The staff at the Federal Communications Commission decided Wednesday to make a non-decision decision regarding the merger of Comcast and Time Warner Cable, and are recommending turning over the matter, including millions of pages of company documents and 14 months of investigative findings to an administrative law judge to sort out.

The procedural move, dubbed by many regulatory experts as a “deal-killer,” is known officially as a “hearing designation order.” But executives at Comcast know it really means the FCC is sending a strong signal it does not believe the merger is in the public interest.

The sudden recommendation by the FCC is seen by some observers as a coordinated move with the U.S. Department of Justice to let Comcast CEO Brian Roberts know the deal is in serious peril. In 2011, the Justice Department declared its opposition to another blockbuster merger between AT&T and T-Mobile, and the FCC announced its own opposition just a few hours later. The merger was declared dead shortly thereafter.

Placing the matter in the hands of an administrative law judge would mean a drawn-out, complicated hearing that would probably last longer than the 1995 trial of O.J. Simpson. Few companies bother. Even if Comcast decides it will fight, if the Justice Department successfully challenges the merger in court, the hearing designation order is moot and the merger fails.

Most observers expect Comcast will call off the merger before dragging the matter out in a court or hearing room.

The Wall Street Journal broke the story last night, calling it a “significant roadblock.”

Wall Street analysts were more direct.

“The fundamental problem with this transaction is there is no major constituency outside of Comcast and Time Warner Cable that want it to move forward,” said Rich Greenfield, analyst at BTIG Research, which has been predicting the deal falls apart. Mr. Greenfield noted that it would be a “very uphill battle” for Comcast to prove its case through the FCC’s hearing process that its merger is in the public interest. “Is it really worth spending more time and resources to fight the government?”

“I’d never say anything was 100 percent dead, but this is in the 99 percent category,” Greenfield added. “It’s not every day that you have a transaction that is universally hated by everyone outside of Philadelphia,” where Comcast is based.

“No, the Comcast deal isn’t dead yet,” said telecom analyst Craig Moffett on Thursday. “But it’s a bit like an elephant that has been dropped out of an airplane. At around 10,000 feet, it is technically still alive. But it is falling fast, there’s not much you can do to stop it, and its odds of survival are pretty low when it hits the ground. Engaging in a war of attrition with the U.S. government is generally a bad idea and one rarely undertaken.”

The usually brash and confident Comcast was uncharacteristically muted in their response to the latest DOJ and FCC developments.

“As with all of our DOJ discussions in the past and going forward, we do not believe it is appropriate to share the content of those meetings publicly, and we, therefore, have no comment,” said a Comcast spokeswoman.

The apparent looming defeat of the Comcast/Time Warner Cable merger would be a testament to unified opposition from consumers, programmers, competitors, and emerging online video distributors that might one day fully challenge traditional cable television.

“In a democracy like this, you have gather your forces to say no to politically powerful people,” Mark Cooper, a Comcast opponent and research director at the Consumer Federation of America, told the Philadelphia Inquirer.

[flv]http://www.phillipdampier.com/video/CNN Death sentence for Comcast merger 4-23-15.mp4[/flv]

A death sentence for the Comcast-Time Warner Cable merger? Analysts think so. CNN reports on the history of a merger deal that used to be “inevitable.” (1:42)

Moffett

Nearly 20 years after the 1996 Telecom Act deregulated much of the cable industry, the renewed threat of increased consumer protection and oversight by the Federal Communications Commission and the dwindling chance regulators will approve the merger of Comcast and Time Warner Cable has increased pessimism about guaranteed high cable industry profits on Wall Street.

Craig Moffett, senior analyst at MoffettNathanson has departed from his usual optimism about the prospects of cable industry stocks and downgraded Comcast, Time Warner Cable and Charter Communications this morning to “neutral,” suggesting the Title II reclassification of broadband could eventually lead to FCC mandated price cuts on broadband after the agency finalizes Net Neutrality regulations.

The cable industry had maintained high hopes for the Republican majority in Congress to trample Net Neutrality and allow the cable industry to continue boosting rates and introducing other pricing schemes including usage-based billing, but Moffett has grown increasingly convinced Republicans cannot override President Obama’s veto power if Congress attempts to change or end FCC oversight over the broadband business.

