WEBVTT - Could See CBS Looking To Buy, Following Disney-Fox Deal 0:00:05.800 --> 0:00:08.719 Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Brahmowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Today 0:00:33.440 --> 0:00:36.320 is the day that the mouse eats the Fox. Yes, 0:00:36.680 --> 0:00:40.559 Disney spending fifty two billion dollars for many assets of 0:00:41.320 --> 0:00:43.479 Century Fox. In here to tell us more is Gita 0:00:43.840 --> 0:00:47.280 Rana nathan Our, senior media analyst for Bloomberg Economics, and 0:00:47.400 --> 0:00:51.960 tar La Chapelle, deal's columnist for Bloomberg Gadfly. Gita, what 0:00:52.159 --> 0:00:55.280 has to go right in order for this merger to 0:00:55.480 --> 0:00:59.560 show that it is a smart deal, not just now 0:00:59.640 --> 0:01:02.600 whenever one is happy and stock prices are moving up, 0:01:03.000 --> 0:01:06.200 but in times when perhaps they're not going to be 0:01:06.280 --> 0:01:09.680 so many hit movies. What kinds of synergies or combinations 0:01:10.040 --> 0:01:14.360 make this a potential success? Um suptem. There are plenty 0:01:14.440 --> 0:01:17.920 of synergies because both of the companies are in such 0:01:18.040 --> 0:01:21.320 similar businesses. There are significant cost savings. Obviously on the 0:01:21.360 --> 0:01:26.120 TV and film production side with all of the sports programming. 0:01:26.840 --> 0:01:30.319 But I think really for them for the deal itself 0:01:30.400 --> 0:01:34.319 to be successful, there are two primary considerations. Number one 0:01:34.400 --> 0:01:38.560 is execution. Disney has absolutely stellar record when it comes 0:01:38.720 --> 0:01:42.480 to acquiring assets and then integrating them. We've seen that 0:01:42.600 --> 0:01:47.360 time and time again with Pixar, with Marvel, with Lucasfilm. Um, Fox, 0:01:47.400 --> 0:01:49.240 of course is going to be a little bit different. 0:01:49.280 --> 0:01:52.320 It's a much bigger asset. But I'm confident they're going 0:01:52.360 --> 0:01:55.560 to do a great job in execution. I think the 0:01:55.640 --> 0:01:58.440 issue where um, you know they're not going to have 0:01:58.560 --> 0:02:02.520 as much control, is going to be on the regulatory side. Um, 0:02:02.520 --> 0:02:05.680 given all of the recent uncertainty with the Department of 0:02:05.720 --> 0:02:08.160 Justice blocking the Time Warner and the A T and 0:02:08.240 --> 0:02:12.000 T deal. So, um, those are the two things that 0:02:12.040 --> 0:02:14.600 we are really looking at. So Tara, come on in 0:02:14.720 --> 0:02:16.880 here exactly on that point. I mean, how big of 0:02:16.880 --> 0:02:18.480 a hurdle is this going to be the cross to 0:02:18.480 --> 0:02:20.960 actually get this deal done. I mean, it's funny because 0:02:20.960 --> 0:02:24.360 it used to be that horizontal mergers like this, meaning 0:02:24.400 --> 0:02:26.680 that a company buying a competitor, were the kind that 0:02:26.919 --> 0:02:29.400 we're most sort of fraught in the regulatory process, and 0:02:29.400 --> 0:02:31.359 now we're seeing a T and T time Warner run 0:02:31.360 --> 0:02:34.160 into hurdles, which is a vertical merger, meaning they're not 0:02:34.240 --> 0:02:37.880 buying competitor, they're buying an adjacent business and that's facing 0:02:37.919 --> 0:02:40.600 all kinds of issues. So it seems like the sentiment 0:02:40.639 --> 0:02:42.280 has been, well, maybe this will have an easier shot, 0:02:42.360 --> 0:02:44.400 which just doesn't make sense when you look at history. 