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FCC Putting Foxes In Charge of the Hen House: Garrity · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg P and L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well,
• 0:32
  Speaker 1: the Internet protections that were put in place two years
• 0:35
  Speaker 1: ago are now gone after the FCC, the Federal Communications Commission,
• 0:40
  Speaker 1: votes to end net neutrality. Here to help us understand
• 0:44
  Speaker 1: the topic is David Garretty. He's the chief executive of
• 0:47
  Speaker 1: g v A Research. You can follow him on Twitter
• 0:50
  Speaker 1: at g v A Research. Also joining us here on
• 0:53
  Speaker 1: our eleven three oh studios is June Grosso, are legal
• 0:55
  Speaker 1: expert and co host of Politics Policy, Politics, Power, Policy
• 1:00
  Speaker 1: and Law and Um June. Maybe just to begin with you,
• 1:04
  Speaker 1: One of the things I learned in researching this topic
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  Speaker 1: is that this goes back to nine because it has
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  Speaker 1: to do with which federal agency, if any, has jurisdiction
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  Speaker 1: over what are called broadband providers. And it turned out
• 1:20
  Speaker 1: to the FCC thought they had jurisdiction, but maybe they don't. Well,
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  Speaker 1: the Supreme Court has pretty much taken care of that issue,
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  Speaker 1: and so now there's a clear authority that the f
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  Speaker 1: T that the f c C has had the authority
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  Speaker 1: that it claims it has that So that argument has
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  Speaker 1: been made, but it's been pretty much taken care of
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  Speaker 1: by Supreme Court case. David, come on in here. We
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  Speaker 1: did get this repeal of the net neutrality rules. How
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  Speaker 1: will A, T and T, Verizon the other big internet
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  Speaker 1: service providers respond to this? Will they immediately start to
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  Speaker 1: raise rates for faster internet service? The providers have essentially
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  Speaker 1: indicated that they're voluntarily um not going to be doing anything.
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  Speaker 1: But the fact of the matter is is that with
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  Speaker 1: the repeal of net neutrality, there's been a tremendous transfer
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  Speaker 1: of power, if you will, from the f CC over
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  Speaker 1: to the incumbent broadband service providers who control the Internet's infrastructure,
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  Speaker 1: and it really now is volitional, voluntary on the part
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  Speaker 1: of these providers to decide what type of pricing they're
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  Speaker 1: actually going to have. So even though the FCC chairman
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  Speaker 1: Agic Pie has said, look, you know, net neutrality was
• 2:32
  Speaker 1: trying to attack an event that was never going to happen,
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  Speaker 1: the fact of the matter is is that Pie has
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  Speaker 1: now opened the door to allow differential pricing. He's now
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  Speaker 1: opened the door to essentially let these companies charged what
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  Speaker 1: the traffic will bear, not just on the household consumer side,
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  Speaker 1: but also on the business side to access to access
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  Speaker 1: something the Internet, which up until now has been viewed
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  Speaker 1: as a utility. June has the FCC's decision also open
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  Speaker 1: the door to lawsuits. It's a question of just how
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  Speaker 1: many lawsuits. So already we have the New York ag
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  Speaker 1: Eric Schneiderman announcing within minutes of the decision that he
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  Speaker 1: was going to lead a multi state lawsuit Washington a
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  Speaker 1: g Bob ferguson, various public interest groups, public knowledge, free press.
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  Speaker 1: And there are several different ways and claims that they
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  Speaker 1: can make due to the way that this was handled. So, David,
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  Speaker 1: I'm trying to figure out. So they are saying, now
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  Speaker 1: these big internet service providers they're not going to raise
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  Speaker 1: prices on a voluntary basis, What will be what will
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  Speaker 1: it take for them to do so? Number one? Number two,
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  Speaker 1: who stands to benefit the most and who stands to
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  Speaker 1: lose the most? Well, I think the first in start
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  Speaker 1: of the second question, First, which is in those who
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  Speaker 1: benefit most are those who have and control the infrastructure.
