the industry hasn't made a dime.

That fact is even more disturbing when you consider that cable is a monopoly in most markets, and cable bills have steadily risen. "The numbers in this industry are just awful," says Jim Chanos, who runs the Kynikos hedge fund and was one of the first to question Enron's accounting. Chanos is now betting against cable stocks. "In the last 17 or 18 years the return on capital for cable has averaged about 5%. That is well below the industry's cost of borrowing," he notes. "Given the industry's huge leverage, I think cable is the next big blowup."

In the late 1990s cable companies reported huge leaps in earnings before subtraction of interest, taxes, depreciation, and amortization--better known as Ebitda. But free cash flow--cash left over after subtracting interest expense and capital expenditures from Ebitda--has remained in the red. That means cable operators aren't making enough to cover infrastructure costs and interest payments. The story only gets worse: What worries investors is that cable companies may be burying day-to-day operating expenses in capital expenditures (or cap-ex, as accounting dweebs call it) to keep Ebitda artificially high. At Time Warner Cable, a subsidiary of AOL Time Warner (FORTUNE's parent), Ebitda came in at $3.2 billion last year, while free cash flow was only $73 million. Investors are eyeballing a 30% jump--to $9.9 billion--in spending on plant, property, and equipment for the same period at the parent company. AOL says much of that sum went for cable upgrades, which it treats as cap-ex.

It's hard to say what that money paid for. For instance, Generally Accepted Accounting Principles allow firms to include the salaries and benefits of employees working on capital projects as capital expenditures. But companies have a lot of wiggle room, says Bob Rock, a fixed-income analyst at John Hancock Funds. "You can take the salary of the vice president of network engineering, which maybe was $500,000, and amortize it under cap-ex," says Rock. "But was he really working on new capital projects the entire year? Companies do not give enough disclosure of what's in that cap-ex line."

While no cable company is rushing to clarify its capital expenditures, most are promising to have positive free cash flow by 2004. That will be a tough target to reach. They won't get there by adding customers, because the number of subscribers has been flat. To break even, they must get current customers to buy new services like digital TV and high-speed Internet access. The average subscriber bill will have to climb nearly $20 a month, to $69, says Karim Zia, an analyst at Deutsche Bank.

But consumers' interest in some of the whiz-bang products is waning. At the end of last year about 23% of cable customers had signed up for digital cable, which gives them additional channels and services like video-on-demand. As part of the breakeven plan, cable companies must nearly double that rate, to 43%, within two years.

Cable operators have bigger hopes for high-speed Internet service, which costs $40 a month (vs. about $14 for digital TV). About 10% of subscribers take the service today. The industry needs that number to reach 30% by 2004. "They're not going to get it," says a former cable executive. "Until you have streaming video, demand isn't going to be that great. People aren't going to spend $40 a month for fast e-mail."

Even if subscribers upgrade, rolling out new services is costly. Cable companies spend about $252 per subscriber each year on plant upgrades, cable modems, and digital boxes for the new services. To get free cash flow, that figure needs to drop to $185.

Operators have promised to curb those expenses, but they are trapped in a vicious circle. They must sell new services to defray their huge capital outlay, but they take a hit whenever a customer bites. And they're always tempted to invest more in the networks to roll out something else--like phone service. Says Oppenheimer Funds portfolio manager Michael Levine:
"People are scared that [operators] are going to spend a lot of money--waste it--on telephony."

Even the healthiest of the bunch is having issues. Comcast, soon to be the largest cable operator, had $120 million in free cash flow in the first quarter. But that will disappear after its merger with AT&T Broadband, since 40% of those cable systems have yet to be upgraded. "We'll have to sustain a one-year period of negative cash flow," admits Comcast CFO John Alchin. "But we've completely rebuilt the network. This is going to last us for decades." Wait. Haven't we heard this somewhere before?



posted by James 11:19 PM

Monday, July 29, 2002

OpenDTV debates...

 
Craig Birkmaier moderates this "List", and contributes his own opinions to keep things going.

Here's a recent sample - Without paying too much attention to who sez what, the back and forth about MONEY seems to home in what seems to be right.....


FWIW.

===============


From: Craig Birkmaier [mailto:craig@pcube.com]
Sent: Friday, July 26, 2002 3:34 PM
To: fzappala@bia.com; 'jedball@gte.net'; Frank Zappala
Cc: openDTV@topica.com
Subject: RE: [OpenDTV] News: Content protection debate reaching do-or-die

At 10:11 AM -0400 7/26/02, Frank Zappala wrote:
Sender:

The Content is connected to the broadcasting by Money. Money generated by advertisers who buy that audience. If you take away the money, the content goes away. This is simple. By the way the Emmy's do not measure commercial success, or the state of the industry. Like the Oscars, it is a closed club that doles out kudos based on highly subjective criteria.

And there is more than one way to get the money.

Clearly advertisers will continue to pay for audiences that deliver large numbers of eyeballs. They will also continue to pay for small niche audience that deliver well qualified demographics. There is room for both high cost/quality content and affordable content that appeals to niche audiences.

There is a huge market for premium content - i.e. direct payment. The revenues from premium cable/DBS channels, cable/DBS NVOD movies, and packaged media sales and rentals is now approaching the revenues from advertiser supported programming. And it is worth noting that a good deal of this content winds up on the broadcast networks as retreads, after the creme has been skimmed via premium distribution.

And we are just getting into a new era of pay-per-view/VOD for episodic television.
===================
My point still stands "no cable network creates original programming to fill the 8pm to 11pm plus, Monday to Sunday. That is 3.5 hours per night, 7 days a week. That is more than 22 hours. The most prolific cable nets can generate maybe 5-7 hours per week, the rest is old Broadcast TV programming. So as eloquent as your responses have been they are still off the mark.
=================
This is absurdly untrue. We disagree about a major point, however. For MANY cable networks, provision of multiple access points to the programs they produce is a KEY PART of te business model. This reduces the number of original hours that must be produced and helps them to accumulate ratings for their programs. And in the coming era of PVRs, this is going to help them boost their ratings. If you think this is not true, the broadcast networks are already providing multiple access points to some of the shows they produce to fill up the 24/7 schedule. As they move to more in-house production they will increase the number of access points to the programming they control, either by repeating the shows on the broadcast network or creating additional networks on which they can offer access. This IS the business model for ABCs Soap Opera network - they want to reach women who now have 9-5 jobs (and men too).

Others have already enumerated all of the cable networks with original programming. And to this I would add an important thought. You are critical of the Food Network for running shows from the BBC, and other syndicators. But this is new original content for the U.S. audience that would never make it on OUR broadcast networks.

Ultimately content creators are looking for eyeballs too. The larger the audience they can reach the more they can make. There are two key considerations here. Access and Reach.

The proliferation of channels has made it possible for many content creators to gain access to distribution. If you have a great idea for a documentary you are not limited to pitching it to PBS. You can talk to the History Channel, Discovery, National Geographic etc. We have been producing a sports magazine show here in Gainesville for three years.

Reach is equally important. Why is Hollywood so concerned about digital piracy? The short answer is they want to milk their content for every penny it is worth through every possible distribution medium. They don't want to prevent you from watching a movie or your favorite TV show via the Internet; they want to control this distribution channel so they can cut out middlemen who eat into their profits. Ditto's for broadcast network affiliates.

Hollywood want to preserve the current delayed distribution model - from theater, to airplanes, to pay-per-view/premium, to packaged media, to broadcast television, to cable television and the Internet. They might make MORE money by delivering a movie to 500 million PVRs on the date of theater release, but the current system has momentum and piracy is a profitable - non-taxable business.