0:02:44.520 --> 0:02:46.840 So I think it could be really interesting to see 0:02:46.840 --> 0:02:49.240 how the government looks at this. I mean I think 0:02:49.240 --> 0:02:51.040 they're going to have some issues on the sports side. 0:02:51.520 --> 0:02:54.400 UM Sky TV, perhaps that's a Sky PLC. Maybe that's 0:02:54.400 --> 0:02:57.680 a little bit easier. Now we'll see easier for Fox 0:02:57.720 --> 0:03:00.240 to complete the deal because that would be uh sort 0:03:00.240 --> 0:03:04.560 of what would happen before Disney would acquire Sky. So 0:03:04.760 --> 0:03:10.160 concerns about proper being a fit, improper broadcaster, and you 0:03:10.200 --> 0:03:13.200 know the scandals that Fox has had. Disney is probably 0:03:13.200 --> 0:03:16.040 a more preferable buyer in that case. Keith, what does 0:03:16.080 --> 0:03:18.080 the competition make of all this? I mean, it's not 0:03:18.080 --> 0:03:20.560 as if they're going to sit idly by while Bob 0:03:20.600 --> 0:03:25.120 Iger tries to combine two huge companies. Yeah, I mean 0:03:25.760 --> 0:03:30.480 this move itself has kind of been um widely viewed as, um, 0:03:30.600 --> 0:03:32.920 you know, creating a Netflix killer. Now, I'm not really 0:03:32.960 --> 0:03:35.600 sure whether they're actually going to be able to do that. Um. 0:03:35.680 --> 0:03:40.160 Netflix is already far ahead, UM, so you know they 0:03:40.360 --> 0:03:43.000 It's going to obviously take some time for Disney to 0:03:43.000 --> 0:03:46.520 to ramp up its presence in the streaming world. But 0:03:46.600 --> 0:03:49.000 I think the bigger question is going to be what 0:03:49.160 --> 0:03:52.160 happens to all of the smaller media companies. What happens 0:03:52.200 --> 0:03:56.080 to a CBS, Viacom, all of these names um now 0:03:56.120 --> 0:04:00.240 in play with Disney becoming such a dominant force in 0:04:00.440 --> 0:04:04.200 the media world. I mean, I think CBS is going 0:04:04.280 --> 0:04:06.000 to be really interesting to watch. And we just did 0:04:06.040 --> 0:04:08.840 a Gadfly piece this week on the three different sort 0:04:08.880 --> 0:04:11.400 of logical deal options that they have on the table now. 0:04:11.440 --> 0:04:13.800 And I think Sherry Redstone could look at a Viacom 0:04:13.880 --> 0:04:17.159 merger again, which is their other property that they control. UM, 0:04:17.279 --> 0:04:19.440 I don't know how much sense that makes with Viacom 0:04:19.480 --> 0:04:21.640 going through such a tough turnaround. But the other ideas 0:04:21.680 --> 0:04:24.960 are Verizon. Verizon could copy a T and T once 0:04:25.000 --> 0:04:26.680 we get a better sense of how this trial is 0:04:26.680 --> 0:04:29.320 going to go over the Time Warner deal, Uh, they 0:04:29.360 --> 0:04:31.360 would you know, be adding content in the same way 0:04:31.360 --> 0:04:32.880 that A. T and T is doing with Time Warner. 0:04:33.200 --> 0:04:37.520 Or there's lions Gate, which has John Malone involved dealmaker obviously, 0:04:38.000 --> 0:04:40.000 um I make I think it makes sense that lions Gate, 0:04:40.040 --> 0:04:42.080 the film studio, would get rolled up into something at 0:04:42.080 --> 0:04:44.359 some point or buy other things. They bought Stars not 0:04:44.440 --> 0:04:47.120 all that long ago. So I think CBS not having 0:04:47.160 --> 0:04:49.440 a film studio, and clearly Disney seeing a lot of 0:04:49.480 --> 0:04:52.960 value in film studios buying Foxes and seeing how Netflix 0:04:52.960 --> 0:04:54.719 has had so much success on the on the movie 0:04:54.760 --> 0:04:57.080 side as well, I think it only makes sense that 0:04:57.120 --> 0:04:59.440 CBS could look at something like that. Next I'm gonna 0:04:59.440 --> 0:05:04.640 throw something crazy out Terra. Would the bigger and improve 0:05:04.760 --> 0:05:08.920 Disney plus Fox be interested in buying Netflix roll them up, 0:05:09.279 --> 0:05:11.440 makes them behemous? It's interesting. I mean, I always thought 0:05:11.480 --> 0:05:13.760 that Disney would be a logical buyer for Netflix. It 0:05:14.000 --> 0:05:18.080 could even solve disney succession question obviously, But I think 0:05:18.120 --> 0:05:20.440 now with this deal, they're kind of going up against 0:05:20.480 --> 0:05:23.560 Netflix and they're trying to take more control of Hulu. 0:05:23.560 --> 0:05:25.640 So I think it depends what happens with Hulu. Does 0:05:25.720 --> 0:05:29.440 Comcast fight Disney if Disney tries to take full control 0:05:29.480 --> 0:05:31.440 of it and try to break that up and take 0:05:31.480 --> 0:05:34.600 it themselves, or if if Disney does keep it, I 0:05:34.640 --> 0:05:36.840 think they'd be more focused on the streaming services that 0:05:36.839 --> 0:05:39.960 they're keeping rather than going after a Netflix. What do 0:05:40.040 --> 0:05:43.000 you think, Yeah, I think so. You know, one of 0:05:43.040 --> 0:05:46.400 them factors is also going to be international. So Disney 0:05:46.520 --> 0:05:53.200 by buying um Star India um gets a significant exposure internationally. 