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>> this week on the communicateors and issues facing the cable industry with analyst jessica cohen and the federal communication bureau commission with bill lake. >> joining us is jessica cohen. what do you do? i am a research analyst covering media, entertainment, and cable and satellite. >> so when it comes to the cable industry what is the economic health overall? >> we are very bullish on cable. they have a huge big fat

area into the home. so multiple services it was video. of and over time it has become broadband and voice. rolling out other services on top of that like home monitoring. you know. it is home security plus. so it things like managing thermostat or turning on the pool heater. and or a nanny cam pet cam. et cetera. this are new service that's are begining to roll out on the platform. rolling out. and as the business, the same thing. voice and data. to be leveraged and in many ways, the separate investment points for cable that the industry filing finally, after years and years and years. after hundreds and billions in investments will become free cash flow positive. so over the last three or

four years, we have seen significant return of capital to shareholders and mostly through the buy backs and through dividends. when did that occur? earnings and free cash positive. is cable name a misno, ma'amer anymore? >> i mean there are cables. but this is a multisurface platform. technology is an enabe letter of so many things. but now we will see guides that will make the guide that we have as consumers used much easier to use. friendlier and make tv an

enjoyable experience. so think of the itunes guide or netflix guide. so this is the recommendation. i cannot tell you how many times that i had to search for a homeland. i this i that it will make a very big difference in terms of what it will do for revenue. and for the cable operators. this is a big opportunity. >> are the cable operators gaining customers or losing customers? >> they are losing customers and video customers at the expense of competitors. whether it is the satellite and we believe that speculation, you no, intel will come out with the new product that may be others that are behind them with over the top type video services.

cable is gaining market share. in most of the country they have afar superior product to anything else that is offered. voice. they are gaining some because of incumbent telephone companies and also there is a significant amount like 30 to 35% wireless subs tuitions. so this hurts the telephone more than cable. cable has been gaining voice and kind of a slower pace than they had previously. on the business side. they are not the incumbent they are gang significant market share. >> when you look at the comcast. different business models that they have in both the network or the cable operator or provider and a network. is that business model a future? for other cable companies? >> company has a different approach. when comcast bought nbc

universal there a lot of discussion. were they doing the right thing or not? time warner spun out the cable. spun out aol. spinning out publishing. they had a very different personality and culture. in the case of comcast. our view. and suggestive view is that this will work extremely well. they stole nbc u and paid a good price. paid a good structure and bought it in a very good time when advertising was extremely weak and it was obvious that content would be a revenue generator for network for the broadcasters and they bought that very well. timing and price, and structure. at this point. nbc is a distant you know.

it is getting better. but still far from where it should and could be. so our view is that nbc universal is the self media play. and comcast is getting virtually no credit. for nbc u if they execute well. so in our analysis. we said that if could not comcast will trade in line with the operator. the value for nbc universal. $5 to $8 for a comcast share f they do a great job and execute well, over the next two years, this could be worth $20 a share. if next cute flawlessly, perfectly maybe $30 but if they mutt will along it will be what it is worth what it is today. our view is that they have known the industry well. and the heir apparent at disney for a long time and there is strong management

beyond him. they know ma to do to if i can the businesss and each of the businesses whether it is broadcast business. cable network business. or international has a huge upside. when you see a potential product like area yeah coming out on to the market. what are your thoughts. it is not me to owe pine on if it is legal or not. i don't think it changes the course of retransthat is an interesting concept. we transition concensus the money that broadcasters get for provide ago signal to paid tv operators. we are in like the third round of retrans so the first round maybe 40 to 50 cents. the second was close to a dollar and in our view the broadcasters will ultimately get ultimately next round to get to the $2 range with the contract. so there is a big step up.

they provide great programming. the broadcasteres to this day provide great programming. you can see how many will pay for abroad cast signal and get something else. >> and i this i that for the broadcasting perspective we will follow entertainment as well. we don't believe there is a risk or retransmission revenue from it. >> the technology is there? >> well there is tons of technology that you know, people don't watch blank screens f it is illegal it will not mat near they plan to work around. they will not have the programming. there is a lot of challenges and loads of technology challenges and have been for years.

providing programming. can you take it in a virtual slingbox. there is disruptive tech he can that's may or may not be illegalal. michael rodney kane is talking about his a la cart cable bill once again. is that a disrupt or? >> it doesn't seem like there is a lot of support i window be a little bit more worried about it from the programmer's perspective. programers do not want to unbundle and have their networks unbundled and sell individual networks. if you are viacom and 15 networks how many people. how many operators will take more than mtv and nickelodeon will they take the full sweep? this is a risk for all programers and of course for paid tv as well.

