Jacko
July 2, 2009
Dateline:Â June 25, 2009.
Headline:Â Michael Jackson is Dead
Dateline:Â June 25, 2009
Headline: The Web Collapses Under The Weight Of Michael Jackson’s Death
Wake up America … if something really big happens (Think Crazy Man with nukes in North Korea), you can’t count on the web.
The government infrastructure programs and future Policy need to require minimum bandwidth delivery of 100 megabits – the proof is in the pudding. I think it should not only be a global economic imperative for the US of A competitiveness for REAL broadband over fiber but also in the interests of Public Safety and National Security.
Fiber access … plain and simple.
Something big happens (Think Crazy man with nukes in Iran), only the rural folks will have connectivity as major centers crash.
Life is Funny…
June 25, 2009
Just a passing thought on CEO’s and CFO’s in the telecom business since the Communications Act of 1996 with Wall Street and Investment Bankers as a constant backdrop.
If you owned a restaurant, and the Chef burned it down once, would you hire that Chef again?
How about if the Chef burned your restaurant down twice?
I still wrestle with how CEO’s and/or CFO’s that have burned down multiple companies or the same company multiple times somehow keep showing up and getting yet another shot in the kitchen. Doesn’t anyone do a background check? Does anyone check to see if they went to Culinary School?
How about the financial people that continually back the Chef? Maybe a little investment in a fire suppression system would be in order first.
I know…everyone in America is a victim. The Chef can’t be responsible.
Then there are the Chefs that run great restaurants and don’t burn them down. But, they are too small of Cheftom to possibly handle a “too big to fail” restaurant.
And then there are the financial investor Chefs in the kitchen with the Chef “helping out” …
Life is funny.
The Cat and the Rat
June 18, 2009
Though I try to steer away from politics in general (not that I don’t have a thought or two), when former AT&T Chairman & CEO monopolist Ed Whitacre’s name pops up as the next Chairman of GM, I have to say something.
This whole car thing…Ed’s appointment, including the Car Czar Rattner, is getting more and more bizarre.
Let’s start with America first, a habit I have of doing. We have an unenjoyment (unemployment) rate over 9%. Amongst the 9% of people not working in America, who want to work, we can’t find anyone else for these positions except Whitacre and Rattner.
Ed Whitacre was not nominated by the GM Management Committee. Ed Whitacre is not being voted upon by the shareholders. Ed Whitacre was appointed Chairman post-BK (chosen) by the Treasury Department! The same Treasury Department headed up by a guy named Geitner, an ex-Goldman Sachs hash slinger. The same Geitner socializing, I mean nationalizing, our banks to “save” them. Think TARP with strings attached and changing the rules, stress tests and other gimmicks.
President Obama just appointed his 16th Czar who is accountable to no one. This is the Salary Czar.
Wouldn’t you think that a Salary Czar might be against hiring Whitacre on? After all, Mr. Whitacre is living off of a $158 million AT&T pension … just like most other AT&T retirees.
Sure I know, he and other government-picked–I mean, independent–Board Directors will work for a dollar a year until things get better at GM. However, Ed Whitacre openly admits he knows nothing about the auto industry and has no experience manufacturing anything. So, at a dollar a year, I guess you get what you pay for. Even unenjoyment pays more than a dollar a year.
(Please don’t tell me how a Chairman is focused on strategy because you would be wrong — a Chairman’s primary duty, I think it is called a Fiduciary Duty, is to make sure all shareholder interests are represented at the table … emphasis on the word “all.” Many companies have separated the Chairman’s role from the CEO’s role for this exact reason – CEO focuses on strategy and execution; Chairman focuses on shareholder interests.)
Are we sure there is no other choice in the 9% unemployed that could use this job? A $158 million pension package … how does Ed get by? Really sorry to see a guy leave retirement to make ends meet. But social security being the mess it is in, can you blame him?
Now the Car Czar, Steve Rattner. Stevie has a reported net worth of at least $188 million, some say over $600 million. He is also building a small $18 million cottage on Martha’s Vineyard. Like our buddy Ed, I just don’t know how he makes ends meet.
In his role as Car Czar he is not accountable to anyone in terms of our Constitution–not even Ed. But if recent history is any indication of the future – if Ed and the Car Czar disagree — bye-bye Eddie!