0:05:53.320 --> 0:05:56.719 No Star India actually has a very big streaming presence 0:05:56.800 --> 0:05:59.679 through its app there, which is called hot Star, which 0:05:59.720 --> 0:06:02.400 is siles ahead of Netflix. So Netflix is still kind 0:06:02.440 --> 0:06:05.839 of trying to gain a foothold in the Indian streaming market. 0:06:05.920 --> 0:06:10.080 For instance, Disney through this hot Star app is already 0:06:10.120 --> 0:06:13.919 going to be miles ahead. So internationally they they're probably 0:06:13.960 --> 0:06:16.440 already a little bit ahead of the game there. The 0:06:16.480 --> 0:06:18.720 problem is really going to be in the domestic market, 0:06:18.920 --> 0:06:21.280 and as Tara pointed out, UM, you know, we're going 0:06:21.320 --> 0:06:23.359 to have to see what happens with Hulu they have, 0:06:23.920 --> 0:06:25.920 I mean, the scale that they have there is absolutely 0:06:25.920 --> 0:06:28.880 not comparable to netflixes at all. It's only about sixteen 0:06:29.000 --> 0:06:31.840 million subs or so. Um So we'll have to see 0:06:32.080 --> 0:06:34.960 how that that plays out with com Cash once their 0:06:35.080 --> 0:06:38.120 consent decree and some time next year. Well, thanks to 0:06:38.400 --> 0:06:39.880 both of you for breaking this down. We will be 0:06:39.920 --> 0:06:41.920 talking more about that throughout the day. The fact that 0:06:41.960 --> 0:06:46.520 Disney is indeed buying parts of Fox for fifty two 0:06:46.720 --> 0:06:51.360 billion dollars. Guita around Nathan, senior media analyst for Bloomberg Intelligence, 0:06:51.360 --> 0:06:54.200 as well as Tara la Chapelle, are Bloomberg gad Fly 0:06:54.400 --> 0:06:57.440 columnists who covers all things tech and deals that has 0:06:57.480 --> 0:06:59.760 been following this for quite a while. Really at the 0:06:59.760 --> 0:07:03.080 big question now has to do with Netflix. How they 0:07:03.080 --> 0:07:23.200 respond This is Bloomberg strong jobs data, Well it may falter. 0:07:23.320 --> 0:07:26.600 According to our next guest, Danielle DiMartino Booth is the 0:07:26.680 --> 0:07:29.680 founder of money Strong and a Bloomberg profit and she 0:07:29.840 --> 0:07:32.440 joins us here in our eleven three oh studio. Danielle, 0:07:32.440 --> 0:07:34.680 always a pleasure, Thanks for being here. What do you 0:07:34.680 --> 0:07:37.920 mean by this strong demand in jobs may actually falter? 0:07:38.040 --> 0:07:40.280 You don't think that the job the hiring spree is 0:07:40.320 --> 0:07:43.240 going to continue. I think that the hiring spree for 0:07:43.280 --> 0:07:46.400 skilled workers is certainly going to continue. Um. But by 0:07:46.400 --> 0:07:48.240 the same token, I don't think that people are paying 0:07:48.240 --> 0:07:51.840 near enough attention to some of the distress um signals 0:07:51.880 --> 0:07:56.120 emanating from the restaurant industry right now. Restaurants followed brick 0:07:56.160 --> 0:08:00.400 and mortar retail into the abyss of over expansion, and 0:08:00.480 --> 0:08:03.120 now they're starting to shrink that footprint. If you look 0:08:03.160 --> 0:08:05.880 at the current economic recovery, as long as it has 0:08:05.920 --> 0:08:11.040 been going on, the main hiring sector has been in 0:08:11.080 --> 0:08:16.440 these restaurants, restaurant, leisure, entertainment. They've all over expanded. Danielle, 0:08:16.560 --> 0:08:21.320 You've been a phenomenal over the decades of predicting the 0:08:21.400 --> 0:08:25.280 early signs of a problem, certainly leading up to the 0:08:25.680 --> 0:08:28.840 housing boom and bust that we saw lead to the 0:08:28.880 --> 0:08:31.840 two and eight failure of Lehman Brothers. And I'm just 0:08:31.920 --> 0:08:37.200 wondering right now, we see a dramatic consensus around global 0:08:37.280 --> 0:08:42.040 synchronized growth, healthy consumer everything