Speaker 1: Hello and welcome to the Votes and Verdicts podcast, hosted
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Speaker 1: The Forthcoming Conversation is part of the Bloomberg Intelligence Election series,
Speaker 1: covering the industry and company impacts of the upcoming election.
Speaker 1: On October eighth, Jennifer Ree, anurag Rana, and Matt Schuttenhelm
Speaker 1: discussed what the election might mean for the USMT sector.
Speaker 1: If you have any questions, please feel free to reach
Speaker 1: out to any of us on the Bloomberg terminal. Hello
Speaker 1: and welcome. My name is Matt Schuttenhelm. I am a
Speaker 1: litigation and policy analyst focused on TMT with Bloomberg Intelligence,
Speaker 1: and joining me today are my colleagues. Jennifer Ree are
Speaker 1: senior antitrust litigation guru, and anurag Rana, senior equity analyst
Speaker 1: for technology. This is the second in a series of
Speaker 1: conversations across the month of October focused on the upcoming election.
Speaker 1: Our first considered financials. This one tackles TMT. Subsequent calls
Speaker 1: will discuss tax, healthcare, industrials, and other topics, all to
Speaker 1: help get you ready to understand the potential impacts of
Speaker 1: the upcoming election. Bloomberg Intelligence is the investment research platform
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Speaker 1: and terminal clients can always reach out to us with
Speaker 1: questions about our research. And so with that introduction, let's
Speaker 1: get started today. How we how we've tried to structure
Speaker 1: this today is as a conversation between the three of us. First,
Speaker 1: we're gonna we're gonna focus on antitrust with with gen.
Speaker 1: Then I'll take a deeper dive into the regulatory play
Speaker 1: playing field facing broadband broadcasters, internet platforms and how the
Speaker 1: election might change that. And then anarag Rana will bring
Speaker 1: it home for us and make it all a little
Speaker 1: bit more concrete and talk about how the election may
Speaker 1: have impacts on some specific companies. If you have questions
Speaker 1: today during this conversation, there there's a Q and A
Speaker 1: box right here on the platform you can drop questions there. Also,
Speaker 1: feel free to reach out to us on the terminal
Speaker 1: over over ib or email. And so I think it
Speaker 1: makes sense to start with antitrust and you Jen, because
Speaker 1: anti trust has become such a big deal in the
Speaker 1: TMT space recently, so over the past three years, it's
Speaker 1: really had a big impact on these companies, not just
Speaker 1: in terms of all the lawsuits brought by the DJ
Speaker 1: and the FTC for monopolization, but also with respect to
Speaker 1: these companies' ability to complete M and A son. Let's
Speaker 1: just start with a backdrop. Can you give us a
Speaker 1: backdrop for all of this and what has changed in
Speaker 1: the last three years in the anti trust world as
Speaker 1: we head into this election.
Speaker 2: Yeah, sure, thanks, Matt. You know, everyone knows we've seen
Speaker 2: really aggressive anti trust enforcement under the Biden administration. The
Speaker 2: business community isn't happy about it. And we have an election,
Speaker 2: We're going to have a different administration and are things
Speaker 2: going to change? And I told Matt, let's I think
Speaker 2: it's important to kind of figure out how we got
Speaker 2: to where we are before we talk about what might
Speaker 2: happen next.
Speaker 1: And the thing is where we are now in.
Speaker 2: Anti trust has come out of a movement that's really
Speaker 2: been developing for about ten years, and I would say
Speaker 2: began to rear itself in the Trump administration. And I
Speaker 2: think that's important to understand that this isn't just about
Speaker 2: what Biden's enforcers have done. And what happened here is
Speaker 2: that a viewpoint began to develop in the more progressive
Speaker 2: circles of the anti trust bar that enforcement for years,
Speaker 2: maybe the last forty years, has just been way too lax.
Speaker 2: This is called the neo brandicean movement because it's inspired
Speaker 2: by the work of Lewis Brandeis, a Supreme Court justice
Speaker 2: in the early twentieth century. He believed that monopolies were
Speaker 2: harmful to workers and innovation and not just price and output.
Speaker 2: A price and output have been more of the focus
Speaker 2: in the anti trust world since about the Reagan era. Now,
Speaker 2: the neo brandiicians believe that lax enforcements resulted in in
Speaker 2: a concentrated economy in which in many areas, not just TMT,
Speaker 2: we've allowed companies to grow way too large via acquisite,
Speaker 2: large and powerful, I should say, via acquisition, and that
Speaker 2: many industries lack sufficient competition, and this leads to a
Speaker 2: lot of societal ills, not just higher price or lower
Speaker 2: quality or less innovation, but more than that. The anti
Speaker 2: trust chiefs at the DOJ and FTC that were appointed
Speaker 2: by Biden, they're part of this camp. They're securely in
Speaker 2: the middle of this camp. And as I said before, though,
Speaker 2: I should note that some of this more aggressive enforcement
Speaker 2: did start under Trump's presidency, but Biden's enforcers really picked
Speaker 2: up that mantle and ran with it. So we began
Speaker 2: to feel the effects in the business community under Biden's
Speaker 2: anti trust enforcers, and they've made it their mission to
Speaker 2: revitalize enforcement, stop merger activity by large incumbent firms, and
Speaker 2: expand the law so that it's easier for plaintiffs to
Speaker 2: win monopolization suits. So in order to do this, they've
Speaker 2: really rewritten the playbook that's been prevalent for years. This
Speaker 2: is both in terms of m and A review and enforcement,
Speaker 2: but also with respect to watching the conduct of companies
Speaker 2: with monopoly positions or dominant market share in markets or
Speaker 2: in a market or markets. So The thing is this
Speaker 2: increased vigilance particularly impacts companies in the TMT sector because
Speaker 2: if you think about it, the large Internet platforms are
Speaker 2: the most powerful companies today and each one of them Meta, Alphabet, Apple, Amazon,
Speaker 2: have a dominant position in some market. Now, I should
Speaker 2: say this can kind of be debated because it depends
Speaker 2: on how you define the markets. But they are dominant,
Speaker 2: they are powerful, and these are the companies that are
Speaker 2: under the microscope and are more easily pursued because as
Speaker 2: a threshold situation in court, the FTC or DOJ has
Speaker 2: to prove that the company has a monopoly position. If
Speaker 2: they can't prove that they're done, these are the companies
Speaker 2: that they're going that they believe they're going to be
Speaker 2: able to do that for. But let me talk about
Speaker 2: M and A for a minute, because I think the
Speaker 2: bigger impact of this neo brandiician movement is with respect
Speaker 2: to M and A because it has prevented a lot
Speaker 2: of deal from being signed to begin with, and it's
Speaker 2: caused a lot of abandonments. I mean, we've always had
Speaker 2: abandonments of deals when they face pressure, but the number
Speaker 2: of abandonments in the last three years has skyrocketed, and
Speaker 2: this has really been felt in the TMT space. We've
Speaker 2: seen little M and A activity. Amazon'squeaked by with the
Speaker 2: one Medical acquisition, but we know it had to abandon
Speaker 2: I Robot Quilecom, Auto Talks fell apart, Adobe, Figma fell apart,
Speaker 2: in Video arm fell apart. Microsoft did manage to acquire Activision,
Speaker 2: but that was with years of litigation, and by the way,
Speaker 2: the FTC is still fighting that one, even though it's
Speaker 2: closed and integrated. Same thing for Meta Within. They had
Speaker 2: to win in court in order to close that deal.