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  Speaker 1: You know, they now have the ability to you know,
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  Speaker 1: change pricing in a differential manner. Uh the charge of
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  Speaker 1: the traffic can bear it certainly argue is that if
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  Speaker 1: you look at it from return on invested capital basis,
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  Speaker 1: they have the opportunity now to open optimize profitability um
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  Speaker 1: in terms of how they're pricing their service. Who loses
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  Speaker 1: are all the participants, whether consumers on the demand side
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  Speaker 1: or UH internet based companies on the supply side. In
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  Speaker 1: terms of who've been feeding the economy? You know, up
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  Speaker 1: until now, we've seen a gradual process where you know,
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  Speaker 1: the deployment of the Internet has ultimately been deflationary. Consumers
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  Speaker 1: became far better at discovering prices, and competitors on the
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  Speaker 1: margin would come in with more efficient business models and
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  Speaker 1: serve to reduce prices to consumers. The net net from
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  Speaker 1: a broad global economy standpoint, the Internet's deployment has been
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  Speaker 1: ultimately disinflationary, and then as a result, we've been able
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  Speaker 1: to enjoy economic growth with with less inflationary consequences. June,
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  Speaker 1: what are the basis for some of the legal challenges
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  Speaker 1: that will be made. There are several basis is. One
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  Speaker 1: of the ones that I think is probably the strongest
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  Speaker 1: is the they failed to follow the proper procedural hurdles
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  Speaker 1: that they had to go through. And that's relates to
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  Speaker 1: the millions of public comments, and you heard Eric Schneiderman
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  Speaker 1: and others saying that they after months of investigation, they
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  Speaker 1: found that at least two million were fake using the
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  Speaker 1: identities stolen from Americans, and a few research study also
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  Speaker 1: found that a lot of them were perhaps filed by bots.
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  Speaker 1: And what happened is they asked the nineteen state attorney
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  Speaker 1: generals asked jee Pie to put a hold on the
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  Speaker 1: on the vote until they could actually look at these comments,
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  Speaker 1: and he refused. So the question is did he consider
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  Speaker 1: those comments as he should have? Did? Did the agency
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  Speaker 1: consider those comments? Or did they fail to follow the
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  Speaker 1: Administrative Procedures Act Because they didn't, they ignored them. And
• 5:45
  Speaker 1: that's actually a pretty strong argument that they didn't follow
• 5:48
  Speaker 1: their own rules. Another really good one is that the
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  Speaker 1: FCC under this blocks the states from making their own
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  Speaker 1: net neutrality rules, and so attorneys general can argue that
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  Speaker 1: the FCC does and have the authority to prevent state
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  Speaker 1: consumer protection laws, and one California state senator has already
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  Speaker 1: said he's going to introduce a bill to impose net
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  Speaker 1: neutrality rules in that state. And so you know, the
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  Speaker 1: FCC doesn't have unlimited authority to preempt and that may
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  Speaker 1: be actually the strongest argument. Well, let's talk David a
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  Speaker 1: little bit about what some of the arguments are for
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  Speaker 1: dropping these net neutrality provisions. Right, because some of the
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  Speaker 1: internet service providers have argued that they would actually be
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  Speaker 1: able to invest more in their infrastructure if they had
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  Speaker 1: less government control. Can you speak to that, well, I mean,
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  Speaker 1: certainly anybody who's getting involved. If you're running a railroad
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  Speaker 1: and you basically have a closed loop, you could argue, yes,
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  Speaker 1: if I could earn more money on the traffic I have,
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  Speaker 1: I'd be willing to spend more money to upgrade the infrastructure. Um.
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  Speaker 1: You know this this is in some ways sort of
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  Speaker 1: an argument that kind of begs the question. Everybody's going
• 6:54
  Speaker 1: to come back and say, look, if I could optimize
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  Speaker 1: for our returns, I would throw you know, a greater
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  Speaker 1: amount of at an issue. So you know, in some respect,
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  Speaker 1: these are companies that on their own are sufficiently profitable.
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  Speaker 1: They aren't regulated to the extent that utilities have been
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  Speaker 1: in the past in which their rates of return were
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  Speaker 1: capped on the investments that they made. And you know,
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  Speaker 1: maybe they're trying to rely upon people's mindset that this
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  Speaker 1: might be something that's the case, but it's not necessarily
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  Speaker 1: so in dealing with the FCC, or in specifics, dealing
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  Speaker 1: with these companies who obviously are quite well off on
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  Speaker 1: their own already to begin with, well, David, if if
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  Speaker 1: they're not going to raise prices, does this matter? Well,
• 7:32
  Speaker 1: I mean, the issue really boils down to is that,
• 7:34
  Speaker 1: you know, do you really trust the fox to run
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  Speaker 1: the henhouse? And so from that standpoint, they may say
• 7:39
  Speaker 1: they're not going to raise prices, but what in effect
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  Speaker 1: is going to perhaps prevent them from doing so, and
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  Speaker 1: doing so in a manner that's less than public At least,
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  Speaker 1: the benefit that you get from the standpoint of having
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  Speaker 1: a regulatory agency such as the FCC oversee this process
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  Speaker 1: and be the one who does have determinative power in
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  Speaker 1: this case perhaps leads to a situation where it's more
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  Speaker 1: likely that something of a utility nature of these companies
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  Speaker 1: would be upheld, rather than looking at possibly the dysfunctional
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  Speaker 1: outcome of having differential pricing and having the creation of
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  Speaker 1: a digital divide that affects not just consumers but also businesses.