is hunky dory, and yet 0:08:42.120 --> 0:08:45.400 consumer debt levels are rising if you strip out mortgages 0:08:45.520 --> 0:08:49.560 rising to record levels. Does this concern you? Is this 0:08:49.600 --> 0:08:52.080 a warning sign? Are you seeing rising delinquencies that are 0:08:52.120 --> 0:08:56.880 also a warning sign? I absolutely am. Consider something we 0:08:57.000 --> 0:08:59.760 have seen twenty three back to back months of in 0:09:00.080 --> 0:09:04.880 lation adjusted credit card spending growth outpaced that of incomes, 0:09:04.920 --> 0:09:08.960 and the gap between the two is widening. Credit card 0:09:08.960 --> 0:09:12.640 delinquencies are going up. Major banks are setting aside lost 0:09:12.640 --> 0:09:16.599 provisions at a faster clips. City group actually expressed surprise 0:09:16.800 --> 0:09:19.240 at how quickly they're having to build up their lost provisions. 0:09:19.920 --> 0:09:23.400 And we're seeing a continuation, a very quiet continuation of 0:09:23.440 --> 0:09:26.599 sub prime auto delinquencies and the beginnings of f h 0:09:26.720 --> 0:09:29.520 A Mortgage delinquencies take up from O nine and ten. 0:09:29.920 --> 0:09:32.840 So f f h A is the one agency that 0:09:32.880 --> 0:09:37.760 allows UH allows borrowers home buyers to put down much 0:09:37.880 --> 0:09:40.480 less for their down pays, the only three percent game 0:09:40.480 --> 0:09:43.360 in town, and it was really the only open mortgage 0:09:43.480 --> 0:09:47.920 entity in the immediate years following the housing crisis where 0:09:47.960 --> 0:09:50.400 people could go and put very little down to buy home. 0:09:50.600 --> 0:09:55.280 Do you feel like policymakers UH sufficiently recognize the increase 0:09:55.400 --> 0:09:59.240 in fixed costs that a lot of consumers are facing. 0:09:59.280 --> 0:10:01.200 I mean, I was looking at a Moody's report on 0:10:01.280 --> 0:10:05.200 consumer asset bacts securitizations that they put out yesterday. As 0:10:05.320 --> 0:10:07.719 the share of renters paying more than fifty percent of 0:10:07.760 --> 0:10:12.480 their incomes towards rent climbs to almost from twenty four 0:10:12.520 --> 0:10:15.840 point one percent in two thousand seven, home ownership slumped 0:10:15.840 --> 0:10:19.719 towards a fifty year low. Meanwhile, health insurance costs some 0:10:19.920 --> 0:10:23.600 thirty two faster than a twelve percent increase in workers 0:10:23.679 --> 0:10:27.679 wages five years. These are astounding statistics. We just had 0:10:27.679 --> 0:10:31.800 the CPI report come out that policymakers perceive as being benign. 0:10:31.840 --> 0:10:33.959 How could they see it any other way? If if 0:10:34.040 --> 0:10:36.679 rent inside the c p I are only eight percent 0:10:37.080 --> 0:10:40.800 of the index, and yet they are at least a third, 0:10:41.000 --> 0:10:44.680 if not fifty percent of a given households balance sheet. 0:10:44.880 --> 0:10:47.640 They're running upwards of four percent. If you think back 0:10:47.640 --> 0:10:49.600 to the peak of the housing boom, that was what 0:10:49.880 --> 0:10:52.719 home price appreciation was doing at the time. But right 0:10:52.720 --> 0:10:57.400 now home ownership and renting are more prohibitively expensive than 0:10:57.440 --> 0:10:59.840 they've ever been. And no, I don't think this is 0:10:59.840 --> 0:11:02.480 on federal reserves radar screen. I just want to go 0:11:02.559 --> 0:11:06.280 through some items that people may actually purchase, such as gasoline. Right, 0:11:06.400 --> 0:11:10.600 gasoline prices they are up. We're seeing about two dollars 0:11:10.600 --> 0:11:13.880 and fifty cents a gallon for a national average. That 0:11:14.000 --> 0:11:17.280 compares to two dollars and twenty one cents same time 0:11:17.480 --> 0:11:21.439 last year, So that's an increase. We've also been speaking, 0:11:21.559 --> 0:11:25.680 as you have, about the delinquency for subprime auto loans, 0:11:26.040 --> 0:11:28.680 and we're talking about a figure that it's about ten 0:11:28.800 --> 0:11:31.600 percent of all of those loans are at least ninety 0:11:31.679 --> 0:11:36.240 days or