Speaker 2: And part of the reason for this is because one
Speaker 2: of the biggest changes in perspective of the enforcers today
Speaker 2: is that they refused to settle a problematic merger. You know,
Speaker 2: I defended deals as a lawyer for many, many years,
Speaker 2: and it was par for the course that if the
Speaker 2: deal posed some sort of antitrust problem, that companies would
Speaker 2: divest or agree to behavioral remedies, we'd get the underlying
Speaker 2: deal closed. It really wasn't about are we going to
Speaker 2: get suit or not. It was about what do we
Speaker 2: need to do in terms of a remedy to get
Speaker 2: this deal closed. But today the agencies believe the problematic
Speaker 2: deal is simply one that shouldn't be done period and
Speaker 2: that remedies don't work, so they don't settle except in
Speaker 2: very rare circumstances, and that's why we have so many
Speaker 2: lawsuits to try to block deals, so many more than
Speaker 2: in the past, and that's why it's been really hard
Speaker 2: for CMT companies to engage in the activity. So with
Speaker 2: that backdrop, I'll move into the area of how what
Speaker 2: do I think is going to change with the election?
Speaker 3: Quick quick question from me, jen If that's okay? Sure,
Speaker 3: So when we look at these large tech companies, especially
Speaker 3: as it relates to Genai investments, not a whole lot
Speaker 3: of companies can do this in a sense that there
Speaker 3: isn't capacity for a startup to go out and spend
Speaker 3: ten twenty to thirty forty billion dollars, which means in
Speaker 3: the next phase of the cycle, they will have a
Speaker 3: disproportionate right revenue coming into them. How does regulation the
Speaker 3: authorities look at that aspect that they have funded these
Speaker 3: things which nobody else can, and they're going to get
Speaker 3: even bigger down the road.
Speaker 2: I mean, I think they do it the same way
Speaker 2: they started with all these monopolization cases, they will start
Speaker 2: investigations they can investigate, and what they're going to be
Speaker 2: watching for an a RAG is that even if those
Speaker 2: big investments are made, that the market stays open, in
Speaker 2: other words, that the assets are needed that are needed
Speaker 2: to advance in the AI space aren't basically hogged by
Speaker 2: or kept by these big Internet platforms so that other
Speaker 2: companies have access. So I think it starts with an
Speaker 2: investigation to the extent that we have a law called
Speaker 2: the Heartscott Ridino Act, which says investments of a certain
Speaker 2: that reach a certain threshold that have to be filed
Speaker 2: with the government and that the deal can't get closed
Speaker 2: until the government's had a chance to review. Now I
Speaker 2: know that these investments are falling under that, but it
Speaker 2: doesn't mean that the agencies can't investigate the investment and
Speaker 2: call the investment itself illegal. But again, the agencies have
Speaker 2: a hard time here right because they can't do anything
Speaker 2: on their own. They need a court order for any
Speaker 2: kind of action. So whether they don't like the way
Speaker 2: the assets that the company that on Microsoft or Google
Speaker 2: has invested in the way they're being handled, they still
Speaker 2: have to go to court to ask the court to
Speaker 2: step in if they don't like the investment itself, again,
Speaker 2: they have to go to court. So I think probably
Speaker 2: in the way you're thinking about it, that industry is
Speaker 2: probably going to advance in the way you expect.
Speaker 1: It to advance. So so, yeah, Jen, So so big
Speaker 1: change in the law and how we think about antitrust.
Speaker 1: Let's take it now to the election. Okay, what happens
Speaker 1: if anything to this revolution, if Trump is elected or
Speaker 1: if a terrorist in the White House.
Speaker 2: So let me say my position on this is probably
Speaker 2: a little different than others. I'll start by saying, this
Speaker 2: movement's taken root. Okay, so we're definitely not going back
Speaker 2: to where we were five or six years ago. We're
Speaker 2: not going back, I don't think under either president. And
Speaker 2: see to where it was when I practiced law, which
Speaker 2: was that ninety nine percent of deals that had problems settled.
Speaker 2: I think that so the hurdles are going to be higher,
Speaker 2: They're going to stay higher. And as I said, it's
Speaker 2: important to understand that things toughened under Trump. I think
Speaker 2: things will be different though. And let me start by saying,
Speaker 2: we're hearing a lot that some believe that it's going
Speaker 2: to be easier under Trump and stay just as aggressive
Speaker 2: under Harris. And part of the reason I think some
Speaker 2: people believe that is because the orthodoxy, the way we've
Speaker 2: always thought about a change in administration is that the
Speaker 2: Republican administrations were easier, let sing on M and A
Speaker 2: than the Democratic ones. And I want to say that
Speaker 2: to the extent that's true, it's only slightly true. If
Speaker 2: you really dig into statistics, there are very few differences,
Speaker 2: you know. I took a look at the deals that
Speaker 2: were subject to in depth or review under a bunch
Speaker 2: of different administrations. The average under Bill Clinton was three percent,
Speaker 2: the average under George W. Bush was three percent, the
Speaker 2: average under Obama was three point four, and the average
Speaker 2: under Trump was two point seven. I don't have good
Speaker 2: data yet for Biden because the FTC's data comes out
Speaker 2: very late, and I only have data for the first
Speaker 2: like eight months, so it's one point six. But I
Speaker 2: believe it's actually much higher than that if we had
Speaker 2: current data. That's not that different. If you look at
Speaker 2: the number of lawsuits filed a challenge a deal under
Speaker 2: George W. Bush in fiscal year FTC's fiscal six that
Speaker 2: was during his second term. It was two under Obama.
Speaker 2: In the FTC's Fiscal twenty fourteen. Also in Obama's second term,
Speaker 2: it was one. Under Biden's fiscal FTC Fiscal twenty twenty two,
Speaker 2: it was twelve. That's where we see the big uptick.
Speaker 2: But this idea that Republicans are always easier isn't exactly right.
Speaker 2: And I don't think that these old rules apply to
Speaker 2: the Trump administration because the approach, at least during the
Speaker 2: first Trump presidency wasn't really traditionally republican. If you look
Speaker 2: at what happened anti trust enforcement of m and A
Speaker 2: was unpredictable. Now, a lot of this depends on who
Speaker 2: he appoints at the FTC and DOJ. He will definitely
Speaker 2: appoint his own people.
Speaker 1: We will have.
Speaker 2: These are the decision makers, right. But what we saw
Speaker 2: the DOJ the last time Trump was president is that
Speaker 2: the DOJ erected hurdles for deals that the Trump didn't
Speaker 2: like where he didn't like the companies. For instance, at
Speaker 2: and T, Time Warner Time Warner owning CNN. Trump didn't
Speaker 2: like that deal. The DOJ challenge did in court.
Speaker 1: I went to that trial. There was literally no.
Speaker 2: Evidence to support their theory of harm.
Speaker 1: They lost. It was expected to lose.
Speaker 2: It looked more like a political challenge than real antitrust challenge.