In the end, does it really matter how you get the bits? What matters is that you want the bits and will either pay for them or allow an advertiser to pay for them.

There is nothing magic about broadcasters delivering large audiences. That too is a legacy. If the networks just decided one day drop OTA broadcasting all together, they would still be able to reach the mass audience. They won't do this because operating the OTA franchise is VERY lucrative in the big markets and it gives them leverage with their competitors. Most of the cable networks you mentioned earlier that are owned/operated by the broadcast networks got onto the cable systems through re-transmission consent agreements. Do you think cable wanted MSNBC? Cable pays through the nose for ESPN.

As for Legacy -- It is something to build upon, not to discard. The transition to digital was supposed to build on that legacy. It has not because the goal is now to produce some sort of magical new content that will revolutionize what we see -- entry in for the consumer $3 - $5 K. Yep that will work.
====================
Here we mostly agree. The current DTV system was created to protect that legacy, not to build on it. The business proposition for the consumer is virtually nonexistent. To an extent, the CE industry pulled one over on the broadcasters. They played along because they wanted to sell more big screen sets that carry higher profit margins. But they controlled the process, sticking the broadcasters with a turkey, while they took the useful components and used them to develop a competitor to cable.

Not bad. Digital TV monitors already account for a huge chunk of the profits from selling TVs. DVD is the most successful CE product in history - more than one billion DVDs sold (kinda sounds like a new McDonalds franchise). The sale of surround sound audio systems are up 987 percent in the first five months of 2002, following on 230 percent growth for the same period in 2001. And the CE industry now has a piece of the action from more than 17 million DBS homes and are poised to take more market share from cable.

Sony is only profitable because of PS2 content and Spiderman. And MPEG-LA (mostly CE vendors) is trying to impose a technology tax on virtually every form of revenue producing digital media content across broadcast, cable, DBs, packaged media and the Internet.

Somehow, local broadcasting looks much like a buggy whip in an era of automobiles...

Inefficient as it may seem -- you will get transition because you can co-operate NTSC and ATSC in simulcast until the legacy receivers can be equipped with inexpensive STB's that will allow reception of the ATSC signal, and compatibility with cable and carriage of the digital signals will allow the same reach as NTSC.
===============
If you say so. Clearly the CEEA does not want to play this game.

It is not about 520p, or 780i, it is about Eyeballs!!. The reason broadcasters can't afford the build out a digital signal is there is no income associated with it.
=================
Agreed

Would you force a transit company to buy buses just to garage them because there is no one out there to ride them?

Would you force GM to build 10 million cars a year if they could only sell 5 million?

The Broadcasters don't want to operate two systems on the income that can sustain one... that is the issue.
================
Careful there. The top 30 markets had no problem with this little annoyance. Most are up and running.

They can afford it because they can pay for it out of the annual capital budget. The next fifty markets can probably survive...after that forget it. The numbers just don't compute. And everyone understood this going it and let it happen, because they didn't think they would be forced to do it.

The receivers and cable carriage need to be available so that if they go digital, they can move the current audience to the new service. This is so simple, I can not understand why it gets lost in the droning threads that pass my screen everyday.
====================
The current audience already has access to the service. They don't need digital STBs to watch the analog tier of their cable system. How it gets to the cable company doesn't matter; unless, of course, you think HDTV is important, which apparently you don't.

We sit around all day discussing the merits of the particular model of bilge pump, while we watch the ship sink. Lets just turn the darn thing on!
=================
Close... Let's turn NTSC off and use all the spectrum to build a viable competitor to cable and DBS. That business model has a chance. Simucasting is an unnecessary burden that makes broadcasters non-competitive.

As for the "spectrum utility plan" I give you the RBOCS's as shining example of the success of separating content from carriage, and having broadcasters lease capacity. The CLEC's had a lot of luck with that approach.
=================
A rather poor example. The spectrum utility idea only works if content and carriage are decoupled; and there would most likely need to be some rules to prevent a few large companies from simply dominating the market for bits. The CLEC's were doomed from the outset because the RBOCS were allowed to compete directly for the customer.

There are certainly risks involved with any for of monopoly/oligopoly. But the alternative is far worse. If we auction the spectrum, who is going to make the required investments in the smaller markets. Its the top 25 problem all over again. We can provide the right incentives for these companies to build out the infrastructure - EVERYWHERE - and we can provide the right incentives for them to operate it efficiently. YOu can;t do this with multiple layers of regulation and guaranteed rates of return. Youu need to give them the incentive to maximize reach and to support competitive applications so that a real marketplace for bits develops.

This is not your father's telco we are talking about here. We are talking about a business that can and should be driven by MONEY... i.e. legitimate profits and a real marketplace.


============================

posted by James 11:34 PM

Sunday, July 28, 2002

Back Breaks...

 
Forbes.com - Magazine Article

Heard all you want to about spines and backs? There's more. Here's a cover article with pictures from Forbes.

" For those who need surgery, the current gold standards are operations called discectomy (removal of part of the disc) and spinal fusion combined with discography, in which a surgeon watches on screen as he pricks each disc to pinpoint the source of pain. Once the culprit is found a small section of the back is cut open and part or all of the damaged disc is removed and the surrounding vertebrae are fused with screws, rods or cages. Almost 200,000 people a year undergo fusions and 80% get better...."

Well, mine still hurts some. I'll let you know...



posted by James 10:33 PM

Saturday, July 27, 2002

Local Bells next to falter?

 
More from Forbes...
Capital Spending for maintenance and to keep up seems to be prevalent here as well as Cable. Duh.

Bad Connection
Scott Woolley, 08.12.02

The giant local phone companies appear to have escaped unscathed in the telecom crackup. Look again: They may well become the final pillar to crumble.

Wall Street has a perverse name for the Baby Bells. They are "cockroaches." An asteroid has destroyed the whole long-distance and fiber-optic sectors, but somehow the local service providers have survived. Verizon, SBC and BellSouth made a combined $20 billion of profit last year and have a collective market value of $240 billion.

1.7 million . The number of cable company lines now used for local phone service.
 
67% . The average annual growth in the time Americans have spent talking on cell phones over the last five years.
 
20 million. Bell phone lines now leased by competitors at wholesale prices.
 
1933 . The last year, prior to 2001, that the number of local phone lines in the U.S. shrank-in the depths of the Great Depression.
 
9 million. The net number of local phone lines cut off in 2001.

So far the Bells' stamina on Wall Street has been remarkable. The stock prices of Verizon, SBC Communications and BellSouth have fallen on average 30% in two years, easily beating the overall market and trouncing Sprint, Qwest, Level 3 and WorldCom, whose shares are off anywhere from 70% to 100%. Investors sought refuge in what had long been one of the most predictable and reliable businesses on the planet. Local phone service has grown, in good years and bad, for seven decades.

Let the shareholder beware: These telecom behemoths are nowhere near as healthy as they appear. While they aren't about to become extinct, neither are they the cash machines they seem to be. Most of those glorious profits are being poured into maintaining equipment or upgrading to meet new competitive threats. In the five years from 1998 through 2002 the Bells will have sunk $140 billion into capital expenses in their local, long-distance, data and international markets. This monstrous outlay will bring them annual revenue growth in those same areas of 2.5%, barely ahead of inflation. Philip Jacobson, an analyst with Network Conceptions in Vienna, Va., puts it succinctly: "The Bells have shown the ability to invest a lot of money with very little result."