greater delinquent. What happens then, if the Federal 0:11:36.280 --> 0:11:41.839 Reserve actually goes ahead and raises interest rates in three 0:11:41.880 --> 0:11:45.440 times and indeed even four times, as many economists say 0:11:45.440 --> 0:11:48.640 that they're going to do well, this is uh. We 0:11:48.760 --> 0:11:51.120 we've read this book before and we actually know how 0:11:51.160 --> 0:11:54.960 it ends. The FED will always over tighten into late 0:11:55.120 --> 0:11:58.400 cycle signs, and right now we could possibly see a 0:11:58.520 --> 0:12:01.800 four percent handle coming on g d P, and it 0:12:01.920 --> 0:12:04.320 is going to be the biggest head fake, and the 0:12:04.320 --> 0:12:06.800 FED is going to end up chasing that head fake 0:12:06.920 --> 0:12:11.160 and over tightening. If Powell is not astute to the 0:12:11.160 --> 0:12:14.840 fact that still waters run deep so underneath the biggest 0:12:14.920 --> 0:12:18.560 natural disaster year in how long two thousand seventeen. Of course, 0:12:18.640 --> 0:12:21.000 building materials have gone through the roof. Of course, there 0:12:21.000 --> 0:12:23.760 were two good years of of of of car sales. 0:12:24.160 --> 0:12:26.960 All of this rebuilding effort has no precedent. You can't 0:12:26.960 --> 0:12:31.520 compare three hurricanes and two massive wildfires to Hurricane Katrina. 0:12:31.640 --> 0:12:33.560 It doesn't work. But that's the only thing in the 0:12:33.559 --> 0:12:36.760 fed's models. Just to push back a little bit. We're 0:12:36.760 --> 0:12:39.200 not seeing inflation pickup. We're not seeing some of the 0:12:39.240 --> 0:12:42.440 other signs of a late stage in the credit cycle. 0:12:42.760 --> 0:12:46.839 Investors will they have flown into the riskiest assets. They 0:12:46.880 --> 0:12:49.959 have shown some discretion this year. You are seeing some 0:12:50.000 --> 0:12:54.920 potholes and credit markets, some losers amid the froth. So 0:12:55.160 --> 0:12:57.560 you know, what are you looking at when somebody says 0:12:57.600 --> 0:13:00.800 to you, look, yes, all that understood. Still in the 0:13:00.840 --> 0:13:03.840 scheme of things, consumer debt relative to GDP isn't necessarily 0:13:03.880 --> 0:13:06.280 at to record high. We aren't seeing the same kinds 0:13:06.280 --> 0:13:09.160 of default rates as you would leading up to a problem. 0:13:09.240 --> 0:13:11.480 What do you say to them? I think that the 0:13:11.520 --> 0:13:13.719 Fed has left the p p I for dead at 0:13:13.760 --> 0:13:17.000 its peril. We saw the producer prices came out at 0:13:17.000 --> 0:13:19.800 a six year high, and it was it was completely 0:13:19.800 --> 0:13:24.160 wholesale disregarded after the CPI came out by policymakers. A 0:13:24.160 --> 0:13:26.000 lot of that was gasoline, right, I mean the gas 0:13:26.200 --> 0:13:28.800 I think about two thirds of the jump in November 0:13:28.800 --> 0:13:31.520 were gasoline related. It was up more than fift But 0:13:31.559 --> 0:13:34.400 if you look at transportation, if you look at manufacturing, 0:13:34.480 --> 0:13:38.400 if if you look at anything related to the supply chain, disruption, 0:13:38.600 --> 0:13:42.480 which is unprecedented following these natural disasters, and you listen 0:13:42.559 --> 0:13:45.360 to every you can look at ten surveys, this is 0:13:45.600 --> 0:13:48.280 my upcoming Bloomberg View column. You can look at ten 0:13:48.520 --> 0:13:52.280 regional manufacturing surveys, and all of the managers are complaining 0:13:52.320 --> 0:13:54.520 about the fact that their prices have gone through the roof. 0:13:54.600 --> 0:13:57.400 They're actually having to leverage up to cover them if 0:13:57.440 --> 0:14:00.240 they can't pass along these price increases, if they don't 0:14:00.240 --> 0:14:03.400 have pricing power. It's building in the pipeline, it's it exists. 0:14:04.040 --> 0:14:06.080 So what do you think the FEED should do next year? 0:14:07.120 --> 0:14:10.240 I think the FED is in a very difficult place. 