• 8:13
  Speaker 1: David Garretty, CEO of g v A Research, and of
• 8:16
  Speaker 1: course June Grasso, legal expert UH and Bloomberg radio host
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  Speaker 1: here with us as well. Thank you to both of
• 8:22
  Speaker 1: you very much for breaking this down a lot of
• 8:24
  Speaker 1: interesting issues and UH right now we are hoping, I
• 8:30
  Speaker 1: suppose to get some clarity in the near future, although
• 8:32
  Speaker 1: this is probably going to be dragged on for a
• 8:34
  Speaker 1: while as the Attorneys General put this to a legal challenge,
• 8:39
  Speaker 1: and we will cover it here. This has become a
• 9:00
  Speaker 1: dirty thing to produce. This was a line talking about
• 9:04
  Speaker 1: bitcoin in an article today on the Bloomberg that digs
• 9:07
  Speaker 1: behind the scenes behind this unbelievable rally that we have
• 9:10
  Speaker 1: seen in the cryptocurrency this year, as to how much
• 9:14
  Speaker 1: energy it's producing and what exactly are the assets that
• 9:18
  Speaker 1: are being used to produce that energy. Here to talk
• 9:21
  Speaker 1: about that is Eddie vander Walt. He is commodities reporter
• 9:25
  Speaker 1: for Bloomberg News, coming to us from London. Eddie, let's
• 9:28
  Speaker 1: just start with the energy consumption of bitcoin mining. There's
• 9:32
  Speaker 1: been a lot of discussion that it is incredibly energy intensive.
• 9:36
  Speaker 1: Can you explain, right, Yeah, that's exactly right, it is.
• 9:40
  Speaker 1: It's it's very energy intensive, and that's that's built into
• 9:45
  Speaker 1: into the DNA of of bitcoin. Really UM. In order
• 9:49
  Speaker 1: to make the well, in order to make the in
• 9:51
  Speaker 1: order to make each coin secure, and in order to
• 9:53
  Speaker 1: make it difficult to limit supply. UM the creator, person
• 9:59
  Speaker 1: by the name of Satoshi no Komoto UM set it
• 10:03
  Speaker 1: up in such a way that you would have to
• 10:05
  Speaker 1: prove that you've done some work in order to to
• 10:08
  Speaker 1: get a bitcoin as a as a as a result, UM,
• 10:11
  Speaker 1: he he modeled it a lot on on gold mining.
• 10:14
  Speaker 1: So what they use is they use a big server,
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  Speaker 1: farms computers, hundreds or thousands of them in in a room,
• 10:21
  Speaker 1: this sort of thing that you would see a Google
• 10:23
  Speaker 1: or or or a Microsoft data center use. UM and
• 10:27
  Speaker 1: and all of these try to solve a mathematical problem.
• 10:30
  Speaker 1: But the thing is they all use electricity, and quite
• 10:34
  Speaker 1: a lot of it, alright. So if they used quite
• 10:37
  Speaker 1: a lot of electricity and they're in China, chances are
• 10:39
  Speaker 1: they using a lot of call to generate that electricity.
• 10:42
  Speaker 1: Is that the basic premise right right? That would be
• 10:44
  Speaker 1: an easy assumption to make, and and and and we did.
• 10:47
  Speaker 1: When we first looked at this, this is this is
• 10:49
  Speaker 1: This was our starting point. But of course you could
• 10:52
  Speaker 1: in China they have a lot of hydro electric facilities
• 10:56
  Speaker 1: as well, which is very clean, very cheap once it's built,
• 11:00
  Speaker 1: um and and they could be plugged into these things.
• 11:03
  Speaker 1: But when we actually broke down the data and when
• 11:06
  Speaker 1: we looked at where the server farms were located, some
• 11:09
  Speaker 1: of them were located around the hydro electric facilities, but
• 11:12
  Speaker 1: a lot was also and particularly a lot of the
• 11:15
  Speaker 1: large ones were way up in the north, a long
• 11:17
  Speaker 1: way from these places. So or all evidence indicates that
• 11:22
  Speaker 1: they are they probably um plugged into coal power plants.
• 11:26
  Speaker 1: So Eddie, this this is sort of one of the mysteries.
• 11:29
  Speaker 1: A lot of people think of bitcoin as being a
• 11:32
  Speaker 1: product of Silicon Valley and a sort of hipster mentality,
• 11:36
  Speaker 1: or as the reality of the trading really mostly happens
• 11:39
  Speaker 1: in Asia, particularly in career retailers as well as in China.
• 11:44
  Speaker 1: How much emphasis among the bitcoin community is there to
• 11:48
  Speaker 1: this high energy consumption aspect of bitcoin or is this
• 11:53
  Speaker 1: something that's just chalked up as sort of a new
• 11:56
  Speaker 1: bi issue in other words, it will get more efficient
• 11:58
  Speaker 1: over time. I think that's I think I think there's definitely.
