AT&T Told to Sell DirecTV by Hedge Fund Investor

VictoriaFTA

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So, with it they could have covered maybe 25-27 states, with D* they cover 50 States plus PR
Cover the whole country with a dying technology that no one wants anymore vs. covering at least half the country with a technology that everyone desires and will continue to desire for the foreseeable future.

Brilliant business strategy!

I know that whenever I look for a new place to live, the first thing I do is find a list of addresses that have fiber service available to them. *Then* I start evaluating properties that are on that list. No fiber connectivity is a deal breaker in 2019.
 
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slice1900

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Just because they could spend $70 billion and cover the country with fiber doesn't mean that investment would be profitable. They have competition for internet service from incumbent cable providers who already have or will soon be upgraded to offering gigabit service (with 10 gigabits on the horizon, not that such speeds are useful for residential customers) and in a few years from 5G.

If they can't earn enough from their fiber to pay back that $70 billion investment, you can't argue it would have been a better investment unless they lose less money with fiber than they would have with Directv.
 

Juan

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And google would be making trillions
Fiber-to-the-home is the best possible connection for internet service, better than cable (actually hybrid fiber/cable) networks. Once you spend the money to lay the fiber, you can collect on it for years by charging for broadband, as well as other IP-based services like TV, home phone, etc. All-fiber networks are also a lower cost to operate and maintain than hybrid fiber/coax.

If AT&T had used the money they spent on the DTV acquisition to instead implement FTTH, they could have wired up every urban/suburban area in their multi-state footprint and even had money left over to expand into lots of other states too. They could have taken a huge share of broadband and TV service away from Comcast and Charter and kept that business for years.
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NashGuy

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Just because they could spend $70 billion and cover the country with fiber doesn't mean that investment would be profitable. They have competition for internet service from incumbent cable providers who already have or will soon be upgraded to offering gigabit service (with 10 gigabits on the horizon, not that such speeds are useful for residential customers) and in a few years from 5G.

If they can't earn enough from their fiber to pay back that $70 billion investment, you can't argue it would have been a better investment unless they lose less money with fiber than they would have with Directv.
Heh. C'mon, fiber broadband networks will bring in WAY more money over their useful lifespan per home passed than will DirecTV. AT&T can get up to at least 50% penetration in areas where they introduce FTTH and be quite profitable long-term.

Sure, HFC's DOCSIS continues to improve and, thanks to a variety of engineering tricks and plant upgrades, will eventually hit symmetrical 10 Gbps in the latter half of the 20s. But whatever HFC can do, FTTH can do better because it's only the best part of an HFC network: the fiber. All passive optical. By the early 2030s, we'll probably see the major HFC networks replace those last stretches of coax in their networks and go all-fiber too. Eventually, it just becomes the best, most cost-effective option.

As for 5G, what do you think is feeding those wireless cells? Fiber.
 
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NashGuy

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And google would be making trillions
Deploying fiber is cost-intensive. It's a long-term investment that takes time to pay back.

Google, at its heart, is an internet-delivered advertising company. It's in their interests for everyone to be connected to the internet all the time with fast speeds and no data caps. I think Google Fiber was just their attempt to make a lot of noise and create public excitement and demand for gigabit internet, especially fiber-based. Their move did help light a fire under AT&T, Comcast, etc.

And so as gigabit internet became more and more widely available in metro areas, I think Google said, "OK, our work is largely done here. Why bother investing huge sums to deploy fiber, especially in neighborhoods where we'll be one of three wired providers (competing with both the incumbent cable and telco operators)? We're making plenty of money on our core ad business through search, YouTube, etc. Let's leave these expensive infrastructure projects to others."
 

CSM

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After thinking about it should AT&T have upgraded everyone to FTTH also do 5g for rural areas, not bought DTV and upgraded UVerseTV? They could have ordered the Arris 4k IPTV DVR, revamped the UVerseTV interface and with FTTH and 5g UVerseTV would be able to do 6 HD streams or maybe 4 HD and 2 4K streams for every customer? Could they have got more customers to have better channel contract negotiations doing it that way?
 
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slice1900

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If installing fiber is so lucrative, why did Google give it up? Why has Verizon pretty much halted new fiber builds, and Centurylink hasn't added any new ones in years?

FTTH is very expensive, and unnecessary in the face of DOCSIS 3.1 speeds. Why do you want to pay $1000+ per customer to install FTTH and hope they stay signed up long enough to pay it back? There's a small town around here with a cooperative telco that started running fiber, but they require you to sign a FIVE YEAR contract to get it, because that's how long it will take for payback.