0:14:11.320 --> 0:14:14.760 I really do. I'm hoping that I'm hoping that there 0:14:14.800 --> 0:14:18.720 are some eagle eyed staffers who can look through this 0:14:18.840 --> 0:14:24.440 supply chain disruption. Maybe hike in March, maybe, but they 0:14:24.560 --> 0:14:28.200 really do need to step back and study the household 0:14:28.200 --> 0:14:33.120 sector and figure out where inflations really going to be 0:14:33.960 --> 0:14:37.280 after all of these natural disasters. Work their way through 0:14:37.320 --> 0:14:39.400 the data, because at the end of it, you will 0:14:39.440 --> 0:14:44.280 have millions of households who remain devastated by these natural 0:14:44.280 --> 0:14:48.440 disasters and don't have the wherewithal financially to rebuild and 0:14:48.480 --> 0:14:51.040 replace all of these assets. They will add on to 0:14:52.080 --> 0:14:56.080 the existing the pre existing defaults and delinquencies that we 0:14:56.160 --> 0:15:00.560 have seen already in the household sector before Hurricane Harvey landfall. 0:15:00.840 --> 0:15:03.640 Danielle di Martino Booth, thank you so much. Always a 0:15:03.680 --> 0:15:06.440 pleasure speaking with you. She is founder of money Strong, 0:15:06.520 --> 0:15:10.560 a Bloomberg profit. Also, for nine years, she was the 0:15:10.640 --> 0:15:32.160 AID Direct Advisor to President Fisher. The Federal Communications Commission 0:15:32.320 --> 0:15:36.320 is currently meeting. They are widely expected to reverse net 0:15:36.320 --> 0:15:41.120 neutrality rules that were instated during a former President Obama's reign. 0:15:41.440 --> 0:15:45.120 Here to talk about what the implications are is Jerry Smith, 0:15:45.160 --> 0:15:49.920 media reporter for Bloomberg News. Jerry, it's almost a foregone 0:15:49.960 --> 0:15:54.360 conclusion that this committee will indeed vote to reverse not 0:15:54.480 --> 0:15:56.960 neutrality rules. Is that correct? Yeah, I mean the hearing 0:15:57.040 --> 0:15:59.280 is happening right now as we speak, but it is 0:15:59.320 --> 0:16:02.480 pretty much um, you know, on along party lines, and 0:16:02.520 --> 0:16:06.960 the Republican UM FCCS commissioners have the majority, so they're 0:16:07.000 --> 0:16:09.400 going to um you know, they've made it pretty clear 0:16:09.440 --> 0:16:12.680 that they're going to vote to remove these rules. So, Jerry, 0:16:12.680 --> 0:16:15.000 I've seen a couple of polls and it looks like 0:16:15.160 --> 0:16:19.280 the majority of Americans polled art not for rolling back 0:16:19.480 --> 0:16:23.160 some of these net neutrality rules. Uh. The argument from 0:16:23.400 --> 0:16:27.240 the industry is that the big broadband behemoths would invest 0:16:27.320 --> 0:16:29.960 more in their infrastructure if they knew that they could 0:16:30.000 --> 0:16:32.400 earn more from it. Can you lay out both sides 0:16:32.440 --> 0:16:36.120 and UH and and sort of why this is happening now? Yeah, 0:16:36.160 --> 0:16:38.920 I mean, the the internet service providers were talking about 0:16:38.960 --> 0:16:43.280 companies UM like Comcast and Verizon. UH. That's the crux 0:16:43.320 --> 0:16:47.760 of their argument that if there's extra regulations on how 0:16:47.800 --> 0:16:52.200 they how they manage their internet service, then that, UM, 0:16:52.280 --> 0:16:54.920 you know, that gives them less incentive to invest in 0:16:54.920 --> 0:16:59.120 their networks. UM. You know, there is some skepticism about 0:16:59.200 --> 0:17:01.880 that argument. Craig Moffatt, who's probably one of the more 0:17:01.920 --> 0:17:05.639 respected UH analysts in the in the industry, UH, you know, 0:17:05.720 --> 0:17:07.600 he said, there's a lot other there's a lot more 0:17:07.640 --> 0:17:10.440 factors that go into the decision of whether a Comcast 0:17:10.520 --> 0:17:13.840 or Verizon invest in their broadband network than just whether 0:17:13.880 --> 0:17:17.320 there's UH neutrality rules. I mean, one key thing about 0:17:17.720 --> 0:17:20.560 the you know, the future of these companies UM Comcast 0:17:20.600 --> 0:17:24.600 in particular, UH, then their video services declining, and so 0:17:24.960 --> 0:17:28.240 the future of their business is selling you internet service 0:17:28.560 --> 0:17:32.480 and they do