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FACT: From a Verizon New York cable franchise, 2014.
On Dec. 9, 2014, Verizon’s CFO Francis Shammo was speaking at the UBS 42nd Annual Global Media & Communications Conference for investors and made a comment — even if the networks were to be reclassified as “Title II” in the Net Neutrality proceedings, it would not harm or influence investment.
John Hodulik, Communications Analyst, UBS
“Obviously there’s a lot of commentary coming out of Washington about this move to Title II. Obviously Verizon has been one of the more of a stiffer opponents of any sort of increased regulation, especially on the Wireless side. What’s your view of that potential occurrence down in Washington and does it affect your view on the attractiveness of investing further in the United States?”
Francis J. Shammo, EVP and CFO
“I mean to be real clear, I mean this does not influence the way we invest. I mean we’re going to continue to invest in our networks and our platforms, both in Wireless and Wireline FiOS and where we need to. So nothing will influence that. I mean if you think about it, look, I mean we were born out of a highly regulated company, so we know how this operates. But related to this discussion around Net Neutrality, the FCC has the right to regulate under 765, they do not need to go to Title II, and why would you go to a 1930 piece of literature to try to regulate something that is a 21st-century technology.
“And I also think that if you look at other countries who have done this, it kind of leads you down to path of total failure because it really, really slows down investment and slows down innovation. So I guess the last comment is, it’s working, why do we need regulations around something that’s working. And again, they can do this under the realms of their legal ability. And I think if they go all the way to the extreme of Title II, I’ll quote what Randal said on stage about a month ago, which is, I think it’s going to be a very litigious environment.”
Stories by Re/code, The New York Times and the Washington Post, among others, came out. Re/code writes:
“Verizon Communications CFO Fran Shammo clearly didn’t read the industry memo about how more regulation of broadband lines is bad because it would lead Internet providers to stop investing in their networks.”
And Re/code points out that Verizon has been telling anyone who will listen that Title II is bad for investment.
“The problem here is that Verizon and other Internet providers have repeatedly warned that future investments in broadband networks may not happen if the FCC opts to re-regulate Internet lines under Title II. Shammo’s remarks appear to contradict what his own company has been telling Washington, which is that tougher net neutrality rules would stifle investment.”
The article also claims that telling one story to investors and another to the Washington lawmakers is common.
“To be fair, there is a long tradition of highly regulated companies telling Wall Street one thing and Washington another.”
And the New York Times adds that there are many others who are chanting the ‘Title II harms investment’ mantra, including equipment manufacturers, who wrote a letter condemning the possible return to Title II.
“Opponents have said that such a move will stifle investment by companies. This week, a group of large telecommunications equipment companies, including Cisco Systems, IBM and Intel, wrote to the F.C.C. urging it not to adopt Title II classification.”
“Title II would lead to a slowdown, if not a hold, in broadband build-out, because if you don’t know that you can recover on your investment, you won’t make it,” the group wrote in its letter. “The investment shortfall would then flow downstream, landing first and squarely on technology companies like ours, and then working its way through the economy over all….”
Verizon had to do some damage control. Verizon’s blog had a guest post from Fran Shammo:
“Last night, (December 10th, 2014) a few news sites ran stories about recent comments I made at an investor conference in response to a question about how the threat of Title II regulation might impact Verizon’s capital investment.
“As Verizon has indicated on several occasions over the past few weeks, discussions about potential regulatory changes related to net neutrality have been going on for a decade, and we don’t change our short-term view on investment based on rumors of what might or might not happen. But as we and other observers of the net neutrality debate have made abundantly clear, experience in other countries shows that over-regulation decreases network investment. If the U.S. ends up with permanent regulations inflicting Title II’s 1930s-era rules on broadband Internet access, the same thing will happen in the U.S. and investment in broadband networks will go down.”
The Washington Post detailed that Verizon still plans to sue the FCC over any decision that reclassifies broadband as Title II:
“Shammo and Verizon are still strongly against Title II, and the industry will likely sue the FCC if it resorts to reclassification. But Shammo acknowledged that, Title II or not, Verizon would keep pouring the same money into its network as it has been.
“In a statement, Verizon spokesman Rich Young said this has been the company’s message all along: ‘Verizon has been very consistent with what we’ve been saying in this area. In this case our CFO’s message is again clear. At this stage, no change’.”
FACT: Verizon’s entire Fiber-to-the-Premises (FTTP) networks used by FiOS TV are already classified as a Title II, common carriage, telecommunications network, based on the Communications Act of 1934.
FACT: Verizon uses Title II so that it can get the state telecommunications utility network’s rights-of-way and charge phone customers for construction.
FACT: Verizon has deceived the FCC, the courts and the public (and some of the media) about these facts.
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