If AT&T builds out fiber everywhere, what's the incentive for people to switch to fiber from cable internet? Unless their cable internet provider has a lot of outages, there is none unless they offer fiber cheaper. And if they do that, it just takes longer to payback that massive install cost.

Fiber works best in areas with crappy cable companies that have unreliable networks or still haven't upgraded to DOCSIS 3.1 yet. But if a competitor started building fiber out in the area, I'm sure it would go to the top of the list for DOCSIS 3.1 upgrades...
 

Juan

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Verizon still doing fiber...but quietly
If installing fiber is so lucrative, why did Google give it up? Why has Verizon pretty much halted new fiber builds, and Centurylink hasn't added any new ones in years?

FTTH is very expensive, and unnecessary in the face of DOCSIS 3.1 speeds. Why do you want to pay $1000+ per customer to install FTTH and hope they stay signed up long enough to pay it back? There's a small town around here with a cooperative telco that started running fiber, but they require you to sign a FIVE YEAR contract to get it, because that's how long it will take for payback.

If AT&T builds out fiber everywhere, what's the incentive for people to switch to fiber from cable internet? Unless their cable internet provider has a lot of outages, there is none unless they offer fiber cheaper. And if they do that, it just takes longer to payback that massive install cost.

Fiber works best in areas with crappy cable companies that have unreliable networks or still haven't upgraded to DOCSIS 3.1 yet. But if a competitor started building fiber out in the area, I'm sure it would go to the top of the list for DOCSIS 3.1 upgrades...
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CSM

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Not counting OTT was another reason UVerseTV wasn’t getting anymore customers is that weren’t giving new customers the latest DVR and didn’t update the UI?
 

NashGuy

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If installing fiber is so lucrative, why did Google give it up? Why has Verizon pretty much halted new fiber builds, and Centurylink hasn't added any new ones in years?

FTTH is very expensive, and unnecessary in the face of DOCSIS 3.1 speeds. Why do you want to pay $1000+ per customer to install FTTH and hope they stay signed up long enough to pay it back? There's a small town around here with a cooperative telco that started running fiber, but they require you to sign a FIVE YEAR contract to get it, because that's how long it will take for payback.

If AT&T builds out fiber everywhere, what's the incentive for people to switch to fiber from cable internet? Unless their cable internet provider has a lot of outages, there is none unless they offer fiber cheaper. And if they do that, it just takes longer to payback that massive install cost.

Fiber works best in areas with crappy cable companies that have unreliable networks or still haven't upgraded to DOCSIS 3.1 yet. But if a competitor started building fiber out in the area, I'm sure it would go to the top of the list for DOCSIS 3.1 upgrades...
The answer is that it's lucrative but only in the long run, after a very expensive up-front build-out. And Wall Street doesn't like lots of short-term pain for extended long-term gains.

The hypothetical scenario we were talking about is: What if AT&T had taken all that cash they paid (i.e. debt they incurred) for buying DirecTV and instead spent all that money on FTTH deployment? The answer is that, in hindsight, it would have been the MUCH smarter long-term move. (Hindsight is 20/20, of course. AT&T didn't realize that linear-channel cable TV service was peaking right when they bought DirecTV.) But in reality, Wall Street would have punished AT&T for spending so much money at the time on FTTH because the payback would have taken so long. So had AT&T *not* bought DirecTV, they probably wouldn't have instead done FTTH.

Still, though, it's an interesting hypothetical.

As for what's the incentive to switch from cable to fiber? Well, for one, fiber has a reputation of being better, more technologically advanced. And it is. But even setting that aside, if a second broadband operator comes in and can offer a product of at least equal quality to cable, with the same or slightly better prices, and they advertise it enough, they'll end up with close to 50% of the market in time. It's just what happens. Folks tend to *hate* the local cable company. Even with FTTN Uverse around here, AT&T got a nice big chunk of the business in Nashville. That'll only go up now that they've converted most of the area to AT&T Fiber.
 
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Jimbo

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Cover the whole country with a dying technology that no one wants anymore vs. covering at least half the country with a technology that everyone desires and will continue to desire for the foreseeable future.

Brilliant business strategy!

I know that whenever I look for a new place to live, the first thing I do is find a list of addresses that have fiber service available to them. *Then* I start evaluating properties that are on that list. No fiber connectivity is a deal breaker in 2019.
Well, that cuts down your destination considerably.
 
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Jimbo

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Heh. C'mon, fiber broadband networks will bring in WAY more money over their useful lifespan per home passed than will DirecTV. AT&T can get up to at least 50% penetration in areas where they introduce FTTH and be quite profitable long-term.