Speaker 2: But Trump I'll push through deals with questionable, questionable remedies
Speaker 2: that he liked. The example there would be Sprint T Mobile.
Speaker 2: So I think their enforcement in the M and A
Speaker 2: space is going to be a little bit more about
Speaker 2: the companies that have found favor with the administration, which
Speaker 2: might have an easier time in the companies that haven't.
Speaker 2: Now under Harris, again, it largely depends on who's appointed
Speaker 2: at the FDCO DOJ, and we have a little bit
Speaker 2: of a strained situation there because there's been a push
Speaker 2: for her to remove Lena Khan. I think that she's
Speaker 2: in a difficult position with respect to that. Lena Kahan's
Speaker 2: term has expired and she can stay on until somebody
Speaker 2: new replaces her. Now Harris could just let her stay
Speaker 2: and not replace her. If she does try to replace her,
Speaker 2: I do think she's going to have a lot of
Speaker 2: anger from the progressive wing of her own party. But
Speaker 2: the issue is she could really become under pressure to
Speaker 2: reappoint her because it's a bit unorthodox for an FTC
Speaker 2: commissioner to stay on for years and years after their
Speaker 2: term has ended. If she does that, Con will need
Speaker 2: Senate confirmation. We don't know what the makeup of Senate
Speaker 2: is going to be, although it seems more likely that
Speaker 2: it's going to be a majority GOP than Democratic, and
Speaker 2: there's no guarantee that they're going to vote her through.
Speaker 2: So this is kind of a strange situation. Con could
Speaker 2: also leave on her own accord, because that often happens
Speaker 2: when an administration changes, even when it moves from even
Speaker 2: if it's the same party. I think Canter at the
Speaker 2: FTC will most likely take another job, and Harris or
Speaker 2: Trump will name a new Attorney General, and that case
Speaker 2: will also name a new Assistant Attorney General in charge
Speaker 2: of antitrust, and it's these people that make the calls.
Speaker 2: I have a feeling that under the Harris administration things
Speaker 2: will be a little bit more pragmatic and sensible. I
Speaker 2: don't think that's the prevalent feeling. I think most people
Speaker 2: believe the aggressive into trust enforcement will continue, and it
Speaker 2: definitely will for some time because Con will be there
Speaker 2: at least for some time unless she takes another job.
Speaker 2: But the position now is so rigid you can't get worse.
Speaker 2: It can't get more rigid, and there are critics, even Democrats,
Speaker 2: that criticize the rigid position to just go after and
Speaker 2: challenge every single deal that has a problem in court.
Speaker 2: I think a slightly more sensible and pragmatic approach would
Speaker 2: be the pick and choose the battles a little more
Speaker 2: carefully and perhaps engage in more settlements that this administration has.
Speaker 2: And I have a feeling that that could happen onunder
Speaker 2: either administration. But I again, I don't think we're going
Speaker 2: to go back to a time that we had for
Speaker 2: about forty years in which you just expected problematic deals
Speaker 2: mostly to settle and only a few challenges every year.
Speaker 1: That that's really helpful, Thanks Jen. So what I think
Speaker 1: we need to touch at least a little bit on
Speaker 1: the current litigation that's ongoing. So there's the FTC suit
Speaker 1: against Facebook, Facebook against Amazon, uh DJ against Google Search,
Speaker 1: against Google ad Tech, DJ against Apple Live Nay, I
Speaker 1: mean the list is long. When when when the Clinton
Speaker 1: administration sued Microsoft back in the nineteen nineties and one
Speaker 1: on liability it ended up settling under the next administration,
Speaker 1: under the under the Bush administration, is that going to
Speaker 1: be the course for for these lawsuits? Do they have
Speaker 1: a chance of settling under the next administration, So I
Speaker 1: tend to doubt it.
Speaker 2: I'll say maybe for a few of them, and I'll
Speaker 2: get into that, and again I'm going to go back
Speaker 2: to saying, remember that it was Trump's DOJ and FTC
Speaker 2: that either began investigations of most of these companies or
Speaker 2: actually sued them. Was Trump's DOJ that brought the lawsuit
Speaker 2: that's existing against Meta, I believe against Google over search
Speaker 2: as well. So Biden's folks picked up the mantle and
Speaker 2: just ran with it. So let's start with the Google cases.
Speaker 2: I would say definitely not. First, these cases are really advanced.
Speaker 2: We have DOJ has already won on liability against Google
Speaker 2: over search, right and it's just finished its trial against
Speaker 2: Google over the ad Tech stack. Search was the victory
Speaker 2: on liability for the DJ and now we're just working
Speaker 2: out remedies. Those are going to be final by August.
Speaker 2: The ad Tech suit could have a decision by the
Speaker 2: end of this year, or maybe even in one queue
Speaker 2: where we're also leaning toward the DOJ winning on liability.
Speaker 2: So these are so advanced, and we certainly know that
Speaker 2: the Trump had been both Donald Trump and jdvans are
Speaker 2: no friend to Google, so I really doubt a settlement
Speaker 2: would happen there, and I highly doubt a settlement would
Speaker 2: happen under Harris administration. Now let's talk about Apple and
Speaker 2: Live Nation, because those are the DOJ's other suits. These
Speaker 2: are really new, we have years ahead of us. Apple
Speaker 2: is just in the motions to dismiss stage. They don't
Speaker 2: even have a trial set yet, and I would expect
Speaker 2: it to end up in six. You have Live Nation
Speaker 2: that's set to start trial in March of two thousand
Speaker 2: and six, so there's a long way to go, and
Speaker 2: I would certainly think these companies are going to try
Speaker 2: if there are new people put in place at the
Speaker 2: DOJ try to settle these cases. Maybe the Apple suit
Speaker 2: has a shot. And I say that because in the suit,
Speaker 2: the DOJ is targeting just this list of very specific conduct,
Speaker 2: which to me is kind of settleable because I could
Speaker 2: see Apple agreeing to change or to seize that conduct,
Speaker 2: and that makes it kind of a settable suit. So
Speaker 2: we'll give it a maybe down the road, especially if
Speaker 2: things don't seem to be going well for the DOJ
Speaker 2: and litigation Live Nation, I would say no, this is
Speaker 2: a really pop dealersuit with consumers. From a political perspective,
Speaker 2: I don't see why either administration would settle so really quickly.
Speaker 2: On the FTC side, we've got suits against Meta and
Speaker 2: against Amazon. Now the one against Meta is in summary
Speaker 2: judgment stage. I do see Meta probably ultimately prevailing in
Speaker 2: this suit. They have a decent shot of disposing of
Speaker 2: it in some rey judgment, but if not in trial.
Speaker 2: No trial dates been set yet, by the way, so
Speaker 2: that's also kind of down the road. I do think
Speaker 2: that it's too advanced to settle now. If some really
Speaker 2: drastic remedy is imposed, like forcing Facebook to sell Instagram,
Speaker 2: which I really doubt is going to happen, maybe there'd
Speaker 2: be a settlement to do something different there. But I
Speaker 2: don't think the case is going to come to that now. Amazon,
Speaker 2: to me is the one that's the most settleable, even
Speaker 2: though the judge mostly just denied the company's motion to dismiss.
Speaker 2: So that's moving into discovery and kind of the long haul.