Even as the Bells stand triumphant, the 20th-century foundations of their business have begun to fracture. The Baby Bells could one day be exposed as the last great telecom illusion, undone by a combination of an overwhelming wave of new competition--from cable, wireless, resellers and elsewhere--and their own underwhelming success at diversifying into new services such as Internet access. They are on a capital-spending treadmill, and the treadmill is picking up speed.

Competition and price-cutting that first struck the long-distance business and then cell phone service are now spreading to local service. The Bells' phenomenal strength is rooted in their absolute lock on the nation's 180 million local phone lines and the seeming inevitability that, each year, they will continue to lay still more. But last year the total number of local phone lines declined 4.7% from the year before as customers cut off 9 million more lines than they added, according to the Federal Communications Commission. Since AT&T was founded in 1885, government stat-isticians have recorded a drop in phone lines only once before, during the Great Depression.

The line decline in 2001 was a direct result of the ferocious assault on the Bells from all sides. As many as 3 million customers decided to forgo a home phone last year, going wireless instead. Cable operators are beginning to offer local phone calls on their rebuilt lines, and poached 600,000 Bell customers last year. Another 2 million households canceled the second phone lines they were using for poky dial-up access to the Internet; high-speed cable access and DSL don't interfere with regular phone service, making second lines superfluous. BellSouth workers used to go into new suburbs in the Southeast and confidently bury thick bundles of wires containing 1.5 to 2.5 phone lines for every home in the neighborhood; this year its workers began burying just one phone line for every home its wires pass.

The erosion began to show up last month in BellSouth's second-quarter report, as sales fell 3.5% and earnings plunged 67% on one-time charges, sending the stock down 18% in a day. Verizon and SBC were also expected to report further phone line losses.

It gets worse. The Bells now lease 20 million lines to resellers, up 32% last year, and they're forced to rent out these precious tendrils at regulated prices that are often just two-fifths what they get from consumer accounts. Competitors leasing those lines can exploit weaknesses in the Bells' kooky pricing structures, relics of their days as regulated monopolies, to steal the most profitable customers. The Bells count on 95%-plus operating margins on newer features such as caller ID and voice mail to juice their earnings, since basic monthly fees remain regulated. MCI's new Neighborhood Complete plan offers unlimited local and long-distance calling for $50 or $60, depending on the region, with caller ID, call waiting and voice mail--so valuable to the Bells--thrown in free of charge. Since launching the plan in April MCI has landed 600,000 customers and is signing up 200,000 more each month.

The Bells will have a hard time holding off the panoply of new competitors, says David Dorman, recently named chief executive of AT&T and a former chief of Pacific Bell. As newcomers steal the fattest customers, the Bells will get stuck serving the low-spending, high-cost ones. "Inexorably," he says, "cable and wireless are going to eat into their share."

For six years the Bells have been bracing for this onslaught, steeled by the passage of telecom deregulation in 1996 and eager to counterattack by moving into long distance and Internet access. But their foray has been expensive, and the new-growth markets have proven disappointing. The Bells fought hard for the right to sell long-distance service, something they were banned from doing in the 1984 antitrust breakup of AT&T. It has been a Pyrrhic victory. As of April Verizon and SBC (the only Bells to have won the right to sell long distance in their home states) handled long-distance calls for 13.5 million customers, almost double the total of 18 months ago. Yet their long-distance revenue in that same period declined. In the most recent quarter it was $1.5 billion, off 6% in a year and a half.
...
Verizon is the most extreme case of a Bell burning through all its cash just to stay even. By the end of this year the company will have piled up five-year spending of $75 billion sprucing up the networks of its myriad pieces (the former Bell Atlantic, Nynex and GTE). Its revenue will have grown 5% a year in this time, to $68 billion this year, with all of that growth due to an influx of new cellular customers. (Verizon owns 55% of Verizon Wireless and consolidates the subsidiary on its own financial statements.) With all that cash plowed into capital projects, Verizon was reduced to issuing new debt to fund $17 billion in dividend payments. Verizon now creaks under $61 billion in total debt, including the money owned by Wireless. Moody's recently put Verizon on credit watch for possible downgrade from its current A1 rating.

The other major Bells' stories are only slightly better. In the five years between 1998 and the close of this year BellSouth will have put $28 billion into capital expenditures. In return the new investment has let the company increase revenue by 6% a year. SBC will have pumped $52 billion into its core business, to achieve some 2.5% annual growth.

Frederic Salerno, vice chairman of Verizon, counters that the last few years "were a bubble in capital spending ... an aberration," forced by the long-distance push and federal rules that required the company to crack open its network and welcome in competitors. Verizon cut capital spending by 45% to $2.4 billion in the first quarter, though Salerno says it continues to invest in new growth areas. "The loss of access lines is not necessarily a disaster if we are able to do two things," he says. "The first is adding new service to the remaining lines; the second is cutting the cost [of those services]."


Bell executives dismiss the idea that they are in trouble. They say soon-to-materialize growth in the newer pursuits--everything from long distance to high-speed Web access to wireless to corporate data-networking--will more than offset any losses in local service. SBC's chief financial officer, Randall Stephenson, argues that stagnating long-distance revenue will begin to flow rapidly as the Bells capture more profitable customers and enter more markets (collectively, they have thus far won approval to sell long distance in 15 of their home states, home to a third of the country's population). He also says the Bells' base of 4 million Internet customers will soon turn profitable as the market shakes off its growing pains. In California, after a customer is hooked up, SBC's operating (a.k.a. EBITDA) margin on digital subscriber line (DSL) service is 40%. "I go out to a mature territory, and I see a business I like," he says.

Analysts on Wall Street often get captivated by EBITDA--earnings before interest, taxes, depreciation and amortization. But wise man Warren Buffett says such talk makes him shudder. One of his letters to shareholders asks acerbically, "Does management think the tooth fairy pays for capital expenditures?" This is the essence of the debate over the Bells' investment value: Defending today's revenue levels may require forever spending so much on new technology that they never have much in the way of free cash flow-what Buffett calls "owner's earnings"-with which to pay down debt or pay dividends. Cable television operators have the same problem (see story below -JMW).

Many Bell execs say their biggest weapon against line losses is a growing ability to combine local phone service with wireless, long distance and broadband. BellSouth recently introduced the "Complete Choice" plan in the Southeast, bundling local with cell or Internet service. "It reduced churn [turnover of high-speed Internet customers] by nearly 70%," says BellSouth Chief Financial Officer Ron M. Dykes. "As we go forward in telecom, churn becomes probably the most important financial indicator," he adds, which may be why he won't say just what BellSouth's churn is.

Meanwhile, the Bells, attentive to the risk of credit downgrades, are hacking expenses and capital spending. SBC cut 11,000 employees in the past year, 5.5% of its payroll. It also is consolidating 450 call centers into only 180 to save $700 million annually. Verizon pared 16,000, or 6% of its total, and BellSouth cut 4,500, or 5%.

The Bells can make up for their shrinking core by buying up their beaten-down telecom peers. Rather than continue pouring their cash into their own questionable capital projects, they could try to simply buy growth. Whether to launch a buying binge "is the single biggest strategic issue facing the telecom industry today," says Luiz Carvalho, a wireless industry analyst with Morgan Stanley.

Bankrupt WorldCom has assets on the block at trash-heap prices. Cell phone companies trade for under 20% of their peak market values. VoiceStream, AT&T Wireless, Sprint PCS and Nextel are all cheap enough to fit in a Bell's budget. But the window of opportunity won't be open long. "If the Bells screw around for a couple years," warns one top telecom executive, "they won't have the currency." A still bigger problem: Buying wireless or long-distance customers won't get them off the capital spending treadmill.

