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Don: Hello and welcome to the 314th episode of The Week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. Roger, how are you doing?

Roger: I'm good. Today, I'm calling in from a bathroom at an airport, because that's literally the only quiet place we have. So, sorry for the echo.

Don: Yeah, it actually sounds pretty good, but we know you're a road warrior and sometimes the mission requires...

Roger: Sacrifices.

Don: Sacrifices, yeah. So, there's a lot going on right now. I thought maybe we could start with one of the things that everybody's been talking about, and that's the new iPhone, or iPhones, I should say, but there's one in particular I think that bears special mention. Why don't you tell us about it?

Roger: One of the things that I think most people know is that Apple decided to drive people more to the pros, so they make people wait for the baselines until spring. They launched the duo. The duo will be quite interesting. When we look at foldable devices, they have like what, two and a half, 3% market share. Journalists and analysts are a lot more enthusiastic about the device than the consumer is. We'll see how this plays out with the duo. I haven't touched one, I wasn't in Cupertino, all of these things. But from friends of mine who have been there and touched this thing, it looks to be a better device than the Galaxy Z8 Fold or Fold Ultra. By the way, I will do a comparison of the two devices. I have a Fold Ultra coming and same with the duo. So, in my moonshining, I will be now device reviewer. Would be fun. And what's interesting is that it seems to be that initially, and today it's, we're recording this on Friday, the device gets launched. It looks like the demand, at least the initial demand, is a little bit light. We ran a survey on this last weekend and the weekend before, like 8,000 people. We're seeing a shift towards the fold, and probably will play out in the survey about 9% say that they will get the fold. But that's before a $2,000 bill hits them in the face, right? Because if you finance that all, it's like $90 or something like that. It's ridiculous. Cut that number in half, so you're looking at 5%. That's roughly the volume of what the Air was and devices like that. But I think Apple will continue to push this, and so this is the first iteration. Now, hopefully it's not the first iteration like the Apple Vision, which never got a second one, but we'll see. But then our survey clearly showed that the carriers have trained people to wait for Thanksgiving and things like that. So, it's going to be a much slower burn than what people expect. With the duo, I've been to several stores and talked to sales reps. They responded back that a lot of people want to touch the device before they buy it. When you look at the bigger picture, there's this industry-wide trend towards going online. And I always make the observation that 43% of mattresses sold are online. And we are at like sub 20% in the telecom industry. Maybe we have to realize that at least devices are a different category than mattresses, because we actually spend probably more time with our phone than we spend on our mattress, which is kind of scary. The hopes and the dreams of the carriers to push this above 50%, it's an uphill battle, but then we know that it took a pandemic.

Don: Well, I think if you're renewing or you're just upgrading within the same ecosystem, it's probably a little bit of an easier decision, right? If you're going from an iPhone 17 to an 18, do you really need to go touch the device, right? But when it's a change of form factor like this, I agree with you. I think that folks are going to want to feel it, want to touch it. The other thing I think is that for the folks that do buy this, there's going to be a lot of insurance being sold associated with it, because nobody's going to buy a folding device that's $2,000 and not have some way to protect it, if they drop it or something of that nature. So, given what we know about the margins for device insurance...

Roger: Oh, very healthy, right?

Don: Very healthy, right? And that's going to be a slam dunk for whoever's selling these devices, right?

Roger: Absolutely.

Don: It's also notable the extent to which this extended the Apple line from a cost perspective. I mean, the most expensive duo is $3,000 if you get like a 2 TB version, which is kind of wild.

Roger: Yeah.

Don: You could buy a nice computer, a very nice computer for that.

Roger: You could buy a very nice computer. That's where we are, right? But wait, that's what these devices are on top of it. You just can't run, well, maybe now you can run AI on it, but you can't run AI models on it, because otherwise the thing turns into a hand warmer or gives you blisters. But yeah, so, at least the iPhone 18 Pro and Pro Max is upon us.

Don: So, there's also some noise going on, I think the other thing we want to talk about today is part of what Wall Street's saying about the cable cos. I know you have a pretty definite perspective on this, so why don't you tell us more about it?