Our Car Czar does have some history in the auto industry. In the recent past he invested into Cerberus Holdings. Yes– the Cerberus Holdings that took Chrysler private. Yes–the Chrysler with TARP money, who is now owned by Fiat; and well, let’s say Cerberus did not do quite well in the deal. Steven also owns $1000.00 in Ford Motor Company stock in a family trust. Seems qualified to me.
But Rattner’s specialty is really deal making and knowing how to invest in really good things! Yet another Real Smart Guy from Wall Street at the helm! I am not quite sure but Stevie may have been involved in some of those credit default swap things that are way too sophisticated for people like you and I to understand. I wonder how Stevie made out with his packaged paper?
Ed and Stevie probably crossed paths years ago. As Ed was putting Humpty-Dumpty (Ma Bell, aka: the ILECs) back together again by acquisitions which the government turned a blind-eye upon, I am fairly confident an investment banking firm that Mr. Rattner was with may have been involved in a few of those transactions … for a fee of course and independent judgment.
My point: we should all feel good that Ed and Stevie share common history – the formation of a team nucleus for the new GM.
What about GM in all this? Let’s see… Senior secured bondholders were trashed (forget about contracts and that pesky Constitution). Junior, unsecured debt became senior when converted into shares. We have a monopolist as Chairman while the government under its Car Czar owns 62% of the new GM.
I really don’t see a happy ending to this story. Do you?
Negotiating 101
June 16, 2009
Some day, I plan on sharing with you a few thoughts on what makes a sales person a professional sales person–and not just a self-proclaimed professional sales person. Next month, I’ll give a few questions you can ask any salesperson to determine the kind of professional they are.
That said, the sales process is a two way street and hopefully the end result creates a win-win, not only in a transaction, but also in building a forevermore relationship. No one should walk away from the table feeling cheated, used or manipulated. “No” is a very acceptable word to use reasonably in negotiations.
In previous lives, I have conducted business all over the globe. I enjoyed conducting business in Japan the most. Why? It’s a cultural thing there – if a deal is not good for your Japanese counterpart they will say “no” and conversely you are expected to also do the same. It’s a very honest way to conduct business with one party realizing that I can only get what I can afford or am willing to pay for, and the seller recognizing they can only negotiate to a certain point having a long term need to stay in business. Also, by the way, Japanese customers prefer you stay in business if they buy from you. It is definitely a different experience from other parts of the world.
Summarily, it’s all about The Golden Rule.
One of our sales folks at AFS whom is a professional, sent along a YouTube clip. Though humorous, it speaks volumes of how buyers sometimes try to conduct themselves which is frustrating to professional sales people. Though it is satire – it makes some good points.
Enjoy:
The softest pillow is a clear conscience.
Whistle While You Work
May 26, 2009
Inside and outside Telecommunications, opportunity abounds!
Much to my surprise and delight, amidst the “stimulus recovery”, money floating around vis-à -vis the American Recovery and Reinvestment Act of 2009 (ARRA), our government has taken action to combat potential fraud!
Without sounding like a Sham-wow commercial, but if you are around or near any of this money, you could be a big winner.  All you have to do is pucker up your lips and … whistle. (You thought I was going to say kiss some ass didn’t you?)
The Feds have issued, as a rule, broader (better) definitions of what constitutes fraud by those using stimulus funds. More importantly, especially if you are in the employ of a firm using said stimulus funds, even greater personal protections are afforded to the employee if you decide to blow that whistle.
Now, I’m not saying there are dishonest operators in America. I pretty much maintain that the ethics and integrity of most businesses and institutions are as good, if not better, than those found inside the Beltway. With over $700 billion in stimulus floating around, I am sure a few shekels may be “innocently” misplaced or used inappropriately. Mistakes happen, if you will…sort of like Presidential appointees or Congressional officials mistakenly not paying income taxes.
These new rules come from the Federal Acquisition Regulation (“FAR”) Counsel as the Enhanced Whistleblower Protections (FAR Case 2009-012). Just a few highlights:
The rules apply to all “Non-Federal employers” who receive grants or contracts, stimulus funds (“employers”), including state and local governments and public or private contractors and their subcontractors.
Employers cannot fire, demote or otherwise discriminate against an employee “as a reprisal for disclosing covered information.”
“Covered information” is any one of five offenses:
- Gross Mismanagement
- Gross Waste of Covered funds
- A substantial and specific danger to public health or safety
- An abuse of authority
- Violation of law, rule or regulation
- The Whistle Blower only needs to have “reasonable belief” that some hanky-panky is going on with the funds or use of funds
The covered rights cannot be waived by condition of employment, including pre-dispute arbitration agreements; unless it’s already included in a collective bargaining agreement.