Verizon Wireless and Cingular (co-owned by BellSouth and SBC) represent the Bells' one reliable source of revenue growth as their core "wireline" businesses have stagnated. Yet the wireless business has proven a sinkhole for investors, who have had to plow ever more money into expanding capacity, with scant return. The average wireless user talked 50% more in 2001 than in 2000, but paid only 5% more for the privilege. With publicly traded wireless stocks off 70% in the past year, Cingular and Verizon Wireless both had to shelve plans to be spun off to the public.

Ultimately, the lure of buying into growth businesses may prove overwhelming, as the Bells struggle to replace the business that their new competitors are stealing. Leap Wireless, a San Diego-based Qualcomm spinoff, has pioneered the sale of cell phone service designed specifically to replace local phone lines. Leap now has 1.4 million customers in 40 midsize cities, and a full 26% of them have cut the cord entirely, canceling local phone service to go wireless. Its subscriber base grew 207% in the past year, and the portion who drop Bell service is rising as well.

Focusing on 40 lesser markets saves Leap the cost of supporting a nationwide network and competing on crowded turf. Its network now costs less than a penny a minute to operate, the company says. (The industry average is roughly 3 cents, according to Morgan Stanley.) The Leap model makes it possible to charge a flat fee--typically $33 a month--and vastly increase usage. Customers talk on Leap's phones for 20 hours a month, triple the wireless industry average.

It is part of a generational shift to wireless, says Leap's chief executive, Harvey White. "Our demographic is younger, and when people start a household today they simply never bother to get a land line." Leap's business model is being mimicked by half a dozen companies around the country. Qwest offers all-you-can-talk service in Minneapolis and Omaha. Alltel's Boomerang service now serves ten cities, such as Albuquerque and Greensboro, N.C.

Since the Bells own stakes in wireless firms, they get back some of the revenue lost to cord-cutters. But it's a miserable trade. When a Bell customer cuts the cord to go wireless, the company loses about $19 in monthly operating income and picks up only $4 to $6 or so in return, according to Merrill Lynch. That's because the Bells' wireless arms recapture only a fraction of the cord-cutters, and wireless subscribers generate less cash flow to begin with.


Still worse for the Bells than cord-cutting is losing customers to the cable companies. About 1.7 million Americans now get their phone service over cable lines, a hair under 1% of total phone lines. A tiny number, but one that grew 66% last year. In the few markets where cable has been around for over two years, about 20% to 25% of homes tend to sign up, says AT&T. So far Cox and AT&T have been the only major cable companies to aggressively push local telephone service, but the cost of equipment needed to let a homeowner talk is falling rapidly. Even their more cautious rivals expect to begin avid pursuit of phone customers in the next two years.

The Bells had once hoped to thwart their cable adversaries by getting into the business of delivering rival video service, but in the mid-1990s those dreams smacked into obstacles of cost and technology. To counter cable in Net access, the Bells pushed DSL, but even that could ultimately hurt their phone business. DSL is a fat enough pipe to let customers shut off primary lines when they add a modem to the household. The idea is simple: Use an Internet connection to carry a phone call from a home out to the regular phone network. Instead of paying the phone company twice for the same wire, pay once for an Internet connection that carries both voice and data. The only hurdle, a significant one, is to make sure an Internet phone provides a prompt dial tone and rings reliably.

Jeffrey Citron, who founded Island ECN and Datek Online, says he has solved those problems. Citron has plowed $19 million of his own money into Vonage, a company that began offering local service over DSL in April. (It also works with cable modems, cutting the Bells out altogether.) Vonage offers 500 minutes of local and long-distance calling for $20 a month and unlimited service for $40. Taking advantage of a technology called Session Initiation Protocol, the phones use the customer's high-speed Internet connection to carry a call to the Internet, which carries it most of the way to its destination before handing it off to the phone network. Island ECN and Datek Online both hit it big by taking a chunk out of the fat profit margins of Wall Street firms, and Citron sees an opportunity to repeat the feat, this time with the Bells as his target. "The incumbents are ripe for being displaced, and technology has created a naturally disruptive force," he says.

Bell executives dismiss talk of massive erosion in revenue and line growth as scaremongering, and that may comfort the 5.5 million shareholders of Verizon, SBC and BellSouth. But then, similar protestations were lodged by long-distance executives five years ago. Today no one can deny that cellular phones and rampant competition are choking that business to death. Sprint attributed most of its 10% dip in long-distance traffic last quarter to increased cell phone use. AT&T long-distance traffic is expected to drop 25% this year, driven mainly by the relentless advance of wireless. Will local phone service repeat the pattern, becoming the last telecom pillar to crumble?

It's looking mighty wobbly.






posted by James 9:58 AM

Cable Fables....

 
Cable's capital spending to stay up with technology is like a shark swimming - it must keep going or die. The fellow who found Enron numbers questionable, and sold short, looks at cash in the cable business.

From Forbes
Cable Spending


The Cable Fable

Elizabeth MacDonald, 08.12.02

The industry is overvalued, says James Chanos, the short-selling sleuth who uncovered the Enron scandal. Why? The never-ending treadmill of capital spending.

James Chanos, the first to spotlight Enron's accounting scams, is someone to be reckoned with on Wall Street. The lanky short-seller has delivered a spate of other prescient calls, targeting high-flying stocks, from Amazon to Yahoo, that later crashed. So when he trains his sights for his investment clients on the cable industry, it pays to listen.

Everyone knows cable stocks aren't doing well, so what's the big whoop? Cablevision is down 84% from its 52-week high, Comcast is down 42%, etc. Adelphia has declared Chapter 11 amid a self-dealing scandal involving founder John Rigas.

Adelphia's shenanigans aside, the industry argues its current travails are temporary. Subscriber growth has flattened, so the cablers are adding new services like digital programming and telephone hookups. What's more, they say, cable has won the broadband race over the phone companies, making it the primary pump into homes for the Internet, video-on-demand and the like. Sure, the cable crowd admits, it has to spend heavily to build out systems, but this is almost done. Prosperity--free cash flow--is just around the corner.

Chanos, 44, has been around long enough to be unimpressed. For one, cable today is eerily reminiscent of the railroads in the 1880s: overleveraged companies going bust, having laid the track that someone else later takes advantage of, with the emphasis on "later." His stronger argument is based not on history but on capital expenditures. He says that capex will continue remorselessly, that operators will have to spend lavishly just to stand in place.

Chanos (pronounced "CHAIN-os") and his firm, Kynikos Associates, looked back 18 years (11 years for Cox Communications, the earliest data available) and concluded cable's story was a fairy tale. Upgrades and new technology always seem to require more, not less, capital spending over the long pull, making the sector heavily reliant on continued financing from investment banks. Chanos says the projections look dismal as far out as 2007, when the industry's capital spending for the current round of new technology is supposed to be done.

Cable analysts customarily ignore net income and look instead at operating income (in the sense of earnings before interest, taxes, depreciation and amortization). While Chanos looks at both, he also focuses on return on capital. The industry's average 5% pretax return on capital over 18 years is paltry, far short of the cost of borrowed money. More consolidation won't help because cable outfits lack the financial oomph for mergers: Comcast's acquisition of AT&T's cable assets is the last big merger we'll see in a while.

Here's one more way of looking at the value of cable assets: Take the enterprise value of a public cable company (interest-bearing debt plus market value of stock, minus cash on hand), then divide that figure by the number of subscribers. While that number currently is $3,500, Chanos would pay no more than an average $2,000 per subscriber.