Speaker 2: And we've got the trial set for October and a
Speaker 2: twenty twenty six, by the way. And I say that
Speaker 2: because Amazon has settled really similar allegations in the UK
Speaker 2: and in the EU, and apparently they offered something along
Speaker 2: those lines to the FTC but they were rejected. But
Speaker 2: a new administration is going to have a couple of
Speaker 2: years to see how those settlements have been playing out
Speaker 2: and whether the merchants that are selling on Amazon's site
Speaker 2: are okay with them, are happier if things are going better.
Speaker 2: And if that's the case, I would think that there's
Speaker 2: probably room for settlement in that suit.
Speaker 1: Got it? That's really helpful. And what about other companies
Speaker 1: in the TMT space, any that are currently a threat
Speaker 1: of a suit like this under a Trump or a
Speaker 1: Harris administration in your view, you know, I don't think so.
Speaker 2: I think they both DOJ and FDC have kind of
Speaker 2: turned their sites to healthcare markets in a pretty big way.
Speaker 2: You've got the FTC going after pharmacy benefit managers. The
Speaker 2: DOJ is looking at United Health. They might file a
Speaker 2: suit there. I just don't really think they have a
Speaker 2: lot of bandwidth left. I mean, you can already see
Speaker 2: the dj which has many more monopolization litigations on going,
Speaker 2: has fewer deal challenges than the FTC, and the FDC
Speaker 2: has more deal challenges or monopolization suits and I just
Speaker 2: don't think that they have the room left if they
Speaker 2: want to keep up the pressure on the M and
Speaker 2: A front, which I do believe they do, to file
Speaker 2: more suits. So I think we kind of see what's
Speaker 2: happening now and now the ones that are ongoing are
Speaker 2: going to play out. So I think Matt is probably time.
Speaker 2: That's a lot on the anti trust and I think
Speaker 2: it's time to bring you in now to talk about
Speaker 2: something different. So we'll talk about we'll talk about the
Speaker 2: legal risks in the TMT space in the US beyond
Speaker 2: anti trust. So we're going to look at broadband providers, broadcasters,
Speaker 2: and internet platforms in other areas. So we have a
Speaker 2: really big question out there about whether broad broadband providers
Speaker 2: will be regulated in the US. Can you walk us
Speaker 2: through how the election might impact that?
Speaker 1: Yeah, So, I mean this has been probably the biggest
Speaker 1: regulatory issue here in Washington for two decades now. Is
Speaker 1: you know, the Communications Act was written in nineteen thirty
Speaker 1: four and nineteen updated in nineteen ninety six, and that
Speaker 1: was sort of before broadband was a big deal, and
Speaker 1: it's now clearly the most important communications product we have today.
Speaker 1: But we have laws that we're that are not really
Speaker 1: up to date for it. So there's a big fight.
Speaker 1: Should the most important product from AT and T Comcast Charter,
Speaker 1: should it be subject to regulation the way broadcasting is,
Speaker 1: the way cable is the way? Why wireless service is it?
Speaker 1: And and and so you know, and we've seen this
Speaker 1: back and forth between the administrations from Republican and Democrat
Speaker 1: taking different approaches to that. And now we have a
Speaker 1: big advance in the courts, and in that the courts
Speaker 1: are getting they're sort of tired of this whole thing.
Speaker 1: And and so that we've seen the demise of the
Speaker 1: Chevron doctrine. Uh, that goes to all of that. So
Speaker 1: where are we now? So so basically we we are
Speaker 1: in a place where the the Biden administration at the
Speaker 1: FCC has moved ahead, tried to push ahead with full
Speaker 1: speed ahead. We're going to regulate, We're going to squeeze
Speaker 1: it into the Communications Act. They've adopted rules to do that.
Speaker 1: That's in litigation at the earliest stages right now. The
Speaker 1: courts hit hit have stayed those rules, but we're at
Speaker 1: the early stages of a challenge to those rules. What
Speaker 1: happens if there's a change in administration, So let's say
Speaker 1: let's say first Biden Harris wins this election. I think
Speaker 1: a Harris FCC is going to press ahead as much
Speaker 1: as possible to try to squeeze broadband into the Communications Act.
Speaker 1: And this really means aggressive net neutrality rules. This really
Speaker 1: means what's known as Title two of the Communications Act
Speaker 1: is is is trying to treat broadband as a telecommunications
Speaker 1: you serve a service, basically a utility, and trying to
Speaker 1: do that if they can get away with it in
Speaker 1: the courts. So they're going to press full speed ahead.
Speaker 1: I think they're going to run into a brick wall
Speaker 1: in the courts, and I both at the Sixth Circuit
Speaker 1: where the case is now, and then at the Supreme Court.
Speaker 1: If Trump wins the election, he controls the FCC, he
Speaker 1: will appoint the chair chairman or chairwoman, and that person
Speaker 1: will speed up this deregulation process. We won't have to
Speaker 1: wait for the courts, because there's a pretty much consensus
Speaker 1: at the FCC that we don't need this sort of
Speaker 1: title to utility style regulation of broadband, and so using
Speaker 1: the way we regulated the phone networks in nineteen thirty
Speaker 1: four doesn't make sense for broadband networks today, and we
Speaker 1: shouldn't be giving a regulator like the FCC the open
Speaker 1: ended power to say this is reasonable, this isn't reasonable.
Speaker 1: You can set this rate, but you can't set that right.
Speaker 1: Forget all of that. Maybe there can be a consensus
Speaker 1: on sort of a light touch, you know, Okay, what
Speaker 1: we agree to some basic net neutrality principles, but not
Speaker 1: none of this open ended. Okay, the regulator gets to
Speaker 1: say what's reasonable and what isn't. And so that's how
Speaker 1: I basically see the in terms of broadband direct impacts.
Speaker 1: If a Trump FCC is calling the shot, it speeds
Speaker 1: up the deregulation. It adds clarity much faster. We don't
Speaker 1: have to wait for years of litigation. I think the
Speaker 1: companies are going to do pretty well in that litigation
Speaker 1: either way, but this speeds it up, gives them certainty
Speaker 1: much more quickly. If you have a Republican controlled FCC.
Speaker 1: And let me just just a footnote on that that
Speaker 1: I touched on Chevron a little bit. We have a
Speaker 1: deep dive on the Bloomberg terminal looking at how really
Speaker 1: this The developments in the court have totally changed how
Speaker 1: this plays out going forward. That regulators used to be
Speaker 1: able to get by with finding uncertainties in the federal
Speaker 1: law and it's not really clear. Okay, FCC gets to
Speaker 1: decide that we're past that now, and that's when when
Speaker 1: people say the end of Chevron, that's what that means.
Speaker 1: Anytime there's uncertainty, it's not the FCC or the regulator
Speaker 1: that gets to decide. It's the courts that get to decide.
Speaker 1: And the courts at the top at least are very
Speaker 1: business friendly and they're not going to give tie breakers
Speaker 1: to the regulator. They're going to give tie breakers to
Speaker 1: the companies. And that's really the defining issue in the
Speaker 1: broadband regulation space. I just think a Republican controlled FCC
Speaker 1: is going to speed that up and give the company
Speaker 1: certainty more quickly.