• 12:01
  Speaker 1: The community say that it is defensible. They say that
• 12:04
  Speaker 1: it is uh that even even the large estimates mean
• 12:08
  Speaker 1: that it is only they say something like one point
• 12:11
  Speaker 1: nor point one percent of of global energy demand, which
• 12:14
  Speaker 1: is still pretty high for for for a fairly unproven product.
• 12:18
  Speaker 1: But the the community will say that, yes, we will
• 12:21
  Speaker 1: become more efficient over time, and we will we will
• 12:24
  Speaker 1: do this in a cheaper way. UM. So I think
• 12:27
  Speaker 1: there's there's definitely. But one thing that we have noticed
• 12:31
  Speaker 1: is that three months ago, because this story didn't we
• 12:33
  Speaker 1: didn't write this overnight, right, this too, This took that
• 12:35
  Speaker 1: took substantial amount of time to do the research. And
• 12:37
  Speaker 1: when we when we started doing the research, the prices
• 12:39
  Speaker 1: were substantially lower. Um. And at that point we were
• 12:43
  Speaker 1: talking to people, they said, look, we can't mind. In Europe,
• 12:46
  Speaker 1: it is not efficient. It's not economical for us to
• 12:50
  Speaker 1: do so. It costs us more in electricity to mine
• 12:53
  Speaker 1: a new bitcoin than we get for selling it. Now. Ever,
• 12:57
  Speaker 1: s a surprise is rallied what two tho? Yeah? Uh,
• 13:01
  Speaker 1: the equations changed somewhat and and and we've got people saying, look,
• 13:05
  Speaker 1: it's it's efficient everywhere, but that certainly wasn't the case
• 13:08
  Speaker 1: when we started. And if prices come down a little bit,
• 13:10
  Speaker 1: it may not be UM may not be economically in
• 13:13
  Speaker 1: Europe again well, and using my Bloomberg here and doing
• 13:17
  Speaker 1: v C C Y it is a pneumonic that I
• 13:21
  Speaker 1: think many people will begin to learn. Uh. It tracks
• 13:25
  Speaker 1: the cryptocurrency market. Bitcoin up about seven percent right now,
• 13:29
  Speaker 1: seventeen thousand, six hundred and fifty. What about the other
• 13:32
  Speaker 1: cryptocurrencies such as a ripple or ethereum or light coin.
• 13:37
  Speaker 1: Are they also being mined in the same manner, right?
• 13:41
  Speaker 1: I saw a story earlier today saying that Ripple is
• 13:44
  Speaker 1: ass has become the third biggest behind ethereum and and
• 13:47
  Speaker 1: and Bitcoin today. UM it varies, certainly. Ethereum is a
• 13:53
  Speaker 1: lot more efficient and at this stage, and the way
• 13:57
  Speaker 1: that is set up early in early in the in
• 13:59
  Speaker 1: the production process or in the coin's lifespan as it were,
• 14:04
  Speaker 1: it is it is it's cheaper to mine UM. That's
• 14:06
  Speaker 1: by design, and and the and the the more established
• 14:09
  Speaker 1: the coin becomes, and the more miners who pile in,
• 14:11
  Speaker 1: the more expensive it becomes. So these coins by definition
• 14:15
  Speaker 1: are younger, but coin was there first. But also efficiencies
• 14:18
  Speaker 1: have been built into ethereum and so on. So yes,
• 14:22
  Speaker 1: I think I think as we go through the iterations
• 14:25
  Speaker 1: and and u as the as the industry evolves, I
• 14:30
  Speaker 1: think a lot of these problems will be solved. Eddie,
• 14:32
  Speaker 1: real quick, is it cheaper to use so called dirty
• 14:36
  Speaker 1: energy or call energy to power some of these crypto
• 14:41
  Speaker 1: mining centers than it is to use renewable energies? Definitely is?
• 14:45
  Speaker 1: It's definitely, it's definitely cheaper to my So it's definitely
• 14:50
  Speaker 1: cheaper in places that use dirty electricity because a lot
• 14:53
  Speaker 1: of places that use clean electricity, that that have a
• 14:58
  Speaker 1: energy mix that's more related towards non fossil fuel UM
• 15:02
  Speaker 1: types of electricity. The electricity is actually subsidized, and that
• 15:08
  Speaker 1: means that your energy uses is heavily taxed UM. So
• 15:12
  Speaker 1: what makes it expensive in Europe is taxes. But also
• 15:15
  Speaker 1: it's just plain and simple, cold is cheap. Thanks very
• 15:19
  Speaker 1: much for joining us. Eddie Vandervolt is our commodities reporter
• 15:22
  Speaker 1: for Bloomberg, joining us from our London studios talking about cryptocurrencies.
• 15:46
  Speaker 1: The tax plan is moving forward, and President Trump says
• 15:50
  Speaker 1: he's expecting to sign a bill early next week that
• 15:54
  Speaker 1: would be the biggest transformation of US tax policy in decades.
