When we published a couple of weeks back a note that said we might see a little bit of deceleration in the short term and this might be as bad as it gets, but that shouldnt change the overall picture that the rate of decline has dramatically accelerated for Traditional Television and there doesnt seem to be any question that we are in a new normal where the rate of decline for the traditional system is probably anor so per year, which is extraordinarily rapid decline for something that has been around as long as traditional paid tv distribution. You are talking about cable and satellite primarily, correct . Craig thats right, traditional communication via cable and satellite. Of thet interesting part story is if you went back a year ago, you would have said the the youtube tv and life werehulu driving integration with from tv. Today that thesis looks wrong and the uptake of those Virtual Services is not terribly strong. What you are seeing is people just defecting entirely from live television. My suspicion is that what we are betweens a bifurcation entertainment and sports. Is that are headed sports programming, which needs to be live for obvious reasons, will increasingly spiral higher and higher and higher in price simply because the distributors i should say the programmers of sports have fixed cost theracts with the leagues, nfl and nba and Major League Baseball and what have you. As the number of subscribers for those services to klein, they have no choice but to raise prices faster and faster and faster. That makes the system increasingly punitive for people who arent sports consumers. You will see entertainment only consumers since we saying i dont need live tv anymore. I can simply entertain myself with subscription videoondemand Services Like today, netflix and increasingly disney plus and hbo max and a whole raft of services that are coming. You will see a complete separation, i think, between the sports and news universe on the one hand and the entertainment universe on the other and you are just beginning to see that now in the numbers. Host to help us export some of kat from theis cats acros washington post. A lot of the Silicon ValleyTech Companies are picking up on trends you mentioned and i want to ask you, next week we expect apple to unveil more details about its streaming service that is coming soon. What are the significances of Larger Companies like amazon and apple getting into the game . Craig there are a couple of things. Obvious, they have awfully deep pockets and they have staying power that traditional players dont have. Erect tv launched directv now, streaming over the top service about two years ago. They were losing by all accounts a tremendous amount of money doing it. Dish network was sling tv at dish network was losing money. It is hard for Traditional Networks to sustain those losses so their growth falls off the table and they fall away as competitors to some extent. The players like google, amazon, and apple who are all playing something of a different game can afford to subsidize this business much longer so googles thesis, you can assume, isnt that we will make money directly by selling television. It is that by selling television, we can alter our advertising business by directly placing ads on the programming and also knowing what you watch. If i know what you watch, i can target ads to you better and charge more for those ads through the other places i can reach you. That is going to be the thesis at google. That is likely to be the thesis at amazon were amazon wants to know what you watch because they can sell you things or be better served in selling you things if you know they know what you watch. Apple is probably a somewhat different business model. They have always been a highbred hybrid of a subscription and hardware company. Cable coupled cap elements to both those things in their new model they will probably have elements of both of those things in their model. It is an ecosystem where there are more monetary systems than selling a tv for profit. Cat on the point that companies can sustain losses for a long time, looking longterm, 10 years, what is my tv package going to look like . What happens to the traditional bundle model we have seen . Craig the bundle is already fraying around the edges, but interestingly, part of the areon the virtual mbpds struggling and losing early traction is they have fallen into the same trap as traditional distributors did, which is they end up with these bloated packages of channels. If you think about the about reaching for a second, the value chain starts with producers of content. The studios and upstream is whats and athletes and have you. It is created in studios. It is aggregated in Cable Networks if we focus on the cable value chain for a second. Aggregated in Cable Networks, those shows. The Cable Networks aggregate into media conglomerates sophia, or fox or disney, and those media conglomerates are aggregated together into the bundle we all know and hate. For a while, you saw a push toward disaggregating the bundle. What has happened is the bundle has reaggregated and all the virtual players have been forced to take all of the programing and networks they didnt programming and networks they didnt want and it has been stuffed down their throats by the content companies that have said you cant get the good without taking the bad, so weve created bloated bundles that customers are now rejecting in the same way they rejected those bloated bundles in traditional Linear Television so they are moving increasingly to subscription videoondemand and that is why i say my suspicion youll see the live tv model only survive for sports and news and that almost Everything Else will move toward ondemand models. The purveyors of content, Live Entertainment