not want the government to have any 0:17:32.520 --> 0:17:35.440 ability to tell them how much they can charge you 0:17:35.560 --> 0:17:39.840 for internet service, which is what these rules do, and 0:17:39.880 --> 0:17:42.760 that that's really the bigger fear. It would be very, 0:17:42.840 --> 0:17:46.000 very surprising to see Comcast or Verizon or E T 0:17:46.119 --> 0:17:49.480 and T slow down people's web traffic or block certain 0:17:49.480 --> 0:17:52.800 web traffic. The big concern for these companies and their 0:17:52.840 --> 0:17:58.040 investors is can the government have the ability to tell them, 0:17:58.240 --> 0:18:00.520 you know, how much you charge for broad band because 0:18:00.560 --> 0:18:03.560 that's really where their future profits are going to be. Drey, 0:18:03.640 --> 0:18:06.760 have we seen this before in the wireless industry with 0:18:07.240 --> 0:18:10.680 I guess it's what called zero rating. Yeah, I mean, 0:18:10.680 --> 0:18:13.240 that's another thing that's happening. I mean, the wireless side 0:18:13.240 --> 0:18:15.560 of internet service has sort of been overlooked in this 0:18:15.560 --> 0:18:18.520 whole debate. It's really been more about, um, the high 0:18:18.520 --> 0:18:21.720 speed Internet that you use on your desktop computer, uh 0:18:21.720 --> 0:18:24.960 and your WiFi at home top computer. That's an old 0:18:25.000 --> 0:18:28.240 that that I can't remember what is that agetting all? Yeah, No, 0:18:28.520 --> 0:18:30.600 but wireless is I mean, that's something that you're seeing 0:18:30.600 --> 0:18:34.640 the wireless companies do. Is zero rating is an industry 0:18:34.760 --> 0:18:38.440 term for saying we are not For example, if you 0:18:38.480 --> 0:18:41.800 want to watch Netflix on UM on your phone through 0:18:41.800 --> 0:18:45.719 a wireless network. Uh, that wireless provider would not count 0:18:45.760 --> 0:18:49.640 that data usage towards the limit that you have. I mean, 0:18:49.680 --> 0:18:52.240 some people have unlimited data usage. And I think T 0:18:52.400 --> 0:18:55.960 Mobile did this with Facebook and Facebook Messenger. They said, 0:18:55.960 --> 0:18:57.760 you know, free access to that that was. That's just 0:18:57.760 --> 0:18:59.879 one of there's a few examples of this where you 0:19:00.119 --> 0:19:03.120 they say this won't count. Uh, this particular service won't 0:19:03.160 --> 0:19:06.720 count towards your your data cap and and that's controversial 0:19:06.760 --> 0:19:09.280 because then you're sort of in some ways, these wireless 0:19:09.280 --> 0:19:13.080 providers can pick winners and losers. So, Jerry, I guess 0:19:13.080 --> 0:19:16.880 if you said worst case scenario, what happens if all 0:19:16.920 --> 0:19:20.080 of these internet providers jack up their prices sky high 0:19:20.119 --> 0:19:22.520 and if anybody wants to get on the Worldwide Web 0:19:22.880 --> 0:19:25.280 they need to pay them. The flip side to that 0:19:25.480 --> 0:19:28.320 is these companies are going to be judicious about how 0:19:28.400 --> 0:19:31.560 much they raise rates because they don't want to ignite 0:19:31.640 --> 0:19:34.920 a backlash that ends up creating them and and sort 0:19:34.960 --> 0:19:36.879 of labeling them as utilities. Right, I mean, isn't this 0:19:36.880 --> 0:19:39.360 sort of the push pull that people are looking for? Right? 0:19:39.400 --> 0:19:41.639 I mean I think the um, you know, the internet 0:19:41.640 --> 0:19:43.960 providers will be very very careful about doing this sort 0:19:43.960 --> 0:19:46.160 of thing. I'd be very surprised if in the near 0:19:46.200 --> 0:19:49.040 future if these rules get rolled back and there's gonna 0:19:49.040 --> 0:19:52.800 be probably a prolonged court battle over this, regardless uh 0:19:52.840 --> 0:19:55.560 that they did anything in terms of blocking or slowing traffic. 