but it doesn't it is both sides. not like one side is rooting for all a la cart and the other isn't this. is a big risk for anybody with sports. how many pay a lot for sports? is there a chance it will not feel that way. it doesn't feel that way. >> when you look at the horizon and you think of the future of tv. 26 everywhere. what you are seeing? >> the great thing is whether it is tv everywhere or education. the multiple device that's so many many of us have is many of the disruptive technologies like twitter for example and facebook. this is made the television experience. for some it has made it better. a difference. and a lot of what is going

on in the special network and the universe is on tv. you know, there is more to it. normal and it will peak. start to come down. people will lose interest. instead we are seeing with many shows in the year. 3, 4, 5. that the viewership is going up. people have binge viewing with netflix. video on demand them. are catching up. now people are talking about homeland. season 2 is doing better than season one, whatever and any walking dead or any show. you can see the audiences build. where would you lose audiences. the biggest shock is covering the industry. for i will not say how many

decades but decades plural is that viewing time has gone up. it has gone up per home. five to six hours a day to eight hours. there is no danger they is television. we have a great product. and particularly american companies as we have a big single country programming tends to get as support and there is a i lot of money in that. so as americans we love our tv and the tv shows are over and over. so it is profitable the initial story on a global basis as well and how did you get started in this industry? >> my god. eons ago i started at a small company a small boutique and the person that hired me. will be indebted he took a chance. took a chance on a young

person. >> were you interested in the cable industry or did they assign to you it? >> i was hired by a guy that covered entertainment. and had i been covered by that which covered auto. i would not be an analyst today it was luck and evolved. when i started covering cable, it was really, really small and a very highly lefrd industry. very different. and it was people that could not get a clear signal. at the involved. and one of the first companies that i followed was mtv as a public company and i remember that slogan i want my mtv. and demographics have changed the cable television, younger people as they got their own households wanted to watch multichannels and will see the same thing with broadband. the broadband penetration in the u.s. is well.

depending on the statistic that you take. high-speed data. 50% plus. over time. our viewers will be 85 to 90%. so this is still a very long runway for cable. so the commercial business and home monitoring and whatever it will become. what are the storm clouds that are a potential for the cable industry. and drivers the last five or seven years, the retransmission could not tempt was used for channel carriage. and fox news was apart retransmission consent that

is the new cross. and a growing cross. sports has gotten completely insane. driven by the teams and the team owners. teams that started their own channels and regional sports channels. nfl is charging a lot of money. and it is passed onto you know -- eventually. to the paid tv providers and satellite. telco. and consumers. then the third driver is normal negotiations. so if you see the companies that are delivered they invested in programming, i will take the discovery for example. the program budget went from $500 million let's than five years ago to a billion one. so this a different company today than the last round of contract negotiations in our view, they will get decent price increases and. because they have delivered high quality programming and across multiple channels with discovery.

tlc. animal planet. in the last contract. all in a free network. et cetera. et cetera. >> how closely to watch fcc as an analyst? >> we have less angst at the moment. less issues. pending but it can be a very big deal at times. and luckly the government took a light hand in broadband and broadband pricing which stimulated the independent story to invest. in the end it was a very positive thing. so the big pipes we have fast high-speed data which is getting faster and faster. the speeds are going up and up. had the industry been regulated with price caps the level of investment would be lower. i was around from the days of the rate roll backs and

the cable industry found a loophole and then they were really, really. closed the loophole and there was 17% rate roll backs disasterous for years, so the light touch of the fcc was a big benefit and a massive amount of investment that has been to the benefit of consumers ultimately. jessica cohen. one of the issue that's we talked a little bit about on the commute -- communicateors here in washington is neutrality. and have you court cases working their way through right now. what are your thoughts? >> well, we will see what happens. like i says verizon case is coming up. but hopefully i think that provide ors of broadband have generally. look, this is not for me, i am not regulator. it feels like they are not favoring their own networks. i should not --, i this i

that broadband there is many flavors and many prices and consumers do have options to pay lower price force lower speeds. higher price force higher speeds and generally when offered the choice, if someone can afford it they will always pay -- prefer to pay for the higher speeds there. are many flavors. and many options out there so far, i think that it is a regulatory touch that has been a big positive. >> do you know tom wheeler at all. >> i do not know him. i hear excellent things about him. >> is there a danger in getting too close to your people that you analyze? is that possible to happen? >> you are saying from a --? >> no as an analyst? for you? is there a danger in getting too close to companies. you have covered them for 20-30 years. >> as an analyst. really, we hope that we always have a very object if

i have opinion and that we can. -- if we didn't have. if we were not as analysts able to provide a truly -- if we were not able to give it an honest appraisal then we actually have no value to our clients. i think this is a lot of what has happened in the past. people can see through that. if you a are acting as a pawn for accompany. initial vestors see through that and there is no value. so what is -- you have to be honest and very objective. and really try to call it as we see it. sometimes that will not make us popular with the companies. honestly, sometimes it will not make us popular with investors this is not a pleasant experience to go through. >> we will leave this program at this point. you can see the remainder of it in the cspan library.