The cable industry has grown increasingly panicked over a new spirit of activism inside the FCC, particularly after FCC chairman Thomas Wheeler began asserting their “worst-case scenarios” for broadband speed and Net Neutrality. The National Cable and Telecommunications Association has warned Net Neutrality and Title II would stifle innovation. But Moffett fears it will more likely stifle profits.

“It would be naïve to suggest that the implication of Title II, particularly when viewed in the context of the FCC’s repeated findings that the broadband market is non-competitive, doesn’t introduce a real risk of price regulation,” Moffett wrote. “Not tomorrow, of course, so yes, near term numbers won’t change. But terminal growth rate assumptions need to be lowered. Multiples will have to come down.”

Moffett, who had been optimistic about the likely approval of the merger deal between Comcast and Time Warner Cable is much less so today.

His earlier 70-30 odds in favor of the merger are now down to 60-40. The headwind of negative press and the reclassification of broadband to a minimum speed of 25Mbps poses considerable risk the deal will be ruled anti-competitive.

Moffett claims the cable industry was also banking on jacking up prices for Internet access, already a very profitable service, to cover reduced profits from cable television. But now the FCC will be watching.

“In the past, changes to broadband pricing would have been the natural remedy,” Moffett said. “That avenue may be no longer open.”

President Barack Obama’s strong commitment to robust Net Neutrality protections for the Internet has created a nightmare scenario for Net Neutrality opponents who can no longer count on an ex-telecom industry lobbyist now in charge at the Federal Communications Commission to take care of their business interests with watered down, damage-controlled, net-protection-in-name-only.

The attacks on President Obama’s convictions began almost immediately after his video was published on whitehouse.gov with Sen. Ted Cruz’s declaration that Net Neutrality was Obamacare for the Internet, a statement that may have played well with his Texas tea party base, but was quickly parodied on social media:

Hal Singer from the ironically named Progressive Policy Institute opined that President Obama’s decision to declare real Net Neutrality would likely lead to the new majority of Republicans to completely defund the agency in retaliation. PPI is strongly opposed to Net Neutrality and many other consumer protection measures and represents the interests of the George W. Bush wing of the Democratic Party, which consists of about six people (and Harold Ford, Jr. probably wishes he was one of them.)

“We are stunned,” Michael Powell, a former FCC chairman who is now president of the National Cable & Telecommunications Association, said in an e-mail to Bloomberg reporters. After six years of supine oversight of giant telecommunications companies from former FCC chairman Julius “Data caps are innovative” Genachowski and the installation of an ex cable and wireless industry lobbyist as chief regulator of the country’s telecommunications industry, AT&T, Verizon and Comcast have faced few challenges to their regulatory wish lists.

The Washington Post “Innovations” editorial page proved once again the Post is now the leading publication neocons and pro-business conservatives keep hidden under their mattresses next to the Wall Street Journal for those private moments. WaPo devoted news space to a hack editorial from Larry Downes, who turned up in Congress earlier this summer to cheerlead the merger of AT&T and DirecTV and has vociferously opposed Net Neutrality since at least 2011.

In his generally fact-challenged piece, Downes proclaims the Obama Administration was seeking nothing less than to saddle the Internet with oppressive outdated regulations written in 1934, that the courts threw out earlier hybrid/compromise Net Neutrality regulations simply because they lacked the words “commercially unreasonable,”  and that implementing Net Neutrality would destroy investment in the world’s leading cable, mobile, and fiber networks.

Downes does not get out much, because other countries as diverse as South Korea, Lithuania, Bulgaria, Japan and Singapore have long since passed the United States, with much of Europe poised to follow their lead. Some of them even enforce Net Neutrality and the sky failed to collapse as a result. Broadband life is good in Bucharest.

Nothing about the Obama Administration’s proposal for Net Neutrality would do anything beyond preserving the Internet as we know and love it and judges told the FCC’s attorneys they had no authority to impose Net Neutrality under the freak flawed framework established by Michael Powell, former FCC chairman-turned cable industry lobbyist.