Stick with $2,000 for now. At first blush that doesn't look terribly expensive, since a subscriber will shell out $800 a year on average and may already have his new set-top box. Subtract a $480 average annual cost to serve the subscriber with repair visits and so on. You get $320, or 16% of the purchase price--pretty good for a cash-on-cash operating return. A strip mall would do only half as well.

But drilling deeper into the numbers offers a less pleasing picture, says Chanos. He factors in the annual maintenance spending to keep the system up and running, particularly as customers upgrade their service. Chanos says the bulls believe that maintenance-level capital spending figure is $100 a year per subscriber, while the bears put it at $150 a year. Chanos charitably takes that bullish $100 and subtracts it from the $320 cash return.

The resulting $220 per subscriber translates into a tiny pot of real cash to service cable's sometimes monstrous debt. Cox stands the best chance of handling its $1,100 debt per subscriber, but then there's $1,352 for Comcast, $2,404 for Cablevision and $2,497 for Charter. (Bankrupt Adelphia's debt was $2,508 per sub; the number can't be broken out for AT&T's and AOL Time Warner's cable operations). While the other companies didn't comment, Cablevision took strong exception to this debt figure, arguing that since it is a diversified company, the calculation includes debt for Madison Square Garden and Rainbow Media, among other things.

Despite Cablevision's complaint, Chanos says if you must buy into cable, skip the stocks and buy the bonds, which have prior claim on the $220 of loose cash.

A July 12 report from Credit Suisse First Boston gives Chanos more ammunition. The report provides a detailed look at "churn," which is essentially cable's costs for labor and advertising. Credit Suisse says that cable companies have been hiding the impact of their churn by capitalizing labor costs. In other words, if they spend $50 to install cable in a home, the cable guys only subtract $20 from revenues to calculate the current period's earnings. Then they spread the rest over a dozen years. The worst offender, Credit Suisse says, is Charter Communications, which capitalizes $29 per customer.

So what are cable stocks really worth? Chanos takes his $2,000 per subscriber and subtracts net debt, preferred stock and minority interests. The results aren't pretty. Chanos says Cox is really worth just $8 a diluted share, not the $27 it's currently trading at. Comcast is worth $5 for its cable assets ($18 if you factor in all its assets, including its stake in QVC), not the $22 it trades at now. As for Charter, at $3? Chanos says its equity is worthless.

What do the cable companies say to all this? Eileen Connolly, vice president of AT&T's financial communications, says all of its upfront expenses will bear fruit--in due course. Revenue is exceeding costs in two new services, high-speed data and local and long-distance telephone services over cable, she insists.

Cox will only say that it expects to turn free cash flow positive by year-end 2003, declining further comment. John Alchin, Comcast's treasurer, says Chanos' estimate that cable assets at Comcast are worth just $5 a share "borders on ludicrous," as it grossly underestimates the value of cable subscribers and Comcast's ability to generate free cash flow. Charter says it will meet its earnings estimates and insists its quality of earnings is just fine. AOL Time Warner officials were unavailable for comment.

==========================

posted by James 9:56 AM

What I'm reading....

 
Books -

Dinesh D'Souza's What Is Great About America - Not as cornball as the title suggests - Real good reasoned look at critics propositions, then devastating arguments on why America with democracy and capitalism and freedom succeeds. Great part on Islam. Addresses the issue: Is it better to be virtuous or free? Heavy stuff made simple. Bravo to this new hot media star from Bombay. DD is a terribly impressve immigrant who after Dartmouth went to the Reagan White House as a domestic policy adiser....then wrote many best seller books. Clear, precise, and right on. Thrilled to meet him at Stanford/Hoover a week ago.

Ann Coulter's Scandal. "The Blond Uzi". Dead on. Appears on a lot of talk shows and devistates the "other side". Amazingly quick and smart.

A New Kind of Science, Stephen Wolfram. First read the interview in Wired. Wired 10.06: The Man Who Cracked The Code to Everything .... Then pop up 50 bucks for the book, where unabashedly he starts with considering simple programs rather than equations as a basis for math, and then goes on to the logical conclusions: Simple programs can yield complex "behavior" - and then demonstrates how simple "rules" might be the basis for all of the sciences. Oh My. Compared by some to the works of Galileo and other "paradigm changing " visionaries. Like getting in on Darwin before He Got Hot....He sees possibility of Everything Explained By One Simple Rule....Wow.

The Skeptical Environmentalist - This Scandanavian author, Bjorn Lomborg, attempted a rational look at the environmentalists' case....and finds the facts suggest much to the contrary. He's been pilloried mercilessly in the PC scientific press, but has responded to all criticsm with wilting replies. Reason triumphs over Junk Science.

Why I Am Not A Muslim, by Ibn Warraq. A reasoned (there's that word again) case that shows that Islam is a belief based on Killing All Who Disbelieve. No freedom, democracy, or capitalism. 16th century Bedouins Run Amok, Raiding Neighboring Oases, Killing Men, Stealing Camels and Women. Why this routine is tough to sell in 2002. Evil. Scary.

Daily -
For political commentary, Real Clear Politics is a great guide to smart people's columns -Peggy Noonan, Charles Krauthammer, Bob Novak, Mike Kelly, Michael Barone, Dick Morris, Pat Buchanan, George Will, Michael Medved, Michele Malkin - all appear listed here regularly;
RealClear Politics - political commentary for the political junkie

Drudge is way ahead of other newsbreaking sites - 4 million plus hits a day. Join them....
DRUDGE REPORT 2002®

The Israeli inside story, right from their intelligence agency, it seems.DEBKAfile, Political Analysis, Espionage, Terrorism Security

Every morning, here's where to start with the Daily Dish - from the Lady Who Coached Monica and Linda Tripp. American Heroine! Her Son Jonah Goldberg is Editor of National Review Online and a great writer himself. News Forum Home Page

And for snippets of brief quotes on the latest scandals, NewsMax is wonderful. NewsMax.com: America's News Page

Andrew Sullivanis a gay conservative. Not many of those around. www.AndrewSullivan.com - Daily Dish

Then there are the texts on optics and color and digitization and compression...Charles Poynton's Classic Digital video color book is a requirement: Amazon.com: A Technical Introduction to Digital Video. New one on HDTV and Color coming in October. See his site. Charles Poynton.

Newsletters -

I like these economy commentators - Bill Bonner, a contrarian living in Paris. Daily Reckoning.

And John Maulden's Wave 2000 - Wave 2000

Love those Contrarians....



posted by James 12:01 AM

Friday, July 26, 2002

Broadcast Customer Reports...

 
Looks like this broadcaster makes more money on derivatives and real estate than TV, and then blames ABC network programming. Hmmm..

FWIW.

JMW

==========================
Fisher Communications Announces Second Quarter Results


SEATTLE--(BUSINESS WIRE)--July 26, 2002--Fisher Communications, Inc. (Nasdaq:FSCI) today reported operating results for the second quarter of 2002.

Net loss for the three months ended June 30, 2002 was $785,000, before net gains on derivative instruments (a variable forward sale transaction and an interest rate swap agreement) amounting to $4,305,000 after income tax effects, or $6,828,000 before income tax effects. Including net gains from derivative instruments, consolidated net income for the second quarter was $3,520,000, or $.41 per share. Consolidated net loss for the second quarter of 2001 was $520,000, or $.06 per share.

Consolidated net loss for the six months ended June 30, 2002 was $4,238,000, or $.49 per share. These results include the after tax effects of gains on derivative instruments (a variable forward sale transaction and two interest rate swap agreements) totaling $3,848,000, and loss from extinguishment of long-term debt amounting to $2,058,000. Consolidated net loss for the six months ended June 30, 2001 was $2,835,000, or $.33 per share.