Speaker 2: Okay, so let's talk about TV and radio broadcasters. I mean,
Speaker 2: they've always faced strict media ownership limits. I know, it
Speaker 2: actually makes it really hard for them to do a
Speaker 2: lot of M and A that gets in their way
Speaker 2: for sure, and they continue to face restrictions despite a
Speaker 2: lot of new competition. So how might the election change that?
Speaker 1: Yeah? We I mean we saw this under the Biden
Speaker 1: FCC that that a deal like the acquisition of a
Speaker 1: broadcaster like Tegna, you know, which I think most people,
Speaker 1: including myself, thought, you, okay, the FCC is not going
Speaker 1: to stand in the way of that. And it did,
Speaker 1: and and and and and the FCC under Democrat control,
Speaker 1: has been real strict for again decades about enforcing media
Speaker 1: ownership caps. How many stations can companies own in local markets?
Speaker 1: The national TV ownership cap, there's a thirty nine percent
Speaker 1: ownership cap. Uh. Nationally, Democrats have have fought aggressively to
Speaker 1: enforce those limits. Republicans that the SCC have have almost
Speaker 1: universally been on the other side and said, look, the
Speaker 1: world has changed since we we adopted you know, all
Speaker 1: these limits for broadcasters. Look at all the new competition
Speaker 1: we face from from the internet today, and and and
Speaker 1: making broadcasters like like next Star and Sinclair the deal
Speaker 1: with with all these owners limits, it's impossible for for
Speaker 1: these companies to keep up. So if the Trump UH,
Speaker 1: if Trump wins the election, his FCC is going to
Speaker 1: go in a deregulatory direction on this as well, in
Speaker 1: my view, and so M and A like an acquisition
Speaker 1: of Tegna, I don't think, you know, I don't think
Speaker 1: that's going to be a problem under under that FCC
Speaker 1: the way it was surprising it the way it was
Speaker 1: under Jessica Rosen Worsol. You're not going to see a
Speaker 1: Republican controlled FCC block a deal like that. You're also
Speaker 1: going to see those local market media ownership caps for
Speaker 1: radio stations and for TV stations, those are going to
Speaker 1: be loosened. They can, they can. They're going to start
Speaker 1: a rulemaking to ease those those limits, and that's also
Speaker 1: likely going to be driven by the courts. Right now,
Speaker 1: the Biden FCC has said that we're sticking with all
Speaker 1: those limits, and they adopted rules to say, okay, we're
Speaker 1: in some cases even tightening or making them tougher. That's
Speaker 1: in the courts right now. Very likely the SCC loses
Speaker 1: in that. As we talked about, the courts are tough
Speaker 1: for this stuff. They're going to throw it back to
Speaker 1: the FCC. And if it throws it back to a
Speaker 1: Trump FCC, that could be a great, great story of deregulation,
Speaker 1: because that's going to be the catalyst for them to
Speaker 1: move ahead with easing these rules in twenty twenty five
Speaker 1: or twenty twenty six. So I think also you could
Speaker 1: see a rule making. There's the thirty nine percent US
Speaker 1: ownership cap, and when the first Trump administration was in office,
Speaker 1: a GPI took the position that, look, we can change
Speaker 1: by rule that thirty nine percent US cap. We could
Speaker 1: raise it to seventy eight percent, or we could get
Speaker 1: rid of it. And so I know there are legal
Speaker 1: questions about whether that's right, and so that that could
Speaker 1: get tested in the courts, but you're you won't see
Speaker 1: a Democrat FCC test that. You will see a Republican
Speaker 1: FCC look look seriously at moving ahead with a rule
Speaker 1: making to raise that level. And so I would expect
Speaker 1: you to see real action in that space to really
Speaker 1: let broadcasters catch up and not be hamstrung by these
Speaker 1: historical limits in both the TV and radio. So it
Speaker 1: certainly radio. I think there's there's almost bipartisan consensus that
Speaker 1: that radio rules should be eased. But I think you'd
Speaker 1: see it as well on the TV side if there's
Speaker 1: a Trump FCC.
Speaker 2: So part of the reason the FDC and d OJ
Speaker 2: have actually brought so many monopolization lawsuits against the Internet
Speaker 2: platforms is because Congress has really failed to regulate them,
Speaker 2: despite a lot of talk about it. The FTC and
Speaker 2: DJ aren't going to sit around and wait for Congress
Speaker 2: to do something here. But how do you see the
Speaker 2: election changing that? And what about regular also at the
Speaker 2: FTC or FCC.
Speaker 1: Yeah, so this breaks into two pieces. I think I
Speaker 1: eat most easily. It's a data privacy regulation and Section
Speaker 1: two thirty and so let me let me talk about
Speaker 1: those two pieces separately. When I talk about data privacy,
Speaker 1: I'm talking about Look, look the billions of dollars these
Speaker 1: companies make from their advertising business, which is basically taking
Speaker 1: what you click on and turning that knowledge into advertising dollars.
Speaker 1: And data privacy legislation is potentially significant because Congress could
Speaker 1: in theory turn that off. It could say, look, all
Speaker 1: that data you're collecting, you can't use it anymore, or
Speaker 1: you can't use it unless consumers say yes, yes, yes, yes,
Speaker 1: yes I want that, and so it could reverse. Right now,
Speaker 1: the default is pretty much go ahead. You know, they
Speaker 1: can use data unless consumers click through a bunch of
Speaker 1: boxes to say no. And no one does that, and
Speaker 1: so in theory, Congress could flip that. And that's why
Speaker 1: data privacy is potentially significant. Now Congress has talked about this,
Speaker 1: as you said, for years and they get nowhere on it,
Speaker 1: and I don't really think that will change, at least
Speaker 1: in a material disruptive way. You might see data privacy legislation.
Speaker 1: You've seen lots of states adopt data privacy legislation that's
Speaker 1: pretty light touch. It doesn't really change the playing field.
Speaker 1: You're very likely to also see kids focused legislation. I
Speaker 1: think there's a bipartisan consensus on that. Again, I don't
Speaker 1: you know, the companies are really moving in that direction
Speaker 1: on their own, and so we're talking about those, you know,
Speaker 1: kids thirteen to sixteen, thirteen to seventeen. The companies are
Speaker 1: kind of lessening how they use data for advertising in
Speaker 1: that space. Anyway, I think you'll see something past there.
Speaker 1: I don't really think Congress under either administration is going
Speaker 1: to pass disruptive data privacy legislation like you see in
Speaker 1: GDPR stuff Aisle the risk. The one place where you
Speaker 1: need to watch, I think is is Lena Khan's FTC.
Speaker 1: So she has proposed a rule making that and she
Speaker 1: calls it the surveillance advertising business and not really spoken
Speaker 1: very positively about that business model, and she's claiming the
Speaker 1: power to make rules to target that business model, and
Speaker 1: so that hasn't advanced under her under the first Biden term.
Speaker 1: I think there's a good chance she tries to advance
Speaker 1: it in a second term if she stays around. As
Speaker 1: you talked about Jen and and so again, this is
Speaker 1: really problematic in the courts. I think she'll run into
Speaker 1: if she goes really aggressive with this rule making. It's
Speaker 1: not easy to see the courts saying okay, good like,
Speaker 1: go ahead. I think they shoot that down. But it's
Speaker 1: not a certainty. It's it's never a good thing when
Speaker 1: a regulator is adopting, you know, business model disruptive rules,
Speaker 1: and then you're left to try to win in court.