Downes also laims he is shocked, shocked I tell you to discover the FCC isn’t immune to political pressure from the White House and other Beltway forces. Except he is one of those Beltway forces.

The Post was content disclosing that Downes was simply a co-author of “Big Bang Disruption:  Strategy in the Age of Devastating Innovation” (Portfolio 2014) and the project director at the harmless-sounding Georgetown Center for Business and Public Policy.

If you suspected Downes was just a tad closer to the industry he often advocates for than the newspaper was letting on, you would be right.

In fact, Downes is a “fellow” at the Bell Mason Group, a corporate advisory firm “passionate about partnering with forward-thinking corporate venturing and innovation executives, […] helping clients build risk-reduced, impactful programs and overcome corporate antibodies and obstacles [and deliver] measurable value.”

Net Neutrality is an example of one of those “risky corporate obstacles” to total monopoly control that could deliver Big Telecom companies “measurable value.” Among Downes’ past clients is a tiny phone company named AT&T, but you wouldn’t know it from Bell Mason’s well-scrubbed website. Too bad for them archive.org took a snapshot of an earlier version of his bio, revealing his less-than-arm’s-length relationship with AT&T.

None of this is apparently pertinent to the editors of the Washington Post. Disclosing Downes’ co-authorship of a far-less germane book one critic called a “big bang disappointment” was more than enough.

Bloomberg News avoided the hopelessly unbelievable talking points about Internet takeovers and concluded President Obama threw his FCC chairman under the bus. But even that conclusion originated from the conservative, anti-Net Neutrality group the Heritage Foundation, quoted in the piece:

“He threw Tom Wheeler under the bus,” said James Gattuso, a senior research fellow at the Heritage Foundation, a Washington-based policy group. Obama’s strong stance makes it harder for Wheeler to reach a compromise among proponents of regulation, Gattuso said.

Except proponents of Net Neutrality are tired of compromises that favor ungrateful telecom companies that routinely sue even the most minor consumer protections out of existence. Wheeler was rumored to be proposing yet another compromise as late as last week, one that would protect deep-pocketed content companies but leave consumers open to further abuse from high cost fast lanes and speed throttles.

Various tea party groups ginned up with claims of an imminent Obama socialist takeover of the Internet, Maoist censorship and protectionist rate regulation took to the comment sections of various news pieces and wrote comments like this:

“I don’t want government control that would force private companies not to control what I can see on the Internet.” 

For public policy mavens that claim Net Neutrality is a solution in search of a problem, countering Wall Street’s decisive view that Net Neutrality is a disaster for plans of revenue boosting schemes are harder to counter.

Obama’s intervention effectively kills Wheeler’s mixed plan, Paul de Sa, a senior analyst at Sanford C. Bernstein & Co. in New York, said in a note. It will be hard for the FCC, with a majority of Democrats appointed by Obama, to deviate significantly from his preference, and strong rules are likely, de Sa said.

Obama’s intervention “does not lead to price regulation of broadband,” in part because the FCC has no desire to do so, he said. Debate in Washington will intensify, with Congress holding “interminable hearings” and trying to prohibit the FCC from applying the strong rules, de Sa said.

The meaning to investors was clear: Internet profiteering plans are on indefinite hold. Comcast Corp. fell 63 cents or 1.2 percent, to $52.33 at 10:39 a.m. in New York trading, and are down as much as 5.1 percent this week. Time Warner Cable Inc. dropped $3.34, or 2.5 percent. AT&T Inc. fell 16 cents to $34.97 and Verizon Communications Inc. (VZ) fell 15 cents to $50.57.

A move to fully reclassify broadband, even if it includes “forbearance” from rate regulation, as President Obama suggested, would send investors scurrying, according to Kim Wallace, a policy analyst at Renaissance Macro Research. That is because it would cast doubt on cable and telecom companies’ abilities to generate a “sufficient return” on capital investments, which they expect to be sky high based on the limited amount of competition that exists today.

Craig Moffett, perennial cable stock booster, had the temerity to blame the latest developments on Comcast.