Roger: I think the cable companies, and I spoke about this, I was speaking at the Citibank conference last week, now I'll probably talk about it on Tuesday at an investor call with Morgan Stanley, that the cable companies are really beaten up on price. They run at like two times free cash flow. It's like how you value a dead company. And you saw Jason Armstrong from Comcast talked about it at the Goldman Sachs conference that they're losing a little bit more home internet customers, but they're undergoing the largest cost transformation ever. And the market beat them up again, right? It's like the market is so pessimistic on cable that it gives cable also a lot of freedom to do whatever they want now, if they have the courage, because how much more can the market punish them? It's like all the goodwill that is ever in a stock has exited that. They're treating them almost like defunct assets, which they don't deserve. In fair disclosure, we're working with a lot of them. We're working with all of the larger ones, we work with all of them. Like we work, as you know, we work with all the telcos. And they're making a genuine effort to improve the customer experience and to provide a better product. And we're seeing it in our numbers. Now, the boogeyman, enter Elon Musk from the right, is there. The danger is that they should not underestimate the danger of Starlink. I think it's a massive impact in rural America, less so urban. We're running now speed test 24/7. And so, for example, one suburban Boston, another one rural Virginia, this is FWA-like quality with the reliability of fiber. FWA-like speeds with the reliability of fiber. Pretty bonkers, right? But I think it will feast on the small rural telcos, and then the more ruralish fringes, driving that whole consolidation of the rural telcos. It might also drive the valuation of the small rural telcos.

Don: Right, as they get rolled up.

Roger: Because your DSL lines are gone. They have an expiration date, and there's nothing going to come back. But overall, I think the cable guys still have a long way to go, but they're making clear progress. And it doesn't matter which of the cable guys it is, they all make progress. And in the end, the customer wins, because that's what we want. And we see it in numbers, satisfaction's going up.

Don: Well, yeah, I mean, the levers are pricing, reliability, and speed, right? And they're improving on all those fronts, right?

Roger: Yeah, and both you and I have been railing against exploding prices, they're even going away from that. Because people don't want to have a gimmick, right? It was really interesting, I was using our Ghost Lab and I had like some carrier executives talking with each other, and then I had the observable behavior pattern of Steve Jobs come in. And he's like, when you have to discount your product, you know you don't have a good product. The iPhone never sold for a discount, and I had people stand in the rain for six hours to get it. If you have a good product, you don't need to discount. Fiber got that. Fiber got that, right?

Don: Right, although didn't Lievonen also say that fiber was making irrational decisions offering $30 and $40 service, and that was part of what was hurting them? That was the big shot that dropped the stock price, right?

Roger: Yeah, but it's not, you can get $45 for 300 megabits per second. That you can get. Verizon in the Northeast, like Massachusetts, is offering 300 for like 45 bucks. But then I can say the same way, cable is selling 300 megabits for $20 to low-income people. It's the same thing. And some of the cable guys, look at the fast offer by Optimum, $25 for 300 megabits of fiber. Comcast is not running into Optimum, but that's an FWA killer type of service, right?

Don: Right. But I think what I would say is that the new reality is that it's going to be hard to charge $250 for fast service when somebody else is charging $20 or $40 for good enough service, right? And that's the world that we're living in now.

Roger: But it's also very, very interesting, we've gotten like heavenly inter-network measurement, and it's really interesting to see, and I'll write about it in the next couple months, what I call the label tax, and the Wi-Fi tax. And the label tax is the difference between what you buy and what you get. Like, one of our people has 5 gigabits, he buys 5 gigabit fiber service. The problem is, the motherboard can only do 1 gigabit. Congratulations, right?

Don: Right.

Roger: You have 1 gigabit service even though you bought five. So we measure then the Ethernet, and then we measure also what ends up on Wi-Fi, on the laptop. And that can be, depending on the laptop you have and the router you have, that tax can be another 90%. So you bought gig, and your laptop ends up with 100 megabits. Whoops. And that's the type of thing that a lot of people don't appreciate. The question is, do they need to appreciate it? But then they complain, this doesn't work, it's not great, whatever.

Don: Most devices are going to have, if they have Ethernet ports, at least a gigabit, but who wants to be wired if you can be wireless, right? I think it's the challenge, and particularly with newer things like Wi-Fi 7, you get closer to that gigabit speed or you can even get to it. But most people don't have that equipment, right?

Roger: But then all Wi-Fi 7 is not equal. So for example, I'm running this on multiple laptops, right? I have a Wi-Fi 6 laptop, I have a Wi-Fi 7 with a 160 MHz channel, and one with a 320 MHz channel. The differences, I don't want to spoil the news, it's very, very interesting what the differences are when you have different capability sets and what comes out in the end. Yeah, it's very, very interesting. To say the least, the results are not necessarily what you expect.

Don: Well, I mean, within this scenario though, right, if you're talking about older equipment and things like this, then wouldn't it follow that...

Roger: But a lot of people live with older equipment.

Don: Right, I know, but wouldn't that then follow that the incumbents, which in this case are the cable companies, might be a little disadvantaged because if those folks are more likely to have older equipment versus somebody who just signed up yesterday?

Roger: Anyway.

Don: Cool. All right. Well, we'll...

Roger: We'll talk about it next week.

Don: Yep. Okay.

Roger: Bye, bye.

Don: Bye.

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