0:19:55.640 --> 0:19:57.600 And the other thing is, you know, this is really 0:19:57.600 --> 0:20:01.440 more about these smaller startups that need access to the Internet, 0:20:01.480 --> 0:20:03.119 and not so much some of these big companies like 0:20:03.160 --> 0:20:05.440 Netflix that are are so huge that this doesn't really 0:20:05.440 --> 0:20:07.600 affect them as much anymore. You said that they're probably 0:20:07.600 --> 0:20:11.119 going to be lawsuits. Could that end up preventing a 0:20:11.200 --> 0:20:13.720 reverse of the net neutrality rules altogether? I think it's 0:20:13.760 --> 0:20:16.399 it's you know, you talk to experts and they would 0:20:16.480 --> 0:20:19.879 argue that this is likely going to see legal challenges 0:20:19.920 --> 0:20:23.400 in the future regardless of how today's hearing turns out. 0:20:23.440 --> 0:20:25.720 So this is something that's been tied up in the 0:20:25.760 --> 0:20:29.359 courts for several years prior to this, and I'd be 0:20:29.480 --> 0:20:31.960 very surprised if it doesn't stay that way. Well, I'm 0:20:32.000 --> 0:20:35.719 just wondering if this could lead to specific add on 0:20:35.960 --> 0:20:39.840 charges if you want to go to specific websites. So 0:20:39.880 --> 0:20:42.399 if you'd like to go to a website that is 0:20:42.480 --> 0:20:45.280 owned by a T and T and you happen to 0:20:45.320 --> 0:20:48.320 be an a T and T wireless customer, Great, they'll 0:20:48.359 --> 0:20:52.280 let you do that along with your planets. The data 0:20:52.440 --> 0:20:54.520 that is used there is not going to be counted 0:20:54.520 --> 0:20:56.560 against you. But if you want to go to a 0:20:56.600 --> 0:21:00.800 competitor's website, or indeed, if you actually are a content provider, 0:21:00.840 --> 0:21:03.320 which a T and T is seeking to become right 0:21:03.440 --> 0:21:05.880 through there, well they already are really with the addish 0:21:05.880 --> 0:21:09.160 network to a certain extent. But if you want content 0:21:09.240 --> 0:21:12.080 from a competing company, maybe they'll slap on a five 0:21:12.080 --> 0:21:14.920 dollar a month charge, or they'll make it more expensive 0:21:15.040 --> 0:21:18.720 or prohibib or the website could charge directly for that access. Yeah, 0:21:18.720 --> 0:21:20.719 I mean, I think it would be less obvious to 0:21:20.760 --> 0:21:23.840 the consumer initially as far as how much you're paying. 0:21:23.880 --> 0:21:26.959 I think this is more about a streaming service like 0:21:27.080 --> 0:21:31.160 Netflix or an internet a YouTube and whether they would 0:21:31.200 --> 0:21:34.040 have to pay extra in order to make sure that 0:21:34.160 --> 0:21:37.480 their content reaches your home unimpeded, and whether they would 0:21:37.480 --> 0:21:40.639 have to pay an internet provider to do that. Um. 0:21:40.680 --> 0:21:43.240 But you know, I think the bigger question is also 0:21:43.359 --> 0:21:46.960 just um, whether these internet providers, um, they just don't 0:21:47.000 --> 0:21:49.080 want the government looking over their shoulder. They don't want 0:21:49.080 --> 0:21:51.840 the government telling them how much they can charge internet service. 0:21:52.080 --> 0:21:54.359 Thanks very much for being with us. Jerry Smith, our 0:21:54.400 --> 0:21:57.920 media reporter for Bloomberg. He'll be following that f c C, 0:21:58.520 --> 0:22:02.040 the Federal Communications Commission decision that will be coming shortly 0:22:02.080 --> 0:22:20.760 on net neutrality. We have talked a lot about the 0:22:20.880 --> 0:22:26.119 GOP tax overhaul plowing toward passage, and yet to GOP 0:22:26.320 --> 0:22:29.800 senators just slammed the fact that the tax overhaul included 0:22:29.880 --> 0:22:33.919 cuts for the rich. We're talking about Susan Collins of 0:22:33.960 --> 0:22:37.119 Maine and Marco Rubia of Florida. Of Florida here to 0:22:37.200 --> 0:22:39.359 talk a little bit about what this means for the 0:22:39.400 --> 0:22:42.439 passage of the bill is Terry Sullivan, partner and senior 0:22:42.480 --> 0:22:46.080 Republican strategist at Firehouse Strategies in Washington, d C. Also 0:22:46.400 --> 0:22:50.520 the former campaign manager for Marco Rubio's presidential campaign. Terry, 0:22:50.560 --> 0:22:53.720 thank you so much for joining us. I'm wondering how 0:22:53.760 --> 0:22:57.280 should we view the descent that we're hearing out of 0:22:57.400 --> 0:23:01.760