Second quarter consolidated revenue declined 6% compared with last year; second quarter operating expenses declined modestly. Depreciation and amortization declined 20%, as goodwill relating to broadcasting properties is no longer amortized.

"The Northwest economy continues to struggle," said Fisher's President and CEO William W. Krippaehne Jr. "Also contributing to the poor results is ABC's network programming, which directly affects Fisher's two largest television stations."

Second quarter television net revenue (after sales commissions) was down 11%. Net revenue from radio operations was unchanged compared to last year's second quarter. For the second quarter of 2002, broadcasting operations reported income from operations of $3,958,000, compared with income of $5,220,000 last year.

Fisher Media Services Company, which began reporting operating results in 2002, showed a loss from operations of $788,000 for the quarter. Media Services' businesses include Fisher Pathways, Fisher Entertainment, and Fisher Plaza.

Revenue from real estate operations increased 12% compared with last year's second quarter. Operating expenses also increased 12%. Second quarter income from operations for Fisher Properties was $1,112,000 compared with $1,030,000 last year.

Fisher Communications, Inc. is a Seattle-based communications and media company focused on creating, aggregating, and distributing information and entertainment to a broad range of audiences. Its 12 network-affiliated television stations are located in the Northwest and Southeast, and its 28 radio stations broadcast in Washington, Oregon, and Montana. Other media operations include Fisher Entertainment, a program production business, as well as Fisher Pathways, a satellite and fiber transmission provider, and Fisher Plaza, a digital communications hub located in Seattle.

More figures on Fisher site - Fisher Communications, Inc. Investor Relations

Friend Birney is Skeptical :

I am assuming the transmitter power bill and the cost of programming, etc. are in "cost of services sold", so how do you suppose G&A comes in at over 30%. Looks like a company that has no intention of making money. This one was always family owned and operated, so why pay taxes twice? Just give all the profits to the management and report flat line. Seems like a plausible explanation anyway. The derivatives non-operating income, so they have to show up below the line. All in all, I suspect this puppy is making buckets of cash for somebody (just like most broadcast ops still really do).

Birney Dayton

posted by James 11:14 PM

Thursday, July 25, 2002

On a personal note...

 
After my neck operation, in early June, I was to wear a neck brace 24/7 for "six to twelve weeks". I recently switched to a softer version neck brace, and so I can drive again. The nerve pain in my arm continues, intermittently, but seems to be getting better.

I've learned of several others with similar symptoms. In each case, the remedy was different. In one case, the pains simply disappeared with no overt treatment. In another, literally years of doctor consultations and false starts from relatives who were MDs, led to the same treatment I just had; but accompanied by suits, lies, lawyers, depositions, and a lot of Blame ("Blame is useless", op.cit.). and a settlement, that mebbe covered the expenses but not the grief...A workmate's friend is having an operation today that goes into the neck from the back with small "non-invasive" tools and cameras and moves the nerves.He's told he'llwalk out of the hospital later the same day. Hmm...

Bone spurs growing into the holes in the spine and pinching the nerves is the common problem. Acupuncture, physical therapy, steroid shots, Anterior disk replacement (me), and the rear entry nerve relocation are just a few of the possible fixes. As Mamoo would say: People will think back to this time as the barbaric ages.

A hundred years ago , Drs were still using leeches and bleeding folks. Heard a report that tried to explain why women are tougher, hardier, able to cope better than men (ok, ok, that's arguable, I'm sure); reasoning that one reason is that they bleed once a month. As we are very little different physically from our cavement ancestors, perhpas our bodies were meant to bleed more than we do now. Men bled a lot more from fighting with animals for their meals and with each other for their women. One prominent Dr. says he bleeds himself once a month because it gets rid of excess iron which contributes to hardening of the arteries. I think perhaps his sense artery is beyond repair, and that Mamoo was right once again.


posted by James 11:18 PM

Get Rid of Broadcast TV?

 

Let's Get Rid of Broadcast TV

From EWeek...

By Jason Brooks
The electromagnetic spectrum is one of our most important and valuable natural resources. However, until wireless technologies and regulatory schemes can evolve to find places for each of us to transmit and receive freely across the airwaves, the spectrum will remain an awfully scarce resource as well.

As a result, we're faced with a situation in which proponents of useful?or at least interesting?technologies such as 802.11b-based wireless networking, satellite radio services and newfangled light bulbs must squabble over interference issues. This scarcity also leads wireless data network providers to pay so much at auction for chunks of spectrum that, in an attempt to quickly recoup their costs, these carriers end up charging so much for their services that wireless data doesn't get a fair chance to take off.

All the while, a fat swath of spectrum lies set aside for an antiquated, content-poor technology that exists to provide entertainment for a rapidly shrinking portion of the populace, and profit for a quickly dwindling number of license owners.

That technology is broadcast television. Although there's big money being made?$36 billion of advertising revenue in 2001, according to the Television Advertising Bureau?the US government provides broadcasters with cost-free and interference-protected access to the spectrum over which they operate. In exchange, what does the average American get out of the deal?

We get free television. Well, it's free as long as you don't count the televisions we buy or the antenna equipment we require to wring a clear signal out of the air, or the commercials we watch. The idea of free TV also ignores our opportunity costs?what else could we have streaming through our airwaves instead of television?

So let's look at what we're paying for with free TV?here's what's scheduled for today on my local CBS affiliate: 5.5 hours of local news, 1 hour of national news, 4 hours of newsmagazine programming, 6.5 hours of talk shows, 3.5 hours of game shows, 3.5 hours of daytime soap operas, and a half hour of paid programming. I have access to about 15 other broadcast channels as well, each offering roughly the same sort of programming.

I'd call myself an avid (perhaps too avid) television viewer, but I probably won't watch a minute of this programming. Much of it runs while I'm at work or asleep; none of the entertainment programs appeal to me; and for news, I prefer radio and the Internet.

Even if I were to watch something like "Big Brother 3" or "Rosie O'Donnell" (FYI: Rosie's a repeat today), I wouldn't be watching it over broadcast TV. It's been about 10 years since I've regularly gotten my television over the airwaves?I subscribed to cable TV for years, and I recently switched to satellite.

For viewing options, broadcast can't touch cable or satellite, and lots of programs that are important to me, such as Celtics games and "Star Trek" reruns, aren't available on broadcast TV. (As for "Knight Rider" reruns, I can't find them on satellite, cable or broadcast, but that burning issue will have to wait for another column.)

I'm not alone in my preference for broadcast alternatives, either: upwards of 70 percent of Americans now get their TV through cable or satellite. As for my dissatisfaction with broadcast television programming, there's no end to the complaints voiced over the sort of content crossing our airwaves?too much violence and sex, not enough children's programming, and the dark specter of paid political advertising jump immediately to mind.

Advocates for forcing broadcast TV stations to change their programming policies tend to craft their arguments around the principle that TV spectrum is a public good, and as a result, TV spectrum must be allotted to optimally serve the public good.

They're right, but rather than involve ourselves any further in the tricky business of regulating content, why don't we get rid of broadcast television all together?

Back when television was getting started, the current scheme of licensing bands of spectrum to television broadcasters made a lot of sense. Sure, the television system was extremely limited in that it allowed only a handful of parties (the licensed TV stations) in a given area to make use of or profit from a public good, but at the time, what else were we going to do with those airwaves?

What if there were a different sort of network, one across which individuals were free to pursue the sorts of content they chose, or could just as easily become a content provider themselves? An Internet, if you will ...