The Kicker: Employers must post notices of these procedures, rights and remedies. So keep an eye on those bulletin boards!
Now, I put on my reality hat. I can only imagine the hell anyone will go through if he or she whistles and not necessarily the hell just from the employer. I am sure our Department of Justice will be most aggressive in pursuing such fraud on a “fast track” such as they do on qui tam complaints. (Cynicism)
So what am I saying? It’s good the Government wants to abate fraud, but expect years of your time to go by before anything, if anything, substantive happens. Whistle Blowers do receive some type of reward as a percent of the alleged fraud, so if I were a Whistle Blower, I wouldn’t spend the money until you have it!
Back to the Future
May 15, 2009
It’s Back to the Future for me – just like the movie.
The big media buzz of Verizon selling select rural wire line (copper) facilities to Frontier Communications over 14 states for $5.6 billion in Frontier stock is the latest indicator that a consolidation cycle is starting and credit markets thawing. Though this deal won’t see Free Cash Flow positive for Frontier Communications for two years, it is the right strategic move for both companies. For an RLEC transaction, the EBITDA multiple is very good.
Verizon is focusing on the higher growth population centers and gains from the divestment of rural facilities that no longer accommodate Verizon. This also lessens any argument that Verizon is a menacing monopoly by way of this divestment.
Frontier Communications benefits from scale as they specialize in more rural areas to the extent they gain more proficiencies by integration. Frontier Communications does not serve the most rural of rural locations, so don’t expect any effort to deliver broadband to the barn, Green Acres or Petticoat Junction. It’s a great consolidating play for Frontier Communications, especially using stock as a currency, leaving the ability to lever debt off of EBITDA flows as a viable option/hedge.
Why is it back to the future for me? Well, way back in the early 1990’s, I was the first President of Frontier Communications well before the Communications Act of 1996. Once again, I will find myself holding Frontier stock as a result of this transaction since I hold Verizon stock. I am more confident this time that my stock quality will sustain itself, as the last time I held Frontier stock, the bandits from Global Crossing bought Frontier Communications, and in very short order destroyed shareowner value, the wealth and pensions of thousands of people. And no one went to prison.
I would like to share with you, my gracious readers, a funny story as an aside to this transaction (at least for me). If you go back to the 1990’s, the really big thing back then was long distance carriers. Hundreds, if not thousands of them existed. In the mid-1990’s, a consolidating cycle amongst these carriers had commenced as there was an over supply of carriers (capacity) that drove long distance prices so low, that you either merged for cost synergy or went bankrupt.
During this time of long distance consolidation, I participated in the Frontier Corporation M&A meetings discussing various targets or strategies. My invite was eventually lost in the mail.
If you have read the blog for sometime now, you know I don’t buy into the lemming model of business (move as a group to mitigate risk in the eyes of Wall Street…after all, if everyone is doing the same thing, it must be the right/safe thing to be doing. And, Wall Street, of course, being the fee-based vultures they are, happily endorses such paradigms.) Myself, I prefer contrarian moves and innovation.
Back to the M&A meetings: My first meeting, I went and listened. After all I was the new guy from “outside” the phone company and I wanted to take in the ambience. The second meeting, I raised my hand and made a suggestion. That suggestion was not to focus on buying into the over-supply of long haul carriers which drove prices into the ground, but instead to focus on acquiring local operating companies that already own infrastructure who are a gateway to the multitudes of long distance operators. My simple mind theory on this approach was that once prices go down, they usually don’t go up – integration synergies will keep the price wars going as things consolidate. I was told: “Dave that’s an interesting idea.” And the discussion continued on acquiring long haul carrier interests.
The third meeting I attended, I listened attentively again. Once again, I suggested a contrarian focus on acquiring local operators, this time my logic was that it had been my experience that those whom are closest to the customer have a better relationship and competitive advantage over those that are more distant – like in long distance. I was told: “Dave–that’s an interesting idea.” And the discussion continued on acquiring long haul carrier interests.
The fourth meeting…well there was no fourth meeting for me. Somehow my name fell off the e-mail invitation list. Several months later, Frontier merged (acquired) a major long distance carrier.