Sure, HFC's DOCSIS continues to improve and, thanks to a variety of engineering tricks and plant upgrades, will eventually hit symmetrical 10 Gbps in the latter half of the 20s. But whatever HFC can do, FTTH can do better because it's only the best part of an HFC network: the fiber. All passive optical. By the early 2030s, we'll probably see the major HFC networks replace those last stretches of coax in their networks and go all-fiber too. Eventually, it just becomes the best, most cost-effective option.

As for 5G, what do you think is feeding those wireless cells? Fiber.
What do you think is supplying the service to the areas already ? Fiber ...
All the VDADs as well as older technology are fed by FIBER .... Not all of them as there are a bunch still out there, but the majority of them are already fiber fed.
 

Jimbo

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The answer is that it's lucrative but only in the long run, after a very expensive up-front build-out. And Wall Street doesn't like lots of short-term pain for extended long-term gains.

The hypothetical scenario we were talking about is: What if AT&T had taken all that cash they paid (i.e. debt they incurred) for buying DirecTV and instead spent all that money on FTTH deployment? The answer is that, in hindsight, it would have been the MUCH smarter long-term move. (Hindsight is 20/20, of course. AT&T didn't realize that linear-channel cable TV service was peaking right when they bought DirecTV.) But in reality, Wall Street would have punished AT&T for spending so much money at the time on FTTH because the payback would have taken so long. So had AT&T *not* bought DirecTV, they probably wouldn't have instead done FTTH.

Still, though, it's an interesting hypothetical.

As for what's the incentive to switch from cable to fiber? Well, for one, fiber has a reputation of being better, more technologically advanced. And it is. But even setting that aside, if a second broadband operator comes in and can offer a product of at least equal quality to cable, with the same or slightly better prices, and they advertise it enough, they'll end up with close to 50% of the market in time. It's just what happens. Folks tend to *hate* the local cable company. Even with FTTN Uverse around here, AT&T got a nice big chunk of the business in Nashville. That'll only go up now that they've converted most of the area to AT&T Fiber.
You do realize how long it would take for that BUILD your talking about would take don't you ...

You guys sound like they should have dropped everything and just went with it across the country ... don't forget they still would have all the other depts to continue to support, so you can't just take all the people that were working and just change them to Fiber specialists ...

You make it sound like they can just drop all the rest of the business and devote everyone to placing fiber.
Ain't happening.

Btw, from what I remember was that Google was the Hot company with thier fiber and that lasted a few years and they said, this sucks, this cost WAY too much money ... and got out of that money pit.
 

navychop

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Didn’t Google back off because their idea of shallow trenching simply didn’t work out?


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slice1900

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Didn’t Google back off because their idea of shallow trenching simply didn’t work out?

They found fiber buildouts were too expensive, so they started looking for ways to make it cheaper and "shallow trenching" was one of their money saving ideas. It didn't work out, so they abandoned the whole thing.

If anyone has an incentive to get everyone a high speed internet connection it is Google, since they can collect a ton of personal information via customer's internet links to add to their vast databases, so if they don't think it makes financial sense...
 
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navychop

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I wonder how many of that lost 1.1M went to Dish?

We should have a pretty good idea soon.


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NashGuy

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You do realize how long it would take for that BUILD your talking about would take don't you ...

You guys sound like they should have dropped everything and just went with it across the country ... don't forget they still would have all the other depts to continue to support, so you can't just take all the people that were working and just change them to Fiber specialists ...

You make it sound like they can just drop all the rest of the business and devote everyone to placing fiber.
Ain't happening.

Btw, from what I remember was that Google was the Hot company with thier fiber and that lasted a few years and they said, this sucks, this cost WAY too much money ... and got out of that money pit.
Sure, it would have taken time to build but, in the hypothetical analysis, the COST over time to build it out would have been the same as what they dropped in one fat bundle to buy DirecTV. Again, go back to the initial comment that sparked this discussion: instead of spending that $48.5 billion on DirecTV, AT&T could have spent the same amount on fiber-to-the-home broadband deployment. Yes, they'd have to pay for the fiber and pay for the engineers and labor to deploy it. I don't know how many miles/addresses they could have passed for $48.5 billion, but I'm thinking quite a few. And all those would be in addition (or in place of) the 14.5 million fiber-available addresses that they ended up doing after the 2015 DirecTV acquisition anyhow. So obviously, yes, AT&T very much has the capacity, even in addition to operating DirecTV, to do a large-scale FTTH deployment. What makes you think they couldn't have done an even larger one without running DirecTV too?

Again, the question is to what extent the company (and its shareholders) wants AT&T to spend large sums on infrastructure in the near-term in early to maximize long-term profits. That's often a hard sell.
 
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