Honestly, I think that just about any other use for the spectrum that's now set aside for broadcast television would be a big improvement, but those airwaves could perhaps best be used to provide wireless, last-mile broadband Internet connectivity for as many American homes and businesses as possible. Give people fat Internet pipes, and let them watch or read or communicate how they see fit.

Thanks to cable and satellite, your favorite TV shows and sporting events wouldn't be going anywhere. In fact, they're leaving broadcast television already. I cited Celtics games as a cable and satellite-only commodity, but starting next season, the NBA Conference Finals will also be available only over cable and satellite?most of the preceding playoff games are already unavailable over broadcast.

What About Digital TV?

I'm glad you asked. I mentioned above that broadcast television utilizes antiquated technology. No one's disputing this, and as you may have heard, the broadcast industry, the FCC and the consumer electronics industry has come up with a plan to fix that.

Digital TV, or DTV, is slated to replace completely our current analog television system by 2007. The FCC has even been kind enough to give broadcasters additional free spectrum in which to simulcast their programming in digital and analog while we all buy new televisions or set-top boxes to receive 2007's all-digital transmissions.

DTV was initially intended to provide for enough compression to fit high-resolution, surround-sound TV programming (HDTV) into the space in which TV stations currently broadcast. However, broadcasters realized they could use digital compression to broadcast four separate channels in that same space instead of broadcasting in HDTV.

The FCC has chosen not to require stations to broadcast in HDTV, so it looks as though, come 2007, the same small group of spectrum freeloaders will see their spectrum fiefdoms quadruple in capacity. These additional channels are likely to carry pay-per-view programming and other for-profit services. As a result, the owners of those swaths of spectrum, the American public, are unlikely to experience a similar quadrupling of the value of their spectrum "investments."

I can't imagine how watching "Jerry Springer" or "Guiding Light" over HDTV would do anything to augment my viewing experience, but if this or any other disruptive video content technology is ever to take off, what better platform from which to launch than the Internet, where anyone can put their wares on display, and anyone so inclined to sample them may do so?

Don't Trust Your Cable Company?

I don't, either?cable companies are merging at least as quickly as broadcast stations are, and our two major satellite providers, Dish Network and Direct TV, are seeking permission to merge. The possibility of entrusting our video content distribution system to even fewer players than under broadcast would be counterproductive.

I'd like to think that Internet technologies could evolve enough over the next several years to serve our video content needs, and do so with a sort of focus on local communities and individual tastes that is not currently possible with broadcast.

Also, it's likely that in the absence of broadcast television, we'd see more satellite providers pop up, some perhaps with a regional focus. The U.S. government could even get involved, and auction off relatively inexpensive space for "free TV" channels.

It's not as crazy as it sounds. My current satellite provider, Dish Network, streams down somewhere in the neighborhood of 700 channels from just two satellites. The government maintains 24 satellites for its freely usable Global Positioning System.

It's your spectrum. How do you want to see it used? Drop me a line at jason_brooks@ziffdavis.com.

===========================


posted by James 4:13 PM

Tuesday, July 16, 2002

France - the Betamax of world history....

 

Jonah Goldberg's Annual Bastille Day French-Bashing Column Jonah Goldberg - National Review Online

Excerpt:
"...the rest of the world increasingly treats France as the Betamax of world history — an interesting alternative, but no less irrelevant for it. "

" For all I know, saying gesundheit — or anything else in German — is still the best way to get a table at a French restaurant."

Very clever funny stuff...





posted by James 3:27 PM

Film cameras fading....?

 
Filming Without the Film
Los Angeles Times article about digital cameras replacing film for movies....

Excerpt:

A Digital Weak Spot

Managing the problems of a digital set remains a daunting task, since such "bugs" can eat up much of the savings that the digital process promises.

Amid the ashy dust of the Mojave Desert, just up a worn road from the boarded-up Oasis Motel, "Confidential Report 001" director Chris Coppola sits and waits impatiently for the crew to set up the cameras.

"This was supposed to be a $600,000 independent film," said Coppola, nephew of Francis Ford Coppola. "Now, we're way, way over budget."

The culprit, the younger Coppola said, is the high-definition gear. Two of the Sony cameras died in the last month as dust and heat made the computer electronics useless. The cameras' computer chips, which are sensitive to distance, can require more time to set up a shot than traditional gear. Then there was the mysterious blue pixel.

"We played back the footage and there it is, in random spots: a single blue pixel," said director of photography Andrew Giannetta. "No one knows why. Even Sony told us, 'We don't know what's wrong. If you figure it out, and figure out how to fix it, tell us.' "

One of the most difficult artistic hurdles is manipulating the look of the footage. Film blurs colors together around their edges, but digital cameras achieve a clarity that strikes some as harsh.

posted by James 10:17 AM

Tuesday, July 09, 2002

From a guy in France -

 
A good French Catholic is no racist; he simply despises
all foreigners and non-believers equally....For every vote
Bush would get from bombing Baghdad, he'd probably get
two from dumping a load on the Elysee Palace.

The Daily Reckoning
posted by James 6:46 PM

Monday, July 08, 2002

Birney on the new Gilder Technology Market Report....

 
From a private post.....

Hi Jim,
...It looks like they locked GG in a box and let someone write the newsletter that speaks plain English. I still say that when it comes to interactive broadband that the Cable guys do not have very much bandwidth (particularly on the return channel). They will have to install buckets of Ciscos on the branches of the HFC network to get the system to be competitive with what the Telcos can provide if they actually decide to compete.

This equipment deployment will require either air conditioned vaults all over the place or environmentally-hardened, pole-mountable (this includes being literally bullet proof) routers. They will also have to light up some more windows from the head end to the distributed routers. The Telcos have a similar problem once you get very far from the CO where they are multiplexing and the current notion of ADSL doesn't work unless you replace the T1 to the SLIC with a DS3 or and OC3, but Cable has the problem everywhere and the Teclos are much better at complex bullet-proof boxes than the cable guys are.....
posted by James 1:55 PM

Saturday, July 06, 2002

France - le punching bag courant...

 
Wow. It seems like there are a lot of folks beating up on France recently. Here are some links.

The New York Times: In the U.S. Nowadays, Little Love for France
Lucianne.com runs a forum for reader comments on each posted article. There was heavy response to this NYT article on US anti-France feelings, with both sides chipping in. Threads2

The Jerusalem Post: France's Jewish Problem

And for a comprehensive, balanced, and realistic look at how Muslims are growing in influence in France, and how the secular French government is trying to deal with them, see the cover article in the new Weekly Standard: Allah Mode

Or go way out there - to the site that keeps us all up to date of Progress Towards the Rapture. Israel plays an important part in apocalyptic prophesy, so these folks are right on top of Myths and Facts about Israel.

Jonah Goldberg, son of Lucianne Goldberg, of the above cited lucianne.com, is editor of National Review On Line, and is busy writing his annual Bastille Day French Bashing column...coming shortly.

posted by James 5:16 PM

Friday, July 05, 2002

No French Copyright?

 
From OpenDTV recently:

" AUSTRALIA plans to endorse CD-copying kiosks in a controversial world-first
plan that legalises music piracy. The Australian Mechanical Copyright Owners Society will allow an Adelaide-based business to operate CD-pirating kiosks nationwide for a modest royalty payment."

From: "John Willkie"
Subject: Re: [OpenDTV] News: CD pirates in from the cold

Sounds like the Aus. government is not content to hobble digital
broadcasting, but now wants to prevent any future recordings from being
released in Australia. (When the French eliminated copyrights a few decades
ago in an alleged egalitarian move, the only thing that was published in
France were naughty post cards.)

John Willkie

P.S. Am I missing an Australian work-around on the laws of economics and an
upgrade on human nature?