• 15:59
  Speaker 1: Here to discuss it with US is Rick Lazio, senior
• 16:01
  Speaker 1: vice president of Alliance Group, also former US Representative from
• 16:05
  Speaker 1: New York serving in Congress from two thousand and one.
• 16:10
  Speaker 1: Congressman Lazio, I'd love to just first start with, how
• 16:14
  Speaker 1: do you address criticism that this bill helps companies that
• 16:18
  Speaker 1: don't need help and don't have any incentive to really
• 16:21
  Speaker 1: invest in their infrastructure, won't necessarily accelerate the US economy
• 16:26
  Speaker 1: and doesn't give that much of a boost to the
• 16:27
  Speaker 1: middle class. How do you respond to that because that
• 16:29
  Speaker 1: is the big core kind of criticism with the whole bill. Right. Well,
• 16:34
  Speaker 1: you know, the trend GDP growth historically post World War
• 16:38
  Speaker 1: two period has been around three percent. We have been
• 16:42
  Speaker 1: around two point two percent since two thousand and eight,
• 16:45
  Speaker 1: since the Great Recession ended with a pick up the
• 16:48
  Speaker 1: last couple of quarters granted in the three and three
• 16:51
  Speaker 1: point So the the economy is underperforming. The projections at
• 16:56
  Speaker 1: least from the internal scorekeepers the Congressional Budget Office in
• 17:00
  Speaker 1: Congress is for the next teen years growth at one
• 17:03
  Speaker 1: nine percent. That's an enormous uh difference in terms of
• 17:07
  Speaker 1: lost output in economic activity revenue for individuals and for businesses,
• 17:13
  Speaker 1: and what Congress is trying to do is to close
• 17:16
  Speaker 1: that gap. Even a little bit would make an enormous difference.
• 17:19
  Speaker 1: The weak parts in most of the of the expansion
• 17:23
  Speaker 1: have centered around business investment, with businesses relying more on
• 17:28
  Speaker 1: adding headcount or hiring more people over the last several
• 17:31
  Speaker 1: years than investing in the kind of productivity enhancing things
• 17:36
  Speaker 1: like new plants or new equipment. That's been a soft
• 17:39
  Speaker 1: spot up until the last quarter or two, I'd say,
• 17:41
  Speaker 1: so the focus has been on this. Two thirds of
• 17:44
  Speaker 1: the tax bill is really focused on trying to stimulate
• 17:47
  Speaker 1: the business community, bus pass throughs, smaller businesses and larger
• 17:51
  Speaker 1: C corps businesses. Hold on a second, because I'm struggling
• 17:54
  Speaker 1: with this. I'm struggling with the two point three trillion
• 17:57
  Speaker 1: dollar figure that we see, and that's the cash holdings
• 18:00
  Speaker 1: corporations have. That's an estimate. It could be bigger, and
• 18:04
  Speaker 1: I'm looking at a pretty accommodative credit market. People have
• 18:07
  Speaker 1: been able to borrow pretty easily. Companies especially what what
• 18:12
  Speaker 1: more do they need? Well, I think they need visibility
• 18:15
  Speaker 1: they need to need to know they've got some permanence
• 18:18
  Speaker 1: on the tax side, and that they've got more competence
• 18:21
  Speaker 1: on the regulatory side. And just as importantly, by the way,
• 18:24
  Speaker 1: the demand is growing, so that's on the consumer side
• 18:27
  Speaker 1: where the GDP is. So all that kind of leads
• 18:31
  Speaker 1: to can we get people to feel more confidence? That's
• 18:35
  Speaker 1: why the STEAD is in part, by the way, so
• 18:37
  Speaker 1: focused on inflation. Janet yellenan and Stead yesterday saying the
• 18:41
  Speaker 1: tax bill itself, they're not concerned about it. In fact,
• 18:44
  Speaker 1: it may well add to growth and lower unemployment. Those
• 18:48
  Speaker 1: are are general positives as long as we don't overheat
• 18:52
  Speaker 1: and right now to try and get that inflation up
• 18:54
  Speaker 1: a little bit. This this stimulus could be just what
• 18:57
  Speaker 1: the doctor ordered. UH. Congress and last year, do you
• 19:01
  Speaker 1: believe that the tax overhaul UH makes it easier or
• 19:06
  Speaker 1: more difficult to fund infrastructure? Um? It's that that depends
• 19:13
  Speaker 1: on how the infrastructure is funded and how much they
• 19:17
  Speaker 1: leverage private sector dollars. I think UM, I think infrastructure
• 19:22
  Speaker 1: could be and should be a more bipartisan effort. I
• 19:26
  Speaker 1: think it will. Yeah, but what about the actual overhaul?