“The great irony is Comcast helped start this ball rolling by trying to buy Time Warner Cable in the first place,” said Moffett, an analyst at MoffettNathanson. “With the specter of possible price regulation hanging in the balance, [the question is] would Comcast still want to increase its exposure to distribution assets” in broadband.

The Wall Street press provides some salve for the chafed telecom industry high-flyer — the likely prospect of litigation tying up Net Neutrality long enough for Republicans to write new telecom laws that would lead to near-total regulatory capitulation and a free hand for providers. But investors sure hate uncertainty, so the Money Party will have to be postponed for now.

We have four illuminating news stories to share today on Net Neutrality:

[flv]http://www.phillipdampier.com/video/PBS Why is Obama weighing in on net neutrality 11-10-14.mp4[/flv]

More than 3 million commenters crashed the Federal Communications Commission website in July to weigh in on the issue of net neutrality. Now President Obama has added his strong support, directing the FCC to protect equal access to all web content. Judy Woodruff speaks with U.S. chief technology officer Megan Smith about the president’s move. (7:33)

[flv]http://www.phillipdampier.com/video/Bloomberg Ex-FCCs Furchtgott-Roth Copps Debate Net Neutrality 11-10-14.flv[/flv]

Former Federal Communications Commission members Harold Furchtgott-Roth and Michael Copps talk about President Barack Obama’s call for the “strongest possible rules” to protect the open Internet and the value of so-called net-neutrality rules. They speak with Cory Johnson on Bloomberg Television’s “Bloomberg West.” (7:00)

[flv]http://www.phillipdampier.com/video/CNN Here is why you should care about net neutrality 11-10-14.flv[/flv]

CNN explores why you should care about Net Neutrality and reminds us in a world of distorted punditry exactly what “Net Neutrality” is. (3:58)

[flv]http://www.phillipdampier.com/video/Fox Business Michael Powell Net Neutrality 11-10-14.flv[/flv]

Fox Business gives former FCC chairman Michael Powell an unchallenged platform to present his views on Net Neutrality. It becomes clear which side Fox is on when they call porn peddler Larry Flynt the quintessential Net Neutrality advocate. (5:08)

[flv]http://www.phillipdampier.com/video/WSJ ATT Buys DirecTV 5-19-14.flv[/flv]

For $48.5 billion, AT&T will vault itself into second place among the nation’s largest pay television providers with the acquisition of DirecTV. The Wall Street Journal reports the executives at AT&T have been looking to for a giant deal for several years. Most executives earn special bonuses and other incentives worth millions for successfully completing these kinds of transactions. (3:03)

AT&T plans to spend $48.5 billion to acquire the nation’s biggest satellite television provider, allowing AT&T to become the second largest pay television company, behind a merged Comcast and Time Warner Cable.

The deal, finalized on Sunday, pays $95 per DirecTV share in a combination of stock and cash, about a 10% premium over DirecTV’s closing price on Friday. Including debt, the acquisition is AT&T’s third-largest deal on record, behind the purchase of BellSouth for $83 billion in 2006 and the deal for Ameritech Corp., which closed in 1999, according to data compiled by Bloomberg.

“This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes. At the same time, it creates immediate and long-term value for our shareholders,” said Randall Stephenson, AT&T chairman and CEO. “DirecTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business. DirecTV is a great fit with AT&T and together we’ll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services. We look forward to welcoming DirecTV’s talented people to the AT&T family.”

The announced acquisition has left some on Wall Street scratching their heads.

“Like any merger born of necessity rather than opportunity, the combination of AT&T and DirecTV calls to mind images of lifeboats and rescues at sea,” telecommunications analyst Craig Moffett of MoffettNathanson Research wrote this week. AT&T, Moffett wrote, is in “dire need of a cash producer to sustain their dividend.”

