Wall St on Bell investments and Net Neutrality

[David Farber <dave () farber net>]

Begin forwarded message:

From: Dewayne Hendricks <dewayne () warpspeed com>
Date: March 15, 2006 10:19:00 AM EST
To: Dewayne-Net Technology List <dewayne-net () warpspeed com>
Subject: [Dewayne-Net] Wall St on Bell investments and Net Neutrality
Reply-To: dewayne () warpspeed com

[Note:  This item comes from reader Matt Oristano.  DLH]

From: Matt Oristano <matt () oristano net>
Date: March 15, 2006 6:58:58 AM PST
To: dewayne () warpspeed com
Subject: Wall St on Bell investments and Net Neutrality

Dewayne:

Looks like Wall St analysts are getting behind the idea that websites  
should pay for a "fast lane" from Bells and Cable ops.

Matt


Analysts Question Bell Investments
By Ted Hearn 3/14/2006 7:54:00 PM
Multichannel News

Wall Street analysts told a Senate committee Tuesday that the  
billions of dollars being spent by AT&T Inc. and Verizon  
Communications Inc. to compete with cable might not produce a profit.

"There is a high degree of skepticism that the substantial investment  
underway at the [phone companies] to deliver broadband networks to  
the home will deliver a satisfactory return on the incremental  
investment," said Luke Szymczak, vice president of JPMorgan Asset  
Management.

AT&T and Verizon are installing high-capacity fiber lines to rapidly  
deliver voice, video and data in a high-stakes battle with cable.

"The costs of these networks are far beyond what the returns of the  
new services can provide," said Craig Moffett, VP and senior analyst  
of U.S. cable and satellite broadcasting at Sanford C. Bernstein & Co.

The two analysts appeared before the Senate Commerce Committee, which  
is expected to vote on a bill next month that would ease phone- 
company entry into cable markets and perhaps include network- 
neutrality safeguards.

The battle between cable and the phone giants has put sharp pressure  
on the stocks of both industries.

Aryeh Bourkoff, managing director at UBS Warburg LLC, expressed  
concern about the regulatory climate facing cable after the industry  
invested more than $90 billion on network upgrades to roll out  
digital TV and high-speed-Internet access.

He referred to possible network-neutrality and a la carte programming  
mandates, as well as less burdensome franchising requirements on  
phone companies, as negatives for cable.

"As media consumption over the Internet develops at a rapid pace, I  
believe it is too early to introduce regulation on key issues such as  
a la carte pricing and packaging and on net neutrality, as the market  
is still in its early stages," Bourkoff said.

Moffett, an opponent of network-neutrality mandates by government,  
warned that if network owners were barred from creating a "fast lane"  
on the Internet to generate more revenue to cover capital  
expenditures, they would have to recover much, if not all, of their  
cost from subscribers, whose monthly bills would likely rise  
substantially.

"Mandated net neutrality would further sour Wall Street's taste for  
broadband-infrastructure investments, making it increasingly  
difficult to sustain necessary capital returns, and it would likely  
mean that consumers alone would be required to foot the entire bill  
for whatever network investments do get made," Moffett said.

Investors dislike policy upheavals in Washington that distract them  
from focusing on market fundamentals, said Kevin Moore, wireline  
telecom analyst at Wachovia Securities.

"We have enough to worry about in considering the rapidly changing  
competitive and technological environment. In other words, we want  
regulatory stability and certainty," Moore said.

Weblog at: <http://weblog.warpspeed.com>



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