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Nov. 26, 2014, 11:55 AM
- ZAYO has received 11 bullish ratings on underwriter coverage day, and no neutral or bearish ones.
- Goldman (Buy, $30 target) calls the fiber network owner "a pure-play opportunity on 20%+ secular growth in data traffic expected over the next few years," and thinks the market for fiber infrastructure service can post a 7% CAGR through 2020. "Our [sum-of-the-parts] analysis suggests the market is giving little credit to revenue visibility and incremental margins of the physical infrastructure business."
- "Zayo owns one of the largest collections of fiber in the U.S. and primarily targets customers with heavy and complex bandwidth needs," says Morgan Stanley. "Consolidated adjusted EBITDA margins for Zayo are ~58%, meaningfully higher than its peers due to its focus on the higher margin products like dark fiber (~70% margins) ... Even if individual product margins remain flat, consolidated margins can grow due to a mix shift."
- MS also observes the fiber services market has seen huge consolidation, and that mobile, cloud, and online video traffic growth is boosting demand.
- Zayo now +39% from October's $19 IPO price. Peers Level 3 (LVLT +1%) and Cogent (CCOI +1.8%), for whom many of the bullish arguments for Zayo also apply, are trading higher.
Nov. 7, 2014, 7:06 AM| Comment!
Nov. 6, 2014, 5:30 PM
Oct. 31, 2014, 12:29 PM
- In a compromise proposal that could give both ISPs and net neutrality proponents much to complain about, the FCC plans to lightly regulate consumer broadband services - they'd be classified as a "retail" service - but also tightly regulate connections between sites and ISP networks under common carrier (i.e. Title II) rules originally created for phone networks.
- The back-end rules could go over well with Netflix (NFLX +2.7%), which has reluctantly struck paid peering/interconnection deals with major ISPs to guarantee high streaming speeds. Reed Hastings has been vocally calling for tougher neutrality rules. Cogent's (CCOI +0.8%) shares tumbled after Netflix struck its first paid peering deal (with Comcast).
- The last-mile rules, however, appear to leave the door open for ISPs to charge Internet companies extra for paid priority/fast-lane access, an idea previously floated by FCC chairman Tom Wheeler. Comcast, Verizon, and AT&T recently declared they have no plans to strike fast-lane deals.
- Neutrality proponents question the ability of a hybrid proposal to withstand legal challenges. "The FCC would lose in court a third time," says Stanford law prof. Barbara van Schewick.
Sep. 18, 2014, 10:00 AM| Comment!
Aug. 19, 2014, 2:50 AM
- The National Association of Broadcasters has filed a lawsuit against the FCC's plans to auction off airwaves stating that the plan will incur expense and harm coverage of TV stations.
- The auction is set to take place next year, and will allow TV stations to take bids and sell their airwaves to meet the surging demand of mobile broadband.
- The new lawsuit challenges the regulations stating that it doesn't fully protect broadcasters that don't participate in the auction.
- Broadcasters say that they should not be forced into having their coverage area reduced or to pay out of pocket for the expense of moving their broadcast signal to a new frequency.
- Relevant tickers: CMCSA, TWC, ALLT, LVLT, CCOI, FTR, WIN, CTL, CHTR, CVC, DISH
Aug. 7, 2014, 7:11 AM| Comment!
Aug. 6, 2014, 5:30 PM
- AAON, AES, AFSI, AINV, AMCX, ATHM, AUXL, BCE, BDBD, BPI, BR, CBB, CCOI, CECE, CECO, CNQ, CQB, CRIS, CTB, DUK, EAT, FUR, FWLT, GBDC, GDP, GLP, GOLD, GTN, HAR, HII, HIMX, HRC, HSC, HSNI, HZNP, ICE, IDCC, IRC, KERX, LAMR, LEAF, LG, LINE, LMIA, LNCE, LPI, LQDT, LXP, LXRX, MFC, MMS, MNK, MONT, MPEL, MPW, MYL, NCT, NRF, NRG, NVO, NXST, NXTM, OGE, ONE, OWW, PBH, PHMD, POZN, PRIM, QIWI, RDN, RGLD, RSTI, RTK, SABR, SATS, SFUN, SGM, SNI, SPH, SRE, SRPT, SSYS, SUNE, TDC, TGH, THS, TICC, TK, TPH, VNDA, WEN, WIN, WMC, WWAV, ZEUS
Jun. 13, 2014, 1:39 PM
- The FCC wants more details about Netflix's (NFLX +0.6%) direct peering deals with the likes of Comcast and Verizon to gauge their impact, chairman Tom Wheeler states before Congress. "We are looking under the hood."
- Reed Hastings has made it clear he views the deals, which in some cases have led to much better streaming speeds for customers, as a necessary evil, and has called for tougher neutrality laws that would make them unnecessary.
- As recent data shows, Netflix speeds still vary considerably from one ISP to another.
- Wheeler's remarks come after a month after he pushed through a neutrality proposal that could open the door to pay-for-priority deals between ISPs and content providers for the last mile, albeit while also seeking comment on whether such deals (fiercely opposed by neutrality advocates) should be banned.
- Traditional Netflix peering provider Cogent (CCOI +0.9%) loses out when Netflix strikes direct peering deals.
May. 15, 2014, 4:43 AM
- The Federal Communications Commission is due to vote today on a proposal to formally allow some "commercially reasonable" deals that would enable Internet content companies to pay fees so that their traffic receives priority on the network.