[flv]http://www.phillipdampier.com/video/Bloomberg ATT DirecTV Deal a Head Scratcher 5-19-14.flv[/flv]

Craig Moffett, founder of MoffettNathanson LLC, talks about AT&T Inc.’s plan to buy DirecTV for $48.5 billion. Moffett speaks with Tom Keene, Scarlet Fu, William Cohan, and Adam Johnson on Bloomberg Television’s “Surveillance.” StockTwits founder Howard Lindzon also speaks. (5:12)

The deal would combine AT&T’s wireless, U-verse, and broadband networks with DirecTV’s television service, creating bundling opportunities for some satellite customers. As broadband becomes the most important component of a package including phone, television, and Internet access, not being able to offer broadband has left satellite TV companies at a competitive disadvantage. AT&T’s U-verse platform – a fiber to the neighborhood network – has given AT&T customers an incremental broadband speed upgrade, but not one that can necessarily compete against fiber to the home or cable broadband.

Some analysts are speculating AT&T will eventually shut down its U-verse television service and dedicate its bandwidth towards a more robust broadband offering. Existing television customers would be offered DirecTV instead.

But deal critics contend AT&T is spending a lot of money to buy its competitors instead of investing enough in network upgrades.

“The amount of cash alone AT&T is spending on this deal — $14.55 billion — is as much as it cost Verizon for its entire FiOS deployment, which reaches more than 17 million homes,” Free Press’ Derek Turner tells Stop the Cap! “Add in the $33 billion in AT&T stock and $18.6 billion in debt, and you can see just how wasteful this merger is.”

In effect, AT&T is spending nearly $50 billion to buy DirecTV’s customer relationships, its satellite platform, and its agreements with programmers, all while removing one competitor from the market. Cable has 54 percent of the pay TV market, satellite has 34 percent, and AT&T and Verizon share 11 percent. AT&T’s U-verse has 5.7 million TV customers. DirecTV has 20.3 million. Combining the two gives AT&T 26 million television customers, second only to Comcast/Time Warner Cable.

Rural Americans will effectively see their choice in competitors drop by one-third, giving them the option of the phone company or Dish Network.

AT&T intends to persuade regulators to approve the deal despite its antitrust implications by offering several commitments the company says are in the public interest and protect consumers:

• 15 Million Customer Locations Get More High Speed Broadband Competition. AT&T will use the merger synergies to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today, utilizing a combination of technologies including fiber to the premises and fixed wireless local loop capabilities. This new commitment, to be completed within four years after close, is on top of the fiber and Project VIP broadband expansion plans AT&T has already announced. Customers will be able to buy broadband service stand-alone or as part of a bundle with other AT&T services.
• Stand-Alone Broadband. For customers who only want a broadband service and may choose to consume video through an over-the-top (OTT) service like Netflix or Hulu, the combined company will offer stand-alone wireline broadband service at speeds of at least 6Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.
• Nationwide Package Pricing on DIRECTV. DIRECTV’s TV service will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers, no matter where they live, for at least three years after closing.
• Net Neutrality Commitment. Continued commitment for three years after closing to the FCC’s Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the DC Circuit Court of Appeals vacating those rules.
• Spectrum Auction. The transaction does not alter AT&T’s plans to meaningfully participate in the FCC’s planned spectrum auctions later this year and in 2015. AT&T intends to bid at least $9 billion in connection with the 2015 incentive auction provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2×10 MHz nationwide spectrum footprint.

[flv]http://www.phillipdampier.com/video/CNN ATT DirecTV Merger 5-19-14.flv[/flv]

CNN says AT&T’s buyout of DirecTV is about getting video programming to customers using all types of technology, but public interest groups suspect it’s about reducing competition. (1:17)

A closer look at AT&T’s commitments exposes several loopholes, however.

AT&T U-verse and DirecTV compete head-on in these areas.

• AT&T’s “commitment” to expand broadband to 15 million new locations is in addition to their Project VIP U-verse expansion now underway. However, AT&T does not say how many rural customers will see wired U-verse service finally become available vs. how many will lose their landlines permanently and have to rely on AT&T’s wireless landline replacement and expensive, usage-capped wireless broadband;
• AT&T’s speed commitment is largely unenforceable and falls apart with language like, “where feasible.” Anywhere they don’t deliver 6Mbps DSL speed can easily be explained away as “unfeasible.” AT&T also only commits to providing DSL where it already offers DSL, so no expansion there;
• The FCC’s Net Neutrality protections never covered wireless and three years is a very short time to commit to the “light touch” approach the FCC had with Net Neutrality back in 2010;
• AT&T’s wireless auction commitment comes with loopholes like “meaningfully,” “provided there,” and “a viable path to at least.”