and now to the political event with the interview this morning on politico. >> i don't think that you have an institution that in a absolute censor absolute sense isn't. think about what happened during the crisis the reserve primary fund. a small market fund had it became set off a crisis and the rest of the money market funds that required interdeveloping by the treasury and the fed to keep that industry supported. one would never before the crisis would have thought of reserve primary fund as a institution, so there is a important lis lesson that would be too big to fail that is a a contingent status. it depends on what is going on in the greater environment of the financial system having said that it is obvious that the risks

posed by any particular institution can be substantially greater. and the imminent failure of some institution requests pose a much more obvious threat to financial system than others. so for that reason we do conventionly identify some institutions that may not characterize as too big to fail but systemicly important. i guess that i would say that with respect to the larger and most complex institutions in the united states, that while a good by the has been done and as you mentioned is still about to be done unsets of regulations and agreements that will be implemented, my own view is that we still do need to do more to get to the point at which the risks of opposed by some of the institutions are confine today what we would think of asmanageable propourings so first, let's start with what has been done.

more than double capital in the largest institutions. we are on our way to a set of liquidity requirements short-term and over a somewhat longer period negotiate something that is medium term liquidity requirement. vet orderly resolution, authority to be improblemed by the fdic. we have the stress testing regime that the fed has put into place. so an awful lot has been done and some of those things surcharged liquidity reqirmentsz will be done they are on the horizon. the big area. the big area i this that i we will need to do more about is short-term wholesale funding. >> right that is the obvious follow yum when we do something on short-term wholesale funding. what do you want to see in terms of reform and banks with lending? >> the first opportunity there is a opportunity here. that is with the net stable funding ratio for those in

your audience that do not know, committee has been negotiating two kinds of arrangements. the first coverage ratio that short-term covers 30 days of vulnerability, has been completed. we in the other banking agencies will put out the proposed regular in the fall to implement with the united states. net funding will deal with alonger term with the banks. right in the original concept, it preceded on the assumption that a matchbook was a more or less safe position information to be in. my own sense is that while it is better to have a more matchbook than a less matchbook it is still a case that wholesale funding. make the institution and/or the system suspect acceptable to runs.

:, their ability to, you know, make loans and drive the economic recovery. was there a way to do it differently, an interim final

rule, something that would be more immediately impactful on these banks and make the system safer, faster? >> you got to remember that, as i mentioned a moment ago, we already doubled the amount of capital in the largest banks and all of them are continuing to build capital in accordance with our expectations and indeed the requirements of basal iii and when we put out the sifi surcharge proposal and sifi surcharges as well. so the danks are already on and participatory reasons and trajectory. the ratio is a important compliment to the risk based capital requirements making sure it is harder to arbitrage. when you have just a leverage ratio there is incentive to do the riskiest things you can within that incentive ratio. when there is only risk-based capital there is only incentive

to arbitrage those categories. when you put the two together you have more coverage. all these requirements are intended to be phased in over a period of years. in doing so, you minimize the chances of disruption to the flow of credit and capital more generally, but i think we've also demonstrated that that we've been quite successful approach when you look at again, the path of capital build in the united states since early 2009. in terms of the, in terms of the reg, interim final, interim final rules are intended for circumstances that are supposed to being exigent where there's a very powerful reason for not having the kind of notice and comment which the administrative procedure act contemplates and which most people think is a very good idea because it means that the proposals made by regulators have a chance to be scrutinized by everyone in the

public. so obviously with this, as with basel iii and volcker and everything else we go out for comment but i think you also can see in the proposal that it's a very strong sense in the agencies that the 3% ratio was just inadequate and that's why we made a proposal for something more. >> what do you make of arguments of banks covered by this, the largest financial institutions, because it will limit the flow of credit and liquidity and, taking into account, going too far to regulate banks without taking into account the impact on the economy and on the accessibility of credit for the banks, do you think there's a legitimate argument there this particular leverage ratio change could be damaging to the economy in some way? >> we'll be interested as always in people's comments, comments from all directions and people can make observations that they think are salient with respect to the impact on the economy. i guess i would say more

generally that there are at least two considerations here. one in the first instance we do have to look, getting back to your first question, we do have to look at what is going to give us a level of safety and stability in the financial system that will protect against a recurrence of the kind of extremely severe financial crisis we had a few years ago and the analytics behind that have suggested that among other things, and perhaps central to the reform process is the need for substantially more and better capital than existed precrisis. so stablizing the financial system, being kind of an insurance policy against a severe crisis is the big benefit that one gets from higher capital levels. are there costs associated with that? true, there are almost always costs associated with any kind of a policy that tries to