content or streams realtime entertainment to young people is an oxymoron to begin with. The idea there is a time of day for a particular show is a not a concept for anything other than a sporting event. Or an awards ceremony or something. Model, i think, will increasingly disappear and you will see skinnier bundles of sports and content, very expensive probably because sports content is so expensive to procure, and the other stuff will be crowded out. Host what is the motivation for reestablishing these large bundles . Craig it is negotiating leverage, right . It is the content owners that 10, 12, 18, 20 networks and have two or three that are must have programming and instead of saying i will sell those threes, they will say in order to get those three, you have to take the other 16. What you end up with is a bloated set of networks. Again, that Network Aggregation er, that it is aggregating shows into a word concept, right . It exists almost entirely because of schedules. It is created around the concept of lead ins and lead outs which was the way we programmed television 20 years ago. It is not the way people consume Television Anymore so some of those Cable Networks have meaning brands, discovery has a brand separate and apart from its schedule, and espn has a brand separate and apart from but you shouldnt loose sight of the fact that Cable Networks are still primarily scheduling mechanisms. They are aggregations of content with a schedule and schedules are increasingly anachronistic. Cat what does that mean for consumers wallets . Cord cutting at first was, this will save me money each month but now there are so many services. If you have a favorite show on hbo, you pay for that in addition to netflix. Maybe amazon too. Longterm, our consumers going to save money or not with all of these new Services Becoming available . Well, they may spend somewhat less money but they will have less content. Realistically it was never a terribly compelling argument from a microeconomics perspective to think that the cost of procuring content with going down would go down as the bundle broke. There is an interesting thought experiment where you could imagine what will happen if he were in a world where the polar opposite, everything was a la of oligarchsandful channels for a certain price. It would behoove some players in that system to say im going to make my content available for free to a lot of other people if they subscribe to this channel. That channele them for a while in hopes they get hooked on it, watch it, and i can tell incremental advertising. Increasingly, i would have distribution for that distribution for the channel and that would partly pay for itself. Other competitors would see that strategy and want to do that soto. Too. You would start. With what started as a knowledge part system blowing up into the model everyone complains about today, saying i cant believe i have to be from these channels i dont watch. The simple example that grass is always greener and people will poke holes in the idea that i like im paying her a bunch of channels i dont want, but the reality is you are probably not. You are probably getting a bunch of channels you dont consume very much. For Something Like free and for the same price, you will get the channels you watch but you wont get all the other channels that might be fun to watch sometimes, and add some measure of value. Do just wont get all that stuff anymore, so inevitably, you will be paying the same amount of money and have less choice, and probably feel worse about it then better when the whole transition is done. Host so what is the strategy for the comcast and the coxes of the world to prevent this . I dont know the Cable Operators necessarily care about preventing it anymore. Ats think about the world in couple of different categories of distributors for a second. The Cable Operators have never been media companies. Rs are offere providers. Debut the lens through the profitability of Different Services they sell. Ony dont make much money video so increasingly, i think they are disinclined to try to stem the erosion. If customers want to leave video, that is ok. Let them leave video and deepen the relationship with them around broadband and sell them a highquality broadband service. At least asably, good an outcome is trying to be all things to all people. Satellite operators are in a much tougher position obviously because they have no business other than video, so for directv and dish network, it is a very challenging future as the number of people subscribing to traditional tv clients. Declines. There is simply no place for them to go, but the world looks very different through those two lenses. The real pressure i think, and comcast has a foot in both camps, is the media companies. The media companies, there is simply no good argument for decline in traditional distribution is good news for a media company. A few of them, disney in particular, may have a lifeboat in the form of a direct to consumer strategy where if they sell enough direct to Consumer Concern subscriptions, they can plug the hole in their statement that is created by the loss of traditional distribution, but for most media companies, it is a very challenging future to see linear distribution start to decline or witherate its declines and no realistic alternative for direct to consumer strategies. Cat for the companies you mentioned like comcast that theirbe doubling down on broadband business at a time when consumers are maybe leaving their traditional cable tv this currentnd, in washington, is that good or bad for a company like comcast . Good ors the techlash bad . Here is the way i would look at it. If i think about the history of the last 10 years or so of Public Policy debate around the Cable Operators. It