• 19:29
  Speaker 1: From what you know about this tax bill, do you
• 19:32
  Speaker 1: believe that it will make it easier or more difficult,
• 19:38
  Speaker 1: less expensive, more expensive to invest in building bridges, fixing
• 19:42
  Speaker 1: roads and highways. Yeah, I'm not sure I know the answer.
• 19:46
  Speaker 1: That I know this that if this works the way
• 19:49
  Speaker 1: the proponents wanted to work, you'll see a growing economy
• 19:52
  Speaker 1: with investors on the outside that are looking to place money,
• 19:55
  Speaker 1: including in areas like infrastructure. And what they've been talking
• 19:58
  Speaker 1: about has not been a Paul totally publicly financed infrastructure initiative,
• 20:03
  Speaker 1: but something that would try and leverage private dollars as well.
• 20:07
  Speaker 1: Who are the in your estimation, who are the Republicans that,
• 20:12
  Speaker 1: particularly in the Senate that may scupper uh this tax overhaul. Well,
• 20:18
  Speaker 1: you've got two senators that the Senator uh uh McCain
• 20:23
  Speaker 1: being one of them that has been struggling with health issues.
• 20:26
  Speaker 1: Santa Quarker voted against the package in the Senate, so
• 20:30
  Speaker 1: he's clearly a question mark. UM. Senator Collins from Maine
• 20:35
  Speaker 1: Senator Rubio from Florida have raised questions UH. Senator Lee
• 20:41
  Speaker 1: as well, UH Rubio and Lee on the child tax
• 20:44
  Speaker 1: credit issue. So there are no every one of these
• 20:48
  Speaker 1: senators understands the incredible leverage that they have with a
• 20:53
  Speaker 1: very tight majority. Uh, and so they are going to
• 20:56
  Speaker 1: raise their issues and squeeze the leadership, and the negotiater is,
• 21:00
  Speaker 1: by my experience, by by at least threatening to withhold
• 21:04
  Speaker 1: their vote until they get some movement in their direction.
• 21:07
  Speaker 1: So this is the kind of last minute horse trading
• 21:09
  Speaker 1: that occurs. But again, the big picture is can we
• 21:13
  Speaker 1: get more research and development, can we get higher productivity?
• 21:17
  Speaker 1: Can we get businesses to start to invest in the future.
• 21:20
  Speaker 1: Can we get them to to be more forward leaning
• 21:24
  Speaker 1: than they have been over the last several years. Congressman,
• 21:26
  Speaker 1: laws are real quick. If you were still in Congress,
• 21:29
  Speaker 1: would you vote for this? I would vote for it,
• 21:32
  Speaker 1: but I would have would would have been you know,
• 21:35
  Speaker 1: I'm from New York. I'm a New York taxpayer, so
• 21:37
  Speaker 1: I'm gonna be a net loser on this tax bill. Um.
• 21:40
  Speaker 1: There are a lot of people in my position. I
• 21:42
  Speaker 1: would have fought quite hard to try and address some
• 21:45
  Speaker 1: of those issues that are important to the coasts. But
• 21:49
  Speaker 1: I understand it. I think overall, if you if you
• 21:52
  Speaker 1: have if you if you're playing to win and you
• 21:54
  Speaker 1: want long term growth, clearly you've got to address the
• 21:57
  Speaker 1: international corporate tax issues almost people on both sides. They
• 22:01
  Speaker 1: I'll agree to that completly. You need to do something
• 22:04
  Speaker 1: more on the business side to build confidence and have
• 22:08
  Speaker 1: some permanency. And clearly you need to do something again,
• 22:10
  Speaker 1: uh to to incentivize more research, more development, more productivity,
• 22:15
  Speaker 1: enhancing investments for business, and I think this bill will
• 22:18
  Speaker 1: do that. Thank you very much, Former US Congressman to
• 22:21
  Speaker 1: Rick Lazio, senior vice president at Alliance Group, on the
• 22:25
  Speaker 1: tax overhaul plan. Star Wars the Last Jedi. It is
• 22:46
  Speaker 1: the second highest domestic preview grows of all time according
• 22:51
  Speaker 1: to the Walt Disney Company. In the Films Today International
• 22:55
  Speaker 1: release or preview, the cumulative box office grows is a
• 23:00
  Speaker 1: hundred and five million dollars. So can anything go wrong
• 23:04
  Speaker 1: with the Kingdom of Mickey Mouse now being joined by
• 23:07
  Speaker 1: the likes of twenty one Century Fox? Here to tell
• 23:10
  Speaker 1: us more is Joe No Sarah columnists for Bloomberg View
• 23:13
  Speaker 1: and you can follow Joe on Twitter at No Sarah
• 23:17
  Speaker 1: b V. That's for Bloomberg View. Joe. So what do
• 23:20
  Speaker 1: you think about this UH fifty two plus billion dollar
• 23:24
  Speaker 1: acquisition of these Century Fox assets. I think that the
• 23:28
  Speaker 1: day will come when they look upon the Fox assets
• 23:31
  Speaker 1: the way they're looking at ESPN. Now it's a it's
• 23:35
  Speaker 1: a these are assets that are going to be in Decline,
• 23:40
