Telecom Industry Convergence Seen Leading to More Questions Than Answers

Telecom technology and industry convergence is disrupting business models and regulation, speakers said Thursday at an annual event at Hogan Lovells. Competition policy has become harder due to the hazier definitions of markets, said NERA Economic Consulting Managing Director Chris Dippon. Along with new opportunities, convergence "destroys old business models," Verizon Associate General Counsel Robert Griffen said.

Dippon said in convergence-related transaction reviews, economics needs to be the cornerstone for defining markets. DOJ, the FTC and the FCC have wherewithal to do the complex analyses needed, he said. The FCC already is "a bizarre animal" in deal review because it looks at non-deal-specific harms, NAB General Counsel Rick Kaplan said. "That element is shrinking." He said changes are needed in ability to effectively scotch a takeover by referring it to the FCC administrative law judge.

Meanwhile, Canada is aggressively trying to create a regulatory environment that will lead to a fourth major wireless carrier there, Dippon said. There has been some limited consideration of convergence issues in transaction reviews in Europe, he said.

With the dissolving of the fat cable bundle, there's considerable programmer worry about being dropped, especially among smaller channels, fuboTV Chief Financial Officer Joel Armijo said. With exception of Disney or CBS, most brands aren't strong enough to go directly to consumers, Armijo said. Discovery’s bid for Scripps Interactive is a synergy play to free up capital, but a long-term solution is needed, Armijo said. Added MPAA Senior Vice President-Government and Regulatory Affairs Neil Fried, platform loyalty won't come “with cat videos.” He said user-generated content will remain "the ultimate niche content” -- it won’t supplant traditional content.

The video content business is “a healthy environment" despite the shakeout in distribution business models, Fried said, pointing to growing content production and consumption. MPAA says last year saw 454 original scripted series, compared with 266 in 2011, and 130 legal services for film and TV content are online.

Extensive legacy regulations on cable operators, compared with the lighter regulation on direct broadcast satellite and lack of over-the-top regulation, isn't sustainable, with the question, "Do you level up or level down?" Hogan Lovells cable lawyer Alexi Maltas said. He said a push is possible for regulation of OTT providers.

Some saw little chance of wireless carriers succeeding in the content business. Armijo said AT&T and Verizon are “cautionary tales.” Maltas said wireless operators will likely do extensive content-related experimentation. Replied Armijo, don't expect actual innovation from telcos since their talent pool is shallower and they move too slowly. Quadra Partners co-founder Paul de Sa added that the challenge for wireless is that unlimited data plans blow up any hopes of monetizing content, while content companies seeing they hurt themselves in exclusive deals with carriers.

Conversely, cable has a better chance of success moving into wireless services, de Sa said. He said cable, backed with MVNOs, might succeed, compared with past attempts in wireless, because the definition of success changed. Cable operators today aren't looking to be national players with mass penetration competition with major carriers, he said.