has been dominated by the Net Neutrality debate, and Net Neutrality, as i said on your show in prior years was, to me, never a battle over First Amendment rights and freedom against blocking and things like that because those issues were never really in question. It was really a commercial dispute between one set of companies, google, facebook, and netflix in particular, who were perceived as the good guys and who wanted to make sure the transport for them was free, and one set of companies that were perceived to be that guys, verizon, at t, comcast were sellers of transport that one of transport to have a price. This conflict between transport is free transport has a price, was essentially cap slated in the next challenge the debate Net Neutrality debate. When it was good guys versus bad guys, it was an easy Public Policy wing to say we are on the side of the good guys, the white hats, google, facebook, and netflix and everybody was against the bad guys, at t, verizon, and comcast. There are no good guys in the room left. Google and facebook in particular are no longer viewed as good guys in anybodys book, but are viewed just as suspiciously as the Cable Operators and the telephone thatnies, so in some ways, debate has lost its Emotional Energy for most voters. Lash is reallych directed not so much at the isps but directed at the google and facebooks and the edge providers of the world. It has relaxed some of the Public Policy pressure that used to be on the isps. Lurch left in the next election and some of the policies that have been espoused by the more leftleaning candidates in the democratic warren,s, sanders and would suggest it is still going to be a regulatory unattractive whereor Cable Operators they will be subjected to more regulation than in the past, but the Net Neutrality debate per se is, i think, noticeably absent from most of the Campaign Rhetoric among the democrats because it is just not an issue that energizes the base anymore now that it is no longer become framed in this good guys versus bad guys framework. Host can you look ahead at potential legislation, regulation, where does section 240 come down . Craig i dont know. It is not a topic i followed as closely. Its hard to be optimistic about any kind of legislative progress for much of anything right now in the current congress, and so whether it is the satellite reauthorization or the markups the seat and unfortunately, there is not much coming out legislatively out of congress. Cat on your point that Net Neutrality has kind of been a more quiet issue on the campaign trail this year, i wanted to ask about antitrust because we certainly have seen the tech policy debate shift toward antitrust and right now in washington, congress is holding a lot of hearings on this issue and both the republican led senate and democrat led house. We have investigations going on in federal agencies, so i wanted to ask what the increased antitrust scrutiny of Silicon Valley might mean for the current cable landscape. Craig if you think about antitrust in a couple of buckets, there is antitrust with respect to mergers and acquisitions and obviously right now, that is highly topical for sprint, tmobile and the state attorney general lawsuit. Further aa bit bit less convinced and i think most people are that the deal will actually survive a state challenge. I think the state challenge has reasonably good odds of winning, probably less than 5050 but better odds than i think most people are giving it. Second, in my a mind it is become the original deal that was proposed in that by the companies and accepted by the chairman of the ftc, the depressed teacher of prepaid subscribers to divestiture of prepaid subscribers to then dish, was flatly rejected by the department of justice and they spent the next two months negotiating fixes to a deal that had to go beyond simply a reseller agreement. At the end of the day what came out two months later was the same reseller agreement with a few bells and whistles to change the optics, but it is hard to see it as meaningfully different than the deal the doj had already said was not sufficient. I have some doubts about whether in the state ag case will conclude the deal satisfies solution satisfies the clayton act, so i think there is a reasonable chance that the deal will end up being rejected. That is a very separate proposition, the. A antitrust is very different than what do you do about the Companies Already perceived to be too big . Google or facebook, and should those companies be should those companies be subjected to additional Regulatory Oversight . As much as that is an issue that is likely to energize an awful lot of people in washington as best we can tell, the tools available for breaking up those companies arent terribly wellsuited for breaking them up. And so, the idea that google or facebook is going to be broken up by antitrust warriors is a little hard to see, given our current antitrust laws. Do you think that congress will overhaul the current antitrust laws, address the unique is this models of these companies . Craig i think to state the obvious for much of anything big to happen in congress, you would need to have a unified congress either a republican or democrat and an administration of the same party. And unless we have that and the sufficient majority to get legislation like that done i have a very hard time seeing it in a world where issues that used to be entirely nonpartisan, almost telecom issue and most antitrust issues, used to be nonpartisan issues. But its hard for me to find any issues that are nonpartisan anymore. Host in our few minutes remaining i want to introduce a couple other topics. 