====================
posted by James 8:02 AM

Thursday, July 04, 2002

What's So Good?

 
Dinesh D'Souza writes about what is good about America in a current best selling book. Here's a column from National Review. DD is hot right now - there are things by him appearing all over. I met him several years ago at a Gilder Telecosm gathering; and hope to see him again in a couple of weeks at a Hoover Institution meeting at Stanford. He's very clear and right on...a pleasure to read. And he has his own web site. Dinesh D'Souza

National Review Online - D. D'Souza Article


posted by James 9:23 AM

Wednesday, July 03, 2002

One Good Recent Thing....

 
OpinionJournal - Peggy Noonan

"Blogging. The 24-7 opinion sites that offer free speech at its straightest, truest, wildest, most uncensored, most thoughtful, most strange. Thousands of independent information entrepreneurs are informing, arguing, adding information. Imagine if we'd had them in 1776: "As I wrote in yesterday's lead item on SamAdams.com, my well meaning cousin John continues his grammatical nitpicking with Jefferson (link requires registration) 'Inalienable,' 'unalienable,' whatever. Boys, let's fight. Start the war." Blogs may one hard day become clearinghouses for civil support and information when other lines, under new pressure, break down."
posted by James 12:45 PM

Why is the Fourth of July....

 

"J" is the first, "U" is the second, "L" is the third...and "Y" is the Fourth of July...
- Mamoo, circa 1954
posted by James 8:29 AM

Tuesday, July 02, 2002

George's Split...

 
Perhaps recognizing his own amazing technology insights don't always extend painlessly over to business matters, George Gilder has tossed the Stock Picking Part over to Trusted Associates. He explains below:
================
Memo from: George Gilder
To: Our readers
RE: The Technology Market Advisor, our great new addition to the Gilder Technology Report, for serious investors only, free to our subscribers.

Today we posted the first issue of the Technology Market Advisor, our terrific new monthly supplement to the GTR, on Gilder.com. By special arrangement, we are placing first issue on our open web site for the whole world to see. (Haven't seen how to get where this is yet, but here is URL TMA7.01.02.pdf. JMW). But future issues will be available only to GTR subscribers.

I have been pushing this project for months, actually more than a year. Now that it is here, I love it. It is just what we need in very tough times.

We are fighting a brutal market. The technology paradigms are working; the Telecosm is becoming a reality. But many of the investors who helped make it a reality are paying a terrible price. We all need help translating our vision of the technology future into prudent investments today.

That's what TMA is for. The first sentence of the first issue says it all:
"Every month our goal will be to apply the Gilder technology paradigms to current market conditions in an attempt to generate opportunities for the tech investor, even in difficult times."

That's what they do from this very first issue with insights and concrete, actionable investment opportunities (or warnings) on Ciena, Terayon, ARRIS, the whole group of cable companies and yes, even a DSL company. (They make a great case.)

Who is behind the Technology Market Advisor? The two guys leading this effort are Andy Redleaf, probably a new name to you--I will tell you about him in a second--and my old comrade Richard Vigilante.

Richard, as you probably know, until recently was my publisher, editor, collaborator, and occasional co-author of the GTR. He has been working with me on technology, editing my books, and collaborating with me intellectually for, well, longer than either one of us wants to remember.

When we first started talking about creating a supplement to give readers some of the practical, day-to-day, traditional, financial counsel there is just no room for in the GTR, I insisted the team include someone who really understood the Gilder paradigms, who had "lived" with the ideas, and helped me over the years work out their implications. That means Richard. He has been working out the paradigms with me since Telecosm, my first big book on technology.

It was Richard who found Andy, and what a find. A brilliant mind with an investment track record to match. Actually Richard and Andy have known each other since college, when Andy accelerated into Richard's class at Yale, (1978) on the way to getting a BA and an MA in math in three years, while winning the math prize as the top undergraduate in the field.

Contemplating an academic career, Andy made what he thought would be a brief stopover in the financial world, always focusing on the most mathematically challenging arenas, like the Chicago Board Options Exchange. (CBOE) He quickly made his first fortune and has assembled an astounding record ever since as an advisor and fund manager.

Here's what I really like about Redleaf: He has a great record in tough markets, starting back in the late 1970s and early 1980s and continuing today.

In 1999 Andy founded Whitebox Advisors, a group of investment advisors (primarily to a family of hedge funds under his strategic guidance). And he continues his record of achievement in tough markets. How? By combining the most mathematically sophisticated techniques of the "quant" world with very traditional fundamental, qualitative analysis, and an appreciation of the structure and psychology of different markets.

Of course anybody can be up in a given year, so I am not going to try to sell you on the Technology Market Advisor just by reviewing Andy's terrific record. Besides past success is no indication of future results (say my lawyers.)

Just read the first issue of TMA, which you can get to by clicking below. It speaks for itself. They focus on one thing: How to turn technology insight into profitable investment.

In next few months the GTR will do some of the most important work in its history as we unveil the future of the microprocessor, radically different, but perhaps even more exciting than what we've seen in the 30 years since Intel announced the 4004. The coming analog revolution will unleash processing power dwarfing even the stunning achievements of Moore's law, with equally powerful implications for investors. And the Technology Market Advisor will be there to help you take advantage of that opportunity, decisively and prudently.

Richard, Andy, and I won't always agree, any more than my GTR team of Bret Swanson, Charlie Burger, Mary Collins Gorski, and John Hammill and I always think alike. In fact you'll see in this very first issue that the TMA takes a different cut than the GTR on some issues. But I am absolutely confident that you will be a better investor for considering what they have to say. Just click here and find out for yourself.

Warmest regards,
George Gilder

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posted by James 10:05 AM

Monday, July 01, 2002

Broadcast Asia Exhibition....

 

A Colleague Reports -

BA2002 was small but OK. Good turnout of 2002/2003 planners and (some) key customers spent many hours on our stand (which... was half last years size) Had Teranex on our stand again and the new CEO mentioned that you convinced him over coffee near your home one day to come to the show ....and I think he is glad you did.

The BA2002 all fit into one hall of the Suntech city and its a great venue for a show as you can walk to and from each day... HKG rumoured to be pretty quiet as Shanghai booms... Korea and Taiwan also moving well... Vietnam mentioned a number of times so could be interesting in the next 5 years... Thailand still shaky and Japan still flat. Little talk or visitors from India. Singapore (business) had a flat year sales wise... rents down and staff cost down as some guys leave and new ones come on with lower salary expectations in the tighter market.


posted by James 6:23 PM

French Media Antics....

 
From Media Unspun

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AU REVOIR, JEAN MARIE
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No one said morphing from a water utility to a new-media champion would be easy. Reuters is reporting that Vivendi Universal chief exec Jean-Marie Messier has found out the hard way just how tough it could be. According to the wire service's no-name source and a report in French daily Le Monde, Messier has agreed to resign.

Messier had moved to New York recently, but you can bet the French boss spent little time this weekend planning Independence Day barbecues like other Yanks. The Los Angeles Times and Wall Street Journal ran stories on the twin forces working against Messier throughout the weekend: eroding support among his French allies on Vivendi's board, and the take-no-prisoners fury of the Bronfman family, which owns 5% of Vivendi and wants Messier gone.

No doubt part of the appeal for the French board members is that another countryman has reportedly been identified as a replacement for Messier. Reuters reports that six European board members have proposed Jean-Rene Fourtou, vice chairman of drugmaker Aventis, to replace Messier. After all, when it comes to revolution, the French love liberte, egalite, and especially fraternite. - Deborah Asbrand


posted by James 10:29 AM