“You can’t justify AT&T buying DirecTV by pointing at Comcast’s grab for Time Warner, because neither one is a good deal for consumers,” said Delara Derakhshani, policy counsel for Consumers Union, the advocacy arm of Consumer Reports. “On the heels of Comcast’s bid for Time Warner Cable, AT&T is going to try to pull off a mega-merger of its own. These could be the start of a wave of mergers that should put federal regulators on high alert.  AT&T’s takeover of DirecTV is just the latest attempt at consolidation in a marketplace where consumers are already saddled with lousy service and price hikes. The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end.”

“The captains of our communications industry have clearly run out of ideas,” said Craig Aaron, president of Free Press. “Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition. These takeovers are expensive, and consumers end up footing the bill for merger mania. AT&T is willing to pay $48.5 billion and take on an additional $19 billion in debt to buy DirecTV. That’s a fortune to spend on a satellite-only company at a time when the pay-TV industry is stagnating and broadband is growing. For the amount of money and debt AT&T and Comcast are collectively shelling out for their respective mega-deals, they could deploy super-fast gigabit-fiber broadband service to every single home in America.”

[flv]http://www.phillipdampier.com/video/CNN Al Franken Skeptical About DirecTV Deal 5-19-14.flv[/flv]

Sen. Al Franken (D-Minn.) appeared on CNN’s New Day this morning to express his skepticism about the consumer benefits of a merger between AT&T and DirecTV. “We need more competition, not less.” (2:40)

Phillip “Spending $6k per cable customer is obviously a much better deal than paying half that to build a fiber to the home network” Dampier

Math was never my strong subject, but even I can calculate the groupthink of American cable and telephone companies and their friends on Wall Street just doesn’t add up.

This week, we learned that cable companies like Bright House Networks, Suddenlink, and Charter Communications are already lining up for a chance to acquire three million cable customers Comcast intends to sell if it wins approval of its merger with Time Warner Cable. Wall Street has already predicted Comcast will fetch as much as $18 billion for those customers and pegged the value of each at approximately $6,000.

But for less than half that price any company could build a brand new fiber to the home system capable of delivering 1,000Mbps broadband and state-of-the-art phone and television service and start banking profits long before paying off the debt from buying an inferior coaxial cable system. Yet we are told time and time again that the economics of fiber to the home service simply don’t make any sense and deploying the technology is a waste of money.

Let’s review:

Google Fiber was called a boondoggle by many of its competitors. The folks at Bernstein Research, routinely friendly to the cable business model, seemed appalled at the economics of Google’s fiber project in Kansas City. Bernstein’s Carlos Kirjner and Ram Parameswaran said Google would throw $84 million into the first phase of its fiber network, connecting 149,000 homes at a cost between $500-674 per home. The Wall Street analyst firm warned investors of the costs Google would incur reaching 20 million customers nationwide — $11 billion.

“We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the U.S., as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business,” Bernstein wrote to its investor clients.

So Google spending $11 billion to reach 20 million new homes is business malpractice while spending $18 billion for three million Time Warner Cable customers is confirmation of the cable industry’s robust health and valuation?

Bernstein’s firm never thought highly of Verizon FiOS either.

“If I were an auto dealer and I wanted to give people a Maserati for the price of a Volkswagen, I’d have some seriously happy customers,” Craig Moffett from Bernstein said back in 2008. “My problem would be whether I could earn a decent return doing it.”

Back then, Moffett estimated the average cost to Verizon per FiOS home passed was $3,897, a figure based on wiring up every neighborhood, but not getting every homeowner to buy the service. Costs for fiber have dropped dramatically since 2008. Dave Burstein from DSL Prime reported by the summer of 2012 Verizon told shareholders costs fell below $700/home passed and headed to $600. The total cost of running fiber, installing it in a customer’s home and providing equipment meant Verizon had to spend about $1,500 per customer when all was said and done.