Speaker 1: So that's a risk I think more than Congress. On
Speaker 1: the data privacy side, Section two thirty. Section two third,
Speaker 1: just briefly is the liability shield that it has protected
Speaker 1: these companies from lawsuits for since nineteen ninety six. Basically,
Speaker 1: it says that that Internet platforms aren't treated as the
Speaker 1: publisher or speaker of content posted by everyone who uses
Speaker 1: the Internet. Just because my user are posting things on
Speaker 1: my site, you can sue the user. You can't see meta,
Speaker 1: you can't sue Google because of that content. And so
Speaker 1: but that Section two thirty has sort of become the
Speaker 1: least popular law you know, in the country. I think
Speaker 1: bipartisan consensus, you know that maybe we went too far
Speaker 1: in just shielding these companies from liability. At the same time,
Speaker 1: there's not really a clear answer in Congress on how
Speaker 1: to change it. No one's really very excited about eliminating it.
Speaker 1: I don't really see that changing. I think there's more
Speaker 1: risk if Republicans control Congress and the White House. I
Speaker 1: think they're more likely to go aggressive on this stuff.
Speaker 1: I also think they're FCC under someone like Brendan Carr,
Speaker 1: just as they did under the Trump administration, would start
Speaker 1: a rule making to try to urge the courts to
Speaker 1: narrow the liability shield. What that means is is the
Speaker 1: companies are going to be able to be sued more
Speaker 1: often and have to you know, cases are good. You
Speaker 1: can't file a motion to dismiss right at the first
Speaker 1: round and throw the case out. It's going to go
Speaker 1: into discovery. You're going to be more costly to settle.
Speaker 1: So if you really cut away section two thirty, the
Speaker 1: cost your litigation costs sore. You're you're settling cases, many
Speaker 1: more cases for much higher amounts if you cut away
Speaker 1: at it, you know, you move in that direction. But
Speaker 1: it's something that companies can can handle. So it's an
Speaker 1: issue to watch on both sides. I think bigger risk
Speaker 1: if Republicans are in control because of concerns about bias
Speaker 1: from big tech, and there's there's a political momentum behind
Speaker 1: going after that, and Section two thirty is often the
Speaker 1: tool they used to go after that, you know that issue.
Speaker 2: Yeah, it seems like these companies are going to continue
Speaker 2: facing a lot of litigation for a lot of years
Speaker 2: ahead of us.
Speaker 1: Now.
Speaker 2: Congress did act though with respect to TikTok. We actually
Speaker 2: saw them do something there. So why don't you tell
Speaker 2: us about where things stand on that and what's next
Speaker 2: both before and after the election.
Speaker 1: Yeah, yeah, so briefly here because I know we're running
Speaker 1: a long but so this is an area where where
Speaker 1: Congress did act. I think people have sort of forgotten
Speaker 1: that and and they kind of think, oh, you know,
Speaker 1: all that talk about TikTok, that's Congress being Congress. But
Speaker 1: TikTok is banned on January nineteenth, you know less than
Speaker 1: you know, a little more than three months from now.
Speaker 1: Unless they win this lawsuit, and I went to the
Speaker 1: to the hearing in the lawsuit last month and it
Speaker 1: went very poorly for TikTok. And so we're waiting for
Speaker 1: that ruling. Now. If TikTok loses on that ruling, they
Speaker 1: can run to the Supreme Court before January nineteenth and
Speaker 1: say please, you know, stop stop this. But I'm not
Speaker 1: sure the Supreme Court will. I think TikTok is in
Speaker 1: real trouble on this issue. So that's great news for
Speaker 1: its competitors, you know, Meta and Alphabet and Snap in particular.
Speaker 1: And so we're looking at a ban by January nineteenth.
Speaker 1: How does the election play into that, I think it
Speaker 1: really there's not much. You know, Trump has come out
Speaker 1: and said, look, I'm actually for TikTok now, even though
Speaker 1: he tried to ban it the first time, he's sort
Speaker 1: of reversed course. Well, it doesn't matter. Congress already did this,
Speaker 1: and he's not going to turn Congress's ship around on this.
Speaker 1: He's not going to spend his political capital to pass
Speaker 1: a new law to bring back TikTok. Where he could
Speaker 1: be relevant is if TikTok were to win in this
Speaker 1: court case that's pending now, the court would throw it
Speaker 1: back to Congress and say, look, you need to fix this,
Speaker 1: and then Trump, you know, whoever's the next president, would
Speaker 1: need to sign that new legislation. I think President Harris
Speaker 1: would sign that fix, and TikTok would get banned a
Speaker 1: second time. Congress would fix it and that would get
Speaker 1: through the courts. President Trump, maybe he wouldn't sign it
Speaker 1: if this is truly his position now that he doesn't
Speaker 1: want to help Meta by banning TikTok, maybe he wouldn't
Speaker 1: sign a new fix. But I'm not even sure we
Speaker 1: get to that. Right now, TikTok's in real trouble based
Speaker 1: on the law that has passed, and you know, there's
Speaker 1: a chance they went in the courts, but I'm not
Speaker 1: sure they will. And so January nineteenth, there's a real,
Speaker 1: real possibility that TikTok is going away. And I don't
Speaker 1: think people are appreciating that as much as they should be.
Speaker 2: It just it seems so strange, such a popular app
Speaker 2: but so just quickly, because we need to get to HONOURAG.
Speaker 2: A hot topic is comprehensive federal AI regulation. So what's
Speaker 2: the future of US regulation look like?
Speaker 1: There? Yeah, so this right now still looks a lot
Speaker 1: to me, like what we talked about the regulation of
Speaker 1: data privacy in Congress, where Congress is still trying to
Speaker 1: figure this stuff out and really has struggled. You know,
Speaker 1: the first hearings in this in May twenty twenty three, everybody,
Speaker 1: it was a Kumbaya moment. Let's go regulate AI. Let's
Speaker 1: let's let's create a new agency. Like you know, we
Speaker 1: had Lindsay Graham and Democrats all coming together and let's
Speaker 1: go do this, and then nothing happens, and and then
Speaker 1: nothing has happened in two years since then, despite a
Speaker 1: lot of talk about it. And I really think I
Speaker 1: don't see the election being a big driver of the
Speaker 1: shape of future AI regulation here. I think there's a
Speaker 1: can erarned from both parties that that they don't want
Speaker 1: to be the EU on this. They don't want to
Speaker 1: get in the way of AI's development in a way
Speaker 1: that drives AI outside of the United States. And I
Speaker 1: think that's true for both Democrats and Republicans. I think
Speaker 1: I think the Republicans are even more aggressive and sort
Speaker 1: of being hands off here. So I think, you know,
Speaker 1: on the whole, I think a Trump uh, you know,
Speaker 1: Republican controlled Congress is a better thing on AI. But
Speaker 1: big picture, I don't really see much concrete. Congress is
Speaker 1: still trying to figure out which questions to ask on AI,
Speaker 1: and so it's so far away from actually adopting answers
Speaker 1: in terms of regulation or in legislation that I don't
Speaker 1: see this as a big driver. So so let me
Speaker 1: leave it there, and then let's just transfer. I want
Speaker 1: to bring in on Iraqi's He's survived his fire drill,
Speaker 1: I think, uh, and and made it back into the
Speaker 1: New York office there. And but but with that, with
Speaker 1: that big picture overview of the law in place, you're
Speaker 1: you're our senior equity analyst on technology and and I
Speaker 1: really I want to look to you, Honor aright to
Speaker 1: make this more concrete. And as we think about the
Speaker 1: election and really talk about some some specific companies, and
Speaker 1: Apple is a company you know better than just about
Speaker 1: anyone can can can you walk us through how you
Speaker 1: think about the election impacting the company? And I'm talking
Speaker 1: I'm thinking regulatory challenges, AI, acquisitions, use of capital, How
Speaker 1: do you think let's just start with Apple, how would
Speaker 1: you think about Apple in terms of your your view?