Today, as we know, long distance is near free with services such a Vonage, VOIP, Skype and MagicJack rapidly driving all-you-can-eat long distance services at flat rates across the globe. Flat rate all-distance is not far behind.
Since waking up with Back to the Future, my biggest worry now is waking up in Ground Hog Day – just like the movie. There is nothing brewing, but the Ground Hog irony of this adventure would be if Frontier Communications were ever to acquire American Fiber Systems because of our local presence, unique fiber assets, lucrative ARPU’s and our focus on being closest to the customer!
Talk about crazy!
Friday’s Reader Response
May 8, 2009
Dave
I am curious, is Long Distance Access costs such a big deal since the RBOCs own the major IXCs? I know for years the IXCs have been asking for Access reform but I haven’t heard much of late. I guess the last was maybe the Missoula plan that AT&T promoted. What do you think?
-Loyd
Loyd,
Thanks for reading, Loyd, and for asking this question.
Given the growth of wireless access, it is a matter of when, not if, that “bill and keep” will be implemented. I predict within the next year it will be in the cross hairs of the FCC and finalized.
Getting “bill and keep” in place does two things: (1) It simplifies things while uprooting an artificial industry of having to analyze access charges constantly which should lower costs; and, (2) it is a viable step to enable flat rate data and Internet services. Usage based services are so old school in this era of routers, packets and alternative access methods. The last folks who do not want to see “bill and keep” implemented are the RLECs and the arbitrage asset-light carriers who rely on terminating access revenues. The arbitrage game is going to become more difficult as further IP penetration occurs as IP networks are agnostic.
-Dave
Spectrum License–Just like Oceanfront Property–Going Fast
April 29, 2009
I have stumbled upon something. It’s so hideous we must protect our children from it.
One part of me says not to look at it again. The other side says to dig in so you can drive yourself crazy.
I have discovered a journal that I was not aware of over my vast and somewhat interesting career in telecommunications. Perhaps it was for the better, maybe God was trying to protect me. This Journal is called: Federal Communications Law Journal. This journal is a cesspool of legalese, theories and views of telecommunications not suitable for those under the age of 21. It is a Beltway Bible of sorts.
In the future, I just may find myself writing a blog comment or two on some article I happen to run across that totally contradicts common sense or demonstrates slight of hand maneuvering. Yes, it is possible, the typical article in this journal will more than likely have been written by a lawyer with a political bent. In essence, I will be reading the devil’s words!
Just happens to be, I read an article already. It was 36 pages long. It espoused a “vision” for a new Communications Policy in this new millennium. The author–I won’t share this person’s identity, but I will share this persons ideas on how the government should be managing licensed spectrum. The author has a deep, deep, deep Beltway history.
The author pretty much pooh-poohs the Communications Act of 1996, though the author played a significant role in its foundation, philosophy and design. The article is pure genius of hindsight Teflon and forward prose of a new communications era. The new Policy “vision” spoke about many, many aspects of Telecom – from access networks to real facilities competition to VOIP to spectrum licensing. The spectrum licensing idea, I mean “vision” is one aspect I found most interesting.
Remember not to long ago the spectrum auctions? This was when carriers or other interested parties would bid on spectrum licenses nationwide, regional or in pockets. If you received a license, you thought you bought some type of exclusive use of the spectrum frequency obtained. In aggregate, these licenses sold for billions of dollars. I would often hear, “… you can’t go wrong buying a spectrum license, it’s like ocean front property, they just don’t make it any more!”
Anyhow, the visionary in this article has a different interpretation of these licenses under a new Communications Policy. I will attempt to simplify things as not too many PhD’s read this blog nor should they!
Let’s say you bought a 700 MHz license. The signal reach, coverage, or broadcast distance falls within a certain band based upon linear amplitude. In simpler terms, for example, we have a 50,000 watt radio station in Rochester, New York that runs on the AM band at the 1180 MHz frequency. This wattage allows for extremely wide broadcast reach – it can cover 26 states and parts of Canada. The reason it can do this is that under Federal license it’s linear amplitude of 50,000 watts allows it to do so. The government licenses this as a part of the Emergency Broadcast System or EBS. Cincinnati, Ohio also has a 50,000 watt station likewise which serves a similar purpose. Such high-power stations are located across the United States for EBS situations stemming from the Cold War days. If you try to find another AM station close to a 50,000 watt behemoth on the dial, it is difficult to gain reception because the signal amplitude is overpowering.