Moffett concluded Verizon was throwing money away spending that much on improving service. He wasn’t impressed by AT&T U-verse either, which only ran fiber into the neighborhood, not to each home. Moffett predicted AT&T was spending $2,200 per home on U-verse back in 2008, although those costs have dropped dramatically as well.

Moffett

Moffett’s solution for both Verizon and AT&T? Do nothing to upgrade, because the price wasn’t worth the amount of revenue returns either company could expect in the short-term.

It was a much different story if Comcast wanted to spend $45 billion to acquire Time Warner Cable however, a deal Moffett called “transformational.”

“What we’re talking about is an industry that is becoming more capital intensive,” Todd Mitchell, an analyst at Brean Capital LLC in New York told Bloomberg News. “What happens to mature, capital-intensive companies — they consolidate. So, yes, I think the cable industry is ripe for consolidation.”

Other investors agreed.

“This is definitely a bet on a positive future for high-speed access, cable and other services in an economic recovery,” said Bill Smead, chief investment officer at Smead Capital Management, whose fund owns Comcast shares.

But Forbes’ Peter Cohan called Google’s much less investment into fiber broadband a colossal waste of money.

“Larry Page should nip this bad idea in the bud,” Cohan wrote.

Cohan warned investors should throw water on the enthusiasm for fiber before serious money got spent.

“FTTH authority, Neal Lachman, wrote in SeekingAlpha, that it would cost as much as $500 billion and could take a decade to connect all the houses and commercial buildings in the U.S. to fiber,” Cohan added.

Cohan was concerned Google’s initial investment would take much too long to be recovered, which apparently is not an issue for buyers willing to spend $18 billion for three million disaffected Time Warner Cable customers desperately seeking alternatives.

An investment for the future, not short term profits.

Municipal broadband providers have often chosen to deploy fiber to the home service because the technology offers plenty of capacity, ongoing maintenance costs are low and the networks can be upgraded at little cost indefinitely. But such broadband efforts, especially when they are owned by local government, represent a threat for cable and phone companies relying on a business model that sells less for more.

The American Legislative Exchange Council (ALEC), funded by Comcast, Time Warner, AT&T, Verizon, and other large telecom companies is at the forefront of helping friendly state legislators ban community fiber networks. Their excuse is that the fiber networks cost too much and, inexplicably, can reduce competition.

“A growing number of municipalities are […] building their own networks and offering broadband services to their citizens,” ALEC writes on its website. “ALEC disagrees with their answer due to the negative impacts it has on free markets and limited government.  In addition, such projects could erode consumer choice by making markets less attractive to competition because of the government’s expanded role as a service provider.”

The Fiber-to-the-Home Council obviously disagrees.

“Believe it or not, there are already more than a thousand telecom network operators and service providers across North America that have upgraded to fiber to the home,” says the Council. “The vast majority of these are local incumbent telephone companies that are looking to transform themselves from voice and DSL providers into 21st century broadband companies that can deliver ultra high-speed Internet and robust video services, as well as be able to deliver other high-bandwidth digital applications and services to homes and businesses in the years ahead.”

Stephenson

In fact, a good many of those efforts are undertaken by member-owned co-ops and municipally owned providers that answer to local residents, not to shareholders looking for quick returns.

The only time large companies like AT&T move towards fiber to the home service is when a competitor threatens to do it themselves. That is precisely what happened in Austin. The day Google announced it was launching fiber service in Austin, AT&T suddenly announced its intention to do the same.

“In Austin we’re deploying fiber very aggressively,” said AT&T CEO Randall Stephenson. “The cost dynamics of deploying fiber have dramatically changed. The interfaces at the homes, the wiring requirements, how you get a wiring drop to a pole, and the way you splice it has totally changed the cost dynamics of deploying fiber.”

Prior to that announcement, AT&T justified its decision not to deploy fiber all the way to the home by saying it was unnecessary and too costly. With Google headed to town, that talking point is no longer operative.