5g is on the horizon. True or false . Craig depends how far out the horizon is. Erm idea that 5g is a near t phenomenon its unrealistic. I should say it differently. The idea that 5g as a Transformational Technology as a nearterm technology is unrealistic. 5g is predicated in part on the millimeter wave of the spectrum, and a lot of the functionality of 5g, particularly the blazing fast speeds, depend on very wide box spectrum and we are still a few years out from anything close to that. Youre talking about millimeter wave. And the Business Case for deploying millimeter wave outside of dense urban areas is not there yet. You will see 5g, coverage but it will be done in relatively narrow blocks of mid bank spectrums. 10, 20 megahertz wide blocks. That is not going to be transformational. I do worry that the hype around 5g has gotten so far ahead of the reality that what should be viewed as a logical and quite positive evolutionary step for Telecom Networks will be viewed as a huge disappointment. Host could it further a Digital Divide . Craig it all must have to further additional divide. If were talking about the divide between urban and rural. There are a lot of ways to think about the Digital Divide, whether it is based on income demographics or what have you. But one of them is urban and rural. Its incredibly hard to imagine a scenario where the revenues associated with 5g, which lets face it there is no real revenue model associated with 5g anywhere, where incremental revenue support incremental investing. Come. Build it, they will very Dense Networks of relatively small cells wi th short propagation distances are a tough sell in cities but they are impossible outside of cities. Yeah, i think it is hard for me to imagine a scenario you can fill in the map with red if you are verizon or blue with at t by doing it in lower frequency spectrum bands, but those will not give the kind of User Experience upgrade that some people are trying to say are everyones god given right in 5g. Do you think you we will see the issue of the growing Digital Divide come up on the 2020 campaign trail . Craig its already being talked about by the Warren Campaign and by other campaigns as we need t o bring couched as there has been a failure of the companys to bring broadband out to rural. America could quibble with that way of constructing the argument. If the economics for bring america doo rural not work it is hard to imagine why youd think companies would do it. That theres a view has been a failure by not bringing broadband otto rural america, and up to now there has not been all that much appetite for throwing huge amounts of money at it. But in some of the further leftleaning plans among the democratic candidates, there is a willingness to do rather grand infrastructure plants that would probably include quite a lot of money to close the Digital Divide. If measured by urban versus rural, probably also by income demographics. How do you think that will play out on the republican side as they are developing their plans, targeting rural voters . Craig you know, it is tough. The traditional republican arguments about physical display fiscal discipline and what have you have lost a fair amount of currency. A republicanis strategy, and it seems there certainly is one from the Trump Administration to contrast the Current Republican Party to the extreme left as categorized by say aoc and the squad, the extent that expensive infrastructure plans and big Spending Plans for health care and broadband and education and what have you are viewed as b eing espoused by that part of the democrats, there is almost certainly a therefore, we will stand for something the opposite of that that will become a big part of the republican platform. Host finally, with google, facebook, twitter, netflix, etc. So big in producing so much video, do you see mergers somewhere down the line . Craig well, um, possibly. Sayes always a desire to that the only way to survive is to cut costs and keep concentrating and, in the traditional model, that has also met you get a lot more leverage. But it depends where you are talking about in the value chain. The business of creating content is not a terribly scaleintensive business. It is in the sense that you need to be reasonably large to be able to survive a good year and a lean year. But you dont necessarily get to tv show all or a that much cheaper because you are already making eight or nine others. So, the economies of scale logic at that layer of the value chain are not compelling. At the layer of value of the chain of aggregating entertainment networks, so aggregating the aggregators, there its all about negotiating leverage. That feels today all increasing increasingly like a strategy of simply trying to defend a sinking ship. It may work for a little while but it will not change the trajectory of the business. I dont know that you were going to see a huge number of mergers for that reason. Its going to be harder to sell big deals into boardrooms because there will be less appetite for exposure to those businesses. Host as always, craig moffett, telecom analyst, we are your coming on the communicators. You as well. All communicators programs are available. Bei inhouse will order. Years, cspan has prevent been providing unfiltered coverage of the white house, the Supreme Court and Public Programs from around the country so you can make up your mind, created by cable in 1979, cspan has brought to you by your local cable or satellite provider. Cspan, your unfiltered view of government. President trump and first hosted ania trump state dinner for australian Prime MinisterScott Morrison and his wife jenny. This is about two hours and 20 minutes. Tonight President Trump and the first lady are hosting her second straight dinner. The first lady has decided on an alfresco dinner in the rose garden. 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