From a commercial perspective, those holding these types of radio broadcast licenses have far greater broadcast reach–larger audiences than those running a 100 watt linear antenna, for example. A need to boost signals or repeat signals is non-existent.
So let’s say you bought a 700 MHz license and you believe you have bought some beach property. No one can block your view, it’s an exclusive. Well, according to the visionary in this article, new Telecom Policy should honor these licenses at their peak linear values. However, lower powered devices should also be able to operate within the band provided that they do not interfere and remain distant from the peak linear aspects of the original licensed owners. Thus, and subject to government regulation, a certified wireless device that can operate within our 700 Mhz spectrum example, may do so at no cost, provided the device does not go above a yet-to-be-determined linear range.
May I quote: “Licensees should be allowed to compete to provide whatever service they think will serve consumers’ demand, provided that they do not cause undue interference to other spectrum users.”
Take this a step further, if you can ride free at 700 MHz albeit over a shorter distance, the use of femtocells may certainly assist in broadening the capability. But that’s just me thinking out loud. If I were a cable company I would…
Talk about the large wireless carriers getting kicked in the wallet! Once again, this is a new Policy vision–not my vision. I will be watching as the new FCC and Administration start looking at revising telecom policy.
Another hypocritical thought I found amazing in this journal article was an idea that the FCC needs a makeover. May I quote: “To this end, the FCC should be about half the size, and about half the personnel should be engineers, economist, and other technical advisers, as opposed to lawyers. No other field offices or other industry support groups should exist.”
Talk about calling the kettle black! Talk about a new Policy of — Do As I Say, Not As I Did!
A Week of Responses 4
April 24, 2009
The last in this week’s installment of response to readers–
Response to “Why I’m Bullish on Qwest”:
Dave,
Verizon was not forced to sell any of its rural properties - Hawaii, KY, or New England. It did it purely to get out of rural was the story. To get out from under the responsibility that Qwest, Windstream and Embarq have: how do I leverage my current aged copper plant in rural land to forestall declining revenue? In other words, I can’t or won’t roll out FTTx because there isn’t enough return.
–Reader
Dear Loyal Reader,
Verizon was smart, they purposely exited remote business areas in relative comparison to their footprint. They got out from underneath a lot of high maintenance network, limited copper infrastructure and a high cost per mile to serve. Verizon is smart. If you go back to the mid-1990’s, cable companies did something similar by swapping properties with each other to consolidate a footprint. Cable companies are not dumb either. As the saying goes inside the
beltway — never waste a good crisis — the monopolist, never waste a good opportunity to concentrate.
–Dave
Dave,
What does Qwest (or US West) do without a national fiber network? It loses all that IP and LD revenue as well as its long-haul wave revenue and probably its CyberCentre money.
–Reader
Dear Loyal Reader,
I don’t run Qwest, but I would sell off a few rural states (like Verizon did) — pare down some more debt. I would consolidate local fiber assets in more lucrative markets and become a consolidator and wholesale provider of local connectivity and IP.  The business model is simpler and needed.
–Dave
Dave,
$2-3B against a debt of $14B. It would be better off spinning off the LH business like Alltel or Sprint did. IPO it and pay off that debt. Even in this market it would probably work.
–Peter
Peter,
There is no IPO market. Long haul was sexy in the 1990’s, that is long over.
–Dave
A Week of Responses 3
April 23, 2009
A third installment of responses to readers’ comments–
In response to “Fresh Squeezed in Florida”:
Dave,
It is interesting you bring up the differential treatment between Cable MSO and Telecom. We are working with the same issue regarding property taxation in relation to the Communications Industry. Telecommunication companies in most states are taxed Centrally at the State level and Cable MSO’s are taxed at the local level. Rather than create a 21st Century tax scheme for a 21st Century technology, some states are trying to pull the Cableco’s into Central Assessment. I don’t believe that is the answer.
–Brian
Dear Brian,
In relation to this, there are different cost rates for pole attachments if you are a utility, cable company, ILEC or CLEC … one would think a cable is a cable … how does the pole know any different …
–Dave
Response to “Skype Makes an Interesting Move”:
Dave,
I am very excited that this codec was released. However, I am really wondering how long until hardware devices start taking advantage of this? Will we start seeing a flood of firmware updates with SILK support?
–TJ
TJ,
To be honest, I have been around the software business a long time, it makes me think about bad things, really bad things. I don’t miss the software business.
–Dave
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