Speaker 3: Yeah, So for I mean this has been no secret.
Speaker 3: For the last six seven years. This has been a
Speaker 3: big issue for all big tech companies, and partially what
Speaker 3: we have seen is they have been able to prosper
Speaker 3: despite a lot of this opposition from you know, Washington
Speaker 3: regarding their business practices. And at the same time I
Speaker 3: think they have also tightened up a lot of issues
Speaker 3: that in some cases they are rightly you know, using
Speaker 3: their dominant position to get their products across. So so
Speaker 3: from that mindset, when we look at Apple, I think
Speaker 3: the near term risks really are around the app store
Speaker 3: fees and what could happen there, and there are several
Speaker 3: you know places around the world you're looking for it.
Speaker 3: EU has done some work. If that happens in the US,
Speaker 3: I mean that could harm their business. Frankly, that is
Speaker 3: an area of concern. Then the other part is what
Speaker 3: happens to the dominant iOS platform. I think they've opened
Speaker 3: up a little bit of that. There is a question
Speaker 3: about their payment systems that's going to keep on lingering
Speaker 3: over the next you could say, several years. Apple's argument
Speaker 3: is their closed system is far more secure. They talk
Speaker 3: a lot about privacy, and I think that really is
Speaker 3: the you know cornerstone of what they are trying to say,
Speaker 3: and in fact, you know, we think, for example, the
Speaker 3: issue that was faced between Microsoft and CrowdStrike recently, where
Speaker 3: because of crowd strikes update the Microsoft operating system had
Speaker 3: an impact. I think that's the kind of stuff that
Speaker 3: Apple's claiming. You know, they don't want anybody to go.
Speaker 1: In and touch that.
Speaker 3: In fact, that's the reason why it's not very big
Speaker 3: in enterprises. So that's that puce and pol is going
Speaker 3: to continue. I think there was a discussion around Apple
Speaker 3: investing in open ai and then getting on their board.
Speaker 1: That didn't happen.
Speaker 3: Then Microsoft stayed away from it. I think any investment
Speaker 3: Apple makes in any open AI platform right now, or
Speaker 3: open air platform or any AI platform right now, I
Speaker 3: think it's going to be.
Speaker 1: Difficult.
Speaker 3: I mean in a sense that they will have to
Speaker 3: jump hoops to figure out that they are not using
Speaker 3: their distribution strength to give undue influence. SAME's the case
Speaker 3: where you know, Google pays them quite a bit of
Speaker 3: money for search default Search, and that's an issue where
Speaker 3: Jen's talked a lot about it. We have done a
Speaker 3: webinar on that topic itself. That's another area of concern
Speaker 3: when it comes to Apple investors as far as acquisitions
Speaker 3: are concerned. You know, luckily for Apple, they really don't
Speaker 3: do a whole lot of large acquisitions, so that's not
Speaker 3: going to be it's going to be immaterial for them.
Speaker 3: So what we can see at least in the near
Speaker 3: term is for Apple, there is an overhang of fees
Speaker 3: that they're charging in terms of CAPEX. They're not going
Speaker 3: to see a spike in capex because of AI investments,
Speaker 3: unlike Microsoft and Amazon that are expanding very rapidly into
Speaker 3: data centers or AIDATA centers. So for Apple, what we
Speaker 3: envision at least for the next three four years, that
Speaker 3: majority of the free cash flow that they generate is
Speaker 3: going to go back into buying backshare. So that's not
Speaker 3: you know, that's not going to change. As I said,
Speaker 3: there is some overhang about the very profitable revenue stream
Speaker 3: coming from Google. We'll see how that, you know, shapes up.
Speaker 3: The second company that I have seen a lot of
Speaker 3: this stuff coming around is Amazon Web. Amazon in total
Speaker 3: now that includes their retail business, and Jen's talked a
Speaker 3: lot about it. Happy to hear Jen, if you have
Speaker 3: any discussions around there. Power as the e commerce platform
Speaker 3: and and and you know what you think is happening
Speaker 3: there well on the.
Speaker 2: E commerce I mean, the challenge by the FTC to
Speaker 2: Amazon's e commerce platform has to do with two things.
Speaker 2: The FTC says Amazon is doing. One, that they force
Speaker 2: third party sellers to provide the lowest price on Amazon
Speaker 2: and not on a website outside of Amazon, like ets
Speaker 2: for instance. But Amazon's cost to that seller are their
Speaker 2: costs are higher, so the price on Amazon should theoretically
Speaker 2: be higher, and it pushes all the other prices up
Speaker 2: that must match this higher merchant cost. So that's one
Speaker 2: area the FTC is looking at. The second area is
Speaker 2: that theoretically Amazon requires the use of its fulfillment services
Speaker 2: in order to give these third party merchants prime prime
Speaker 2: eligibility goods, give them the buybox where they need to
Speaker 2: be in order to make their sales on the Amazon website.
Speaker 2: So again, I think in the UK and EU, Amazon
Speaker 2: kind of said, what, We're going to stop doing that stuff,
Speaker 2: and that probably opens the door for some third party
Speaker 2: merchants to sell products at a lower price on their
Speaker 2: own website or on some other website outside of Amazon,
Speaker 2: and I certainly think that could impact Amazon's e commerce platform,
Speaker 2: it's e commerce revenue. I think down the road on
Speaker 2: rog we're probably going to see that in the US,
Speaker 2: whether it's the court or whether it's a settlement, we're
Speaker 2: probably going to get there. And so you know, I
Speaker 2: love your thoughts and how that impacts them.
Speaker 3: To be very frank and blunt, we don't think it's
Speaker 3: going to have a major impact. And the only reason
Speaker 3: is because what we have seen in the last you
Speaker 3: could say, a couple of years, even a little bit longer,
Speaker 3: that convenience, not the price, is the principal driver of
Speaker 3: people choosing the Amazon platform, and Prime's really done a
Speaker 3: really good job about it in terms of getting the
Speaker 3: orders to you in the matter of hours in certain cases.
Speaker 3: I mean, I'm amazed at sometimes I would place an
Speaker 3: order and within four hours you'll have it at your doorsteps.