  Speaker 1: movies that people really like to watch. The movies will
• 23:43
  Speaker 1: do all right, um. The problem. The problem is what
• 23:47
  Speaker 1: Disney is talking about is taking these assets and making
• 23:52
  Speaker 1: them part of a streaming app that will be the
• 23:57
  Speaker 1: Disney version of Netflix uh and Amazon Prime. Um. And
• 24:02
  Speaker 1: the problem is that they don't. At the same time,
• 24:05
  Speaker 1: they don't want to leave the revenue that they have
• 24:09
  Speaker 1: always gotten and still get to some extent from the
• 24:13
  Speaker 1: legacy media i e. The cable bundle, and so they
• 24:17
  Speaker 1: you know, they're doing screwy things like they're saying, well,
• 24:20
  Speaker 1: we know esp ESPNS and Decline, we know that we
• 24:23
  Speaker 1: need to stream it, but we're not gonna put anything
• 24:27
  Speaker 1: on the streaming app that's on television. Well, hold on
• 24:31
  Speaker 1: a second. So you're saying that they haven't disclosed or
• 24:36
  Speaker 1: perhaps even thought out exactly how they are going to
• 24:40
  Speaker 1: how much of their empire they're going to commit to
• 24:42
  Speaker 1: the streaming service and we're talking about Hulu uh and
• 24:45
  Speaker 1: how much they're going to try to compete with Netflix
• 24:47
  Speaker 1: at Amazon Prime. Well, I don't think I don't think
• 24:50
  Speaker 1: they're gonna use Hulu at all in this. I think
• 24:53
  Speaker 1: they're going to have their own streaming app. That's going
• 24:56
  Speaker 1: to be Disney Movies, Pixar Movies, twenty one Century Movies, UM,
• 25:01
  Speaker 1: old Fox Shows, Old f X shows, UM that that's
• 25:04
  Speaker 1: how I nationally gret some things from National Geographic. I mean,
• 25:08
  Speaker 1: I think that could be a pretty powerful streaming app.
• 25:11
  Speaker 1: But the question is, you know, how how how much
• 25:14
  Speaker 1: money are they going to commit to new content? How
• 25:16
  Speaker 1: much are they just going to think about it as
• 25:18
  Speaker 1: you know, someplace to stuff old content? You know, how
• 25:21
  Speaker 1: much are they going to abandon their need to uh
• 25:24
  Speaker 1: for revenue from the cable bundle? And and to me,
• 25:28
  Speaker 1: that's the that's the core question. Uh do you know
• 25:31
  Speaker 1: anybody under thirty who has a who has who have
• 25:35
  Speaker 1: who have a cable subscription? There's an ereie silence there, Yes, alright,
• 25:41
  Speaker 1: subscribe subscribers, subscribers. Subscriber count for cable television has continued
• 25:47
  Speaker 1: to decline. Got that? So what do you believe Disney
• 25:51
  Speaker 1: will have to do in order to access either your
• 25:55
  Speaker 1: mobile phone or your monitor, your screen at home in
• 25:59
  Speaker 1: order to make this happen? Because right now, what you
• 26:01
  Speaker 1: have Amazon, as you've described with their fire stick, You've
• 26:05
  Speaker 1: got Roku the player, plus you have of course the
• 26:09
  Speaker 1: Apple uh TV and Chrome cast is now we're going
• 26:13
  Speaker 1: to get another get the plug into No no, no,
• 26:15
  Speaker 1: it'll be an It'll be an app like Netflix or
• 26:17
  Speaker 1: Amazon Prime. I mean the real question is will there
• 26:20
  Speaker 1: be enough content on it to attract all those people
• 26:25
  Speaker 1: who are either cutting the cord or never got the
• 26:28
  Speaker 1: chord in the first place. That that's really the question.
• 26:30
  Speaker 1: And I don't think the answer at the moment is yes,
• 26:33
  Speaker 1: because I don't think they're all I don't think they're
• 26:35
  Speaker 1: all in. I think there's still have one ft in
• 26:38
  Speaker 1: cable and one foot theoretically in streaming. Now. The second
• 26:43
  Speaker 1: issue is technology Netflix and people don't really think about this,
• 26:47
  Speaker 1: but the Netflix interface is fabulous and they think about
• 26:52
  Speaker 1: it all the time and they fiddle with it all
• 26:55
  Speaker 1: the time. And there's nothing comparable out there, not even
• 26:58
  Speaker 1: HBO in terms of suggesting things for you or or
• 27:02
  Speaker 1: or you know, showing you previews of things. And Disney
• 27:06
  Speaker 1: will have a lot of work to do to catch
• 27:09
  Speaker 1: up with that because that's not their strength. Yeah. Well,
• 27:13
  Speaker 1: I'm wondering and just talking about Netflix. I know you
• 27:16
  Speaker 1: have written a number of columns about how good Netflix
• 27:20
  Speaker 1: is and how you think that they're going to be
• 27:22
  Speaker 1: very successful in their strategy. I'm wondering how much that's
• 27:26
  Speaker 1: coloring your perception here that basically Disney has a very
• 27:30
  Speaker 1: high hurdle to cross in being true competition for Netflix.