- Facebook (FB), Twitter (TWTR) and Google (GOOG, GOOGL) are among those opposed to "pay-for-priority," while Netflix (NFLX) is strongly in favor of net neutrality as well. The latter has reluctantly forged "direct-peering" agreements that remove bottlenecks between networks and ensure that its contents streams more smoothly.
- Advocates of net neutrality fear that pay-for-priority will lead to "fast lanes" for corporations that can afford it and slower traffic for others, and some even want Internet providers to be reclassified as utilities, as is the case with telephone operations.
- Meanwhile, the FCC is also scheduled to decide on rules for the sale of low-frequency airwaves to wireless carriers, with the regulations expected to limit how much Verizon (VZ) and AT&T (T) can purchase.
- Other relevant tickers: CMCSA, TWC, ALLT, LVLT, CCOI, FTR, WIN, CTL, CHTR, CVC, DISH.
May. 12, 2014, 10:34 AM
- Following a public backlash, FCC chairman Tom Wheeler is backtracking a bit on rule changes (floated last month) that would allow U.S. ISPs to charge content providers for access to a priority "fast lane."
- A new draft of Wheeler's plan seeks comment on whether such arrangements, referred to as "paid prioritization," should be banned. It also states the FCC will scrutinize deals with content providers to make sure non-payers aren't at a disadvantage, prevent ISPs from doing deals with varying terms, and (notably) seek comment on whether broadband should be regulated as a public utility.
- Netflix (NFLX +3.2%), whose bandwidth spend accounts for a sizable portion of its expenses, is higher amid a broader Internet stock rally. The streaming giant has struck direct peering deals with Comcast and Verizon this year, but has also made it clear it's not thrilled with having to make them.
- Cogent (CCOI +2.2%), which provides peering services for Netflix and many others, is also higher. Its shares tumbled after the Netflix-Comcast deal was announced.
May. 8, 2014, 6:30 AM| Comment!
May. 7, 2014, 5:30 PM
- AEE, AES, AGO, AMCX, AMED, AMRC, APA, APO, BBEP, BCRX, BDBD, BITA, BPI, CAJ, CBB, CCC, CCOI, CDW, CECE, CECO, CRIS, CRNT, CSTE, CVC, DF, DISH, DNDN, FLY, FSYS, FUN, FXCM, GBDC, GLP, GOLD, GTN, GTXI, HCN, HII, HIMX, HSC, ICE, IRC, JASO, KEM, KERX, LIOX, LNCE, LPI, LPX, LQDT, LXP, LXRX, MGA, MMS, MNK, MPEL, NICE, NPSP, NXST, NXTM, ONE, PCLN, PCP, PKD, POZN, PRFT, REGN, RGEN, RSTI, SKYW, SNI, SPH, SRPT, STE, SUNE, TDC, THS, VC, VITC, VNDA, VRX, WAC, WD, WEN, WIN, WMC, WWAV.
Mar. 21, 2014, 2:49 PM
- Direct peering deals such as the one Netflix (NFLX -3.7%) struck with Comcast are a "toll to the powerful ISPs to protect our consumer experience," says Reed Hastings in a much-discussed blog post calling for tougher net neutrality rules to "protect an open, competitive Internet."
- Though analysts have argued the Netflix/Comcast deal could actually lower Netflix's bandwidth costs, Hastings declares action is needed to keep cable/phone duopolies from having undue leverage against Web service providers.
- He dismisses ISP complaints about Netflix's huge downstream volumes by arguing Netflix doesn't get a cut of the high-margin broadband revenue ISPs generate, and by noting ISPs don't pay fees for services (e.g. online backup) that generate heavier upstream volumes.
- Level 3 (LVLT -0.6%) and Cogent (CCOI -0.6%), each of whom get charged by ISPs for acting as intermediaries for the likes of Netflix (assuming no direct peering), also call peering a neutrality issue. Today, Cogent offered to pay for capacity upgrades at ISP peering points in lieu of service payments, while arguing ISPs should ultimately be regulated as common carriers.
- Dan Rayburn isn't sold on Hastings' arguments. "Netflix likes to make it sound like there is only one way to deliver videos on the Internet when in fact, there are multiple ways ... the company that should be blamed will be different depending on the business situation."
Feb. 28, 2014, 2:21 PM
- D.A. Davidson has upgraded Cogent (CCOI +3.3%) to Buy.
- Shares are recouping some of the losses they saw earlier this week in response to Netflix's peering deal with Comcast, which (along with other peering deals being discussed) stands to lower the amount of traffic Netflix hands off to Cogent's network.
Feb. 24, 2014, 6:41 PM
- Verizon (VZ) and AT&T (T) have confirmed that they, too, are talking with Netflix (NFLX +3.4%) about direct peering deals. Verizon CEO Lowell McAdam says his company's talks with the streaming giant have been going on for about a year.
- Netflix shares closed the day with strong gains, as analysts argued direct peering deals such as the one just reached with Comcast could end up having a neutral or even positive impact on Netflix's bandwidth costs, given the company will no longer have to pay intermediaries such as Cogent (CCOI -6.8%).
- Dan Rayburn: "It should actually be cheaper for Netflix to buy direct from Comcast, and they also get an SLA, which also improves quality ... While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit."
- Others aren't convinced direct peering deals are a positive. The Washington Post: "Cogent has many competitors. Verizon's FiOS service does not. If companies like Cogent are squeezed out of business, it will make these already powerful network owners even more powerful."
- GigaOm: "These agreements aren’t transparent ... rates could go up over time, and they essentially act as a tax on the Internet."
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