Speaker 3: So it is that element of value versus price is
Speaker 3: what you're getting, and I think people are becoming priced
Speaker 3: and sensitive about certain things. We have seen that actually
Speaker 3: from some of the research that there are certain products
Speaker 3: that are cheaper on Walmart. But that doesn't mean that
Speaker 3: there is a there's the growth rates in Amazon's online
Speaker 3: business as have been impacted because of that so we
Speaker 3: we don't think that's a major hang up for their
Speaker 3: e commerce business. Now as far as the AWS business
Speaker 3: is concerned, now that's another place where we think they
Speaker 3: need some I would say more acquisitions, perhaps in the
Speaker 3: security aspect of it, some on the AI side of it.
Speaker 3: I think that's they're not going to do it. And
Speaker 3: you know, you and I've talked a lot about the
Speaker 3: I robot one, which was such a small, tiny acquisition
Speaker 3: and yet Amazon could not get.
Speaker 1: It across and honor, let's kind of bring it home
Speaker 1: that Microsoft you mentioned briefly earlier. But how would you
Speaker 1: think about, you know, election impacts for a company like Microsoft.
Speaker 3: Yeah, I would say perhaps, you know, unless we see
Speaker 3: a change in the sentiment in Washington. Activision was probably
Speaker 3: the biggest acquisition they probably went through, and the rest
Speaker 3: of them are going to be very small tokins. It's
Speaker 3: going to be very difficult for them to do. You know,
Speaker 3: you could a big acquisitions. Now they've done two things
Speaker 3: which I have been surprised that they were able to
Speaker 3: get through without getting a lot of flak. I mean
Speaker 3: they did get some you could say, more news articles
Speaker 3: than reality because their strong investment in open ai gives them,
Speaker 3: you know, I would say considerable influence about what's happening there. Now.
Speaker 3: I do not know under the legal framework where that lands.
Speaker 3: Because currently open ai is using a lot of the
Speaker 3: infrastructure from Microsoft run their operations. I think down the
Speaker 3: road that will change. It just just a matter of time,
Speaker 3: because you know, a lot to evangelize open ai software,
Speaker 3: they do need to work with other providers in a
Speaker 3: much closer way. And the second one is when they
Speaker 3: actually hired an entire team from a AI startup without
Speaker 3: really acquiring it, and then they paid some money to that.
Speaker 3: So I was a bit surprised at those two elements.
Speaker 3: I do know where it falls. I mean one of
Speaker 3: you can perhaps tell us how it shapes up. But
Speaker 3: those words the surprising factors. They're finding new ways of
Speaker 3: dealing with, you know, cooperation anad with with other startups.
Speaker 3: And in the case of Microsoft, I think they are
Speaker 3: spending so much in data centers over the next few years.
Speaker 3: I think that's going to be the big focus rather
Speaker 3: than a big acquisition. We anticipate that to be the
Speaker 3: the neartom cash outlay for them.
Speaker 1: Yeah, I mean I think we saw Elon Musk kind
Speaker 1: of raise concerns about the Open AI Microsoft relationship. And
Speaker 1: I think his first lawsuit on that got thrown out
Speaker 1: or or he bailed on the first one. He I
Speaker 1: think he's tried again. I'm not sure those legal issues
Speaker 1: aren't very concrete at at this point. And I don't
Speaker 1: don't really see see much of a thread other than
Speaker 1: you know, elon you know, trying to grab some headlines
Speaker 1: on that. And but it's definitely something to watch going forward.
Speaker 1: I think if there are other questions, please feel free
Speaker 1: to reach out to us. I think there is one
Speaker 1: in the chat let's let's let's so yeah, I let
Speaker 1: me tackle this one. So discontinuation of the Affordable Connectivity
Speaker 1: Program was a surprise to people. This is the and
Speaker 1: and how does that change going forward in an election?
Speaker 1: That's a great question, and and we didn't talk a
Speaker 1: lot about it, and and here if that that's exactly right.
Speaker 1: So this program expired in April of this year. This
Speaker 1: is a thirty dollars subsidy program for low income broadband
Speaker 1: subscribers that that Congress put forward actually originally before COVID,
Speaker 1: then changed it in COVID. A lot of people bipartisan consensus,
Speaker 1: both both parties wanted to get this approved and extend
Speaker 1: it past April May, but they could Congress again couldn't
Speaker 1: get it done. And and and I think the reason
Speaker 1: why they couldn't get it done is because Republicans in
Speaker 1: Congress don't like they like the ACP. They don't like
Speaker 1: the broader FCC Universal Service Program, which is an eight
Speaker 1: nine billion dollar program that's you know, known for having
Speaker 1: a lot of waste in it, and and they want
Speaker 1: a substantial, comprehensive reform of that. And so once that
Speaker 1: gets done, I think ACP becomes part of a solution
Speaker 1: going forward that that Republicans and Democrats will agree on.
Speaker 1: Now here's the big thing to watch here. There's there's
Speaker 1: a big catalyst coming forward, and that is the Supreme
Speaker 1: Court is about to grant a case on this. I
Speaker 1: think they're going to grant it next month in November.
Speaker 1: That that strikes down that whole nine billion dollar program.
Speaker 1: And so companies AT and T, Verizon, Luhman, telecom carriers,
Speaker 1: they actually defend the program. They they they benefit from
Speaker 1: this Universal Service Program because even though they pay into
Speaker 1: it on their telephone side, they get a lot of
Speaker 1: money out on the broadband side. And they don't want
Speaker 1: they want the certainty of having that program in place.
Speaker 1: But this court is really interested in in, as we
Speaker 1: said earlier, striking down limits on you know, loose language
Speaker 1: for regulators. And there's a there's a challenge to this
Speaker 1: nine billion dollar Universal Service program that says the whole
Speaker 1: thing's unconstitutional because Congress was too vague about it, and
Speaker 1: and so we got to throw the whole thing back
Speaker 1: to Congress to fix. I think there's a real chance
Speaker 1: that happens. I think you'll see headlines on it in November,
Speaker 1: you'll see an argument in the first quarter of next year,
Speaker 1: you'll see a decision in June that could strike down
Speaker 1: the whole nine billion dollar program. Then Congress is going
Speaker 1: to have to fix it, and then you're gonna there's
Speaker 1: going to be conversations about how to fix it. I
Speaker 1: think ACP will be part of that fix. That will
Speaker 1: probably you know, it's going to take a year or
Speaker 1: two to get you know, figure it out, but I
Speaker 1: think ACP will be part of that fix. There's also
Speaker 1: big push from a Publicublicans to make big tech companies
Speaker 1: fund the Universal Service Program in a way they never have.
Speaker 1: It's always been paid by a search charge on phone
Speaker 1: company bills, big big quesh to make Google and Alphabet
Speaker 1: pay for it. I've even seen some people say online
Speaker 1: gambling there should be a tax on that to pay
Speaker 1: for it. So lots of moving pieces to fund rural
Speaker 1: broadband going forward, to fix the FCC Universal Service Program.
Speaker 1: But watch for that catalyst at the Supreme Courts. I
Speaker 1: think it will start happening as soon as early November.
Speaker 1: You'll see headlines on this. So that's where we stand now.
Speaker 1: If there are other questions, please reach out to us
Speaker 1: at any time over the Bloomberg terminal. Thank you so
Speaker 1: much for joining us today, and hope you have a
Speaker 1: great day.