• 27:35
  Speaker 1: That's that's definitely affected my thinking. No, no question about it.
• 27:39
  Speaker 1: Um you know, name one legacy media company aside from HBO,
• 27:46
  Speaker 1: that has that has a success, has truly been successful
• 27:51
  Speaker 1: attracting cord cutters. But if they hadn't bought these Fox assets,
• 27:57
  Speaker 1: would they be in a better position. No, now they
• 28:00
  Speaker 1: wouldn't be invest position. My issue is that as people
• 28:04
  Speaker 1: abandon the cord, Fox shows on television are going to
• 28:08
  Speaker 1: have the same kind of decline as the ESPN is having,
• 28:12
  Speaker 1: and it's going to turn out to hurt them in
• 28:15
  Speaker 1: in an earning sense, rather than help them. I see.
• 28:18
  Speaker 1: So in other words, they're looking backwards and they're saying,
• 28:21
  Speaker 1: for us to be successful in the model we've always known,
• 28:24
  Speaker 1: perhaps we'll push it through these online streaming things, but
• 28:28
  Speaker 1: we will look at the content we've had, rather than saying,
• 28:30
  Speaker 1: what's the content of the future. How can we created
• 28:33
  Speaker 1: how can we then how you know, stream it in
• 28:35
  Speaker 1: the best way possible? God, I wish I had said
• 28:37
  Speaker 1: that in my column, but then you wouldn't have the
• 28:40
  Speaker 1: other paragraphs to write. Um, so, has this brought them
• 28:43
  Speaker 1: new competition from the likes of Verizon and A T
• 28:47
  Speaker 1: and T. Verizon wants to acquire a Time Warner? Sure,
• 28:50
  Speaker 1: I mean A T and T would have an A
• 28:52
  Speaker 1: T and T Time Warner would would definitely be competition.
• 28:55
  Speaker 1: And I could totally see Time Warner doing the same
• 28:58
  Speaker 1: thing Disney is trying to do. Bundle bundle Hbo Turner, Um,
• 29:03
  Speaker 1: Time Warner. You know Warner Brother movies. Um. Uh, don't
• 29:07
  Speaker 1: they have some famous cartoons? Yeah? Come on Rabbit? Oh
• 29:12
  Speaker 1: my god, that rabbit. So it's a real quick Um.
• 29:15
  Speaker 1: What would you think Disney ought to have done with
• 29:18
  Speaker 1: fifty two billion dollars that could have put it at
• 29:20
  Speaker 1: a perhaps better competitive advantage. I think they should have
• 29:23
  Speaker 1: bought Netflix. I think that would have solved two problems,
• 29:28
  Speaker 1: one the forward looking problem the streaming problem. Uh. It
• 29:31
  Speaker 1: would also have solved the Eiger succession problem. Because Read
• 29:35
  Speaker 1: Hastings is a great CEO. Does this deal put a
• 29:40
  Speaker 1: lot of pressure on Bob Iger absolutely, because this is
• 29:44
  Speaker 1: this like a key man issue right now. Well, it
• 29:47
  Speaker 1: definitely puts a lot of pressure on him. He's done it,
• 29:51
  Speaker 1: he's extended his contract to in order to uh you know,
• 29:55
  Speaker 1: oversee it. Uh and and you know, as other people
• 29:59
  Speaker 1: have said, it is legacy defining for him, so he
• 30:01
  Speaker 1: needs this to work. Jonah Sarah, thank you so much
• 30:04
  Speaker 1: for joining us. We love speaking with you. Jono Sarah,
• 30:06
  Speaker 1: calumnist for Bloomberg View. Um, I don't really feel too
• 30:11
  Speaker 1: bad for Bob Iger, considering that he got a more
• 30:14
  Speaker 1: than a hundred billion dollar payout from this deal and
• 30:17
  Speaker 1: he's not doing too badly. Thanks for listening to the
• 30:22
  Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
• 30:25
  Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform
• 30:29
  Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox.
• 30:34
  Speaker 1: I'm on Twitter at Lisa abramowits one before the podcast.
• 30:37
  Speaker 1: You can always catch us worldwide on Bloomberg Radio.