The iPhone Duo and Don't Count Out Cable

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the three hundred and fourteenth 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 doing?

Roger Entner 0m22s

I'm good. 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 Kellogg 0m34s

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

Roger Entner 0m41s

The sacrifices.

Don Kellogg 0m42s

The sacrifice. 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.

Don Kellogg 0m56s

Why don't you tell us about it?

Roger Entner 0m57s

One of the things that I think most people know is that Apple decided to drive people more to the pros, so they made people wait for the baselines until spring. You know, they launched the duo. The Duo will be quite interesting. When we look at foldable devices, you know, they have like, what, two and a half, 3% market share. Journalists and analysts are a lot more enthusiastic about the device than the consumers.

Roger Entner 1m25s

We'll see how this plays out with the Duo. I haven't touched one. I was in 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 Z eight Fold or Fold Ultra. By the way, I will do a comparison of the two devices.

Roger Entner 1m49s

I have a Fold Ultra coming and same with the with the Duo. So, you know, in my moon shining, I will be now a device reviewer. It will be fun. But what's interesting is that it seems to be that, like, initially, you know, and today, it's we're recording this on Friday. The device gets on launch.

Roger Entner 2m10s

It looks like that the demand, at least the initial demand, is a little bit light. We ran survey on this last weekend, then the weekend before, like 8,000 people. We're seeing a shift towards the fold, and probably will play out in the in the survey about 9% say that they will get the fold. But that's before they before a $2,000 bill hit them in the face. Right?

Roger Entner 2m36s

Because if you finance that all, it's like $90 or something like that. It's like 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 be continuing to push this, and so this is the first iteration.

Roger Entner 2m58s

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 gonna be a much slower burn than I think what people expect. With the Duo, you know, 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.

Roger Entner 3m30s

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. You know, the hopes and the dreams of the carriers to push this like above 50%. It's a uphill battle, but then we know that, you know, it took a pandemic.

Don Kellogg 4m8s

I think if you're renewing or you're just upgrading within the same ecosystem, it's probably a little bit of an easier

Roger Entner 4m13s

Yeah.

Don Kellogg 4m14s

That's Right? If you're if you're going from, you know, an iPhone 17 to an 18, do you really need to go touch the device? Right? But so when it's a change of form factor like this, I agree with you. I think that folks are gonna wanna feel it, wanna touch it.

Don Kellogg 4m26s

Yeah. The other thing I think is that for the folks that do buy this, there's gonna be a lot of, you know, insurance being sold associated with it. Because nobody's gonna 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 Entner 4m44s

Oh, very healthy. Right?

Don Kellogg 4m46s

Very healthy. Right? And that's gonna be a slam dunk for whoever's selling these devices. Right? Absolutely.

Don Kellogg 4m51s

It's also notable, you know, 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 two terabyte version, which, you know, is kinda wild. Yeah. You could you could buy a nice computer, a very nice computer for that.

Roger Entner 5m7s

You can buy a very nice computer. That's where we are. Right? By the way, that's what these devices are on top of it. You just can't run.

Roger Entner 5m15s

Well, maybe now you can run AI on it, but you can't run AI models on it because otherwise the thing, like, turns into, you know, a hand warmer or gives you blisters. But yeah. So at least the iPhone 18 pro and pro max is upon us.

Don Kellogg 5m31s

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

Roger Entner 5m42s

You know, I think the the cable companies are and I spoke about this. I was speaking at the Citibank conference last week, and I'll probably talk about it on Tuesday at an investor call with Morgan Stanley that, you know, the cable companies are really beaten up on price. You know, they run at, like, two times free cash flow. It's like how you value a debt company. And you saw it, like, 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 through their largest cost transformation ever.

Roger Entner 6m29s

And the market beat them up again. Right? It's like the market is so 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 like almost like defunct assets, which they they don't deserve.

Roger Entner 6m57s

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, work with 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.

Roger Entner 7m17s

Now the boogeyman, you know, enter Elon Musk from the right, is there. The danger is that they should not underestimate the danger of stopping. I think it's a massive impact in rural America, less so urban. But, like, you know, we're running now a speed test twenty four seven. And so, for example, one suburban Boston, another one rural Virginia.

Roger Entner 7m45s

This is FWA like quality and 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 at the more rural ish fringes driving that coal consolidation of the rural telcos.

Roger Entner 8m7s

It might also drive the valuation of the small rural telcos.

Don Kellogg 8m12s

Right. As they get rolled up.

Roger Entner 8m13s

Because your DSL lines are gone. They have, like, an expiration date, and there's nothing gonna 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.

Roger Entner 8m30s

And in the end, the customer wins because that's what we want, and we see the number of satisfactions going up.

Don Kellogg 8m36s

Well, yeah, I mean, the levers are pricing, reliability, and speed. Right? And Yeah. They're improving on all those fronts. Right?

Roger Entner 8m45s

Yeah. And both you and I have been railing against exploding prices. They are even going away from that, because people don't want to have a gimmick. Right? It was really interesting.

Roger Entner 8m57s

I I was using our GhostLab, and I had, like, some carrier executives talking with each other. And then I had, like, the observed behavior pattern of Steve Jobs come in, and he's like, you know, 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.

Roger Entner 9m25s

Fiber got that. Right?

Don Kellogg 9m27s

Right. Although, I mean, didn't Livingston 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 Entner 9m38s

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. But then I can say the same way, cable is selling 300 megabits for $20 to low income people.

Roger Entner 10m2s

It's the same thing. And some of the cable guys are 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 Kellogg 10m21s

Right. But I I think what I would say is that the new reality is that, like, it's kinda be hard to charge $22.50 for, you know, fast service when somebody else is charging 20 or 40 Yeah. For good enough service. Right? And that's the world that we're living in now.

Roger Entner 10m36s

But it's also very, very interesting. We've gotten, like, heavily into network measurement, and it's really interesting to see, and I'll write about it in the next couple months, what I call it the label taxes and what the WiFi tax is. And the label tax is the difference between what you buy and what you get. Like, one of our people has five gigabits he buys five gigabit fiber service. The problem is the motherboard can only do one gigabit.

Roger Entner 11m9s

Congratulations. Right? Right. You have one gigabit service, even you you bought five. So we measure then the Ethernet, and then we measure also what ends up on WiFi on the laptop, and that can be depending on the laptop you have and the router you have, that tax can be another 90%.

Roger Entner 11m31s

So you bought gig, and your laptop ends up with a 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 is like, this doesn't work.

Roger Entner 11m49s

It's not great. Whatever.

Don Kellogg 11m51s

Most devices are gonna have if they have Ethernet ports or at least a gigabit, but, like, who wants to be wired if you can be wireless. Right? It's I think it's the the challenge. And, you know, particularly with, like, newer things like Wi Fi seven, you get closer to that gigabit speed or you can even get to it. But then most people are not don't have that equipment.

Don Kellogg 12m9s

Right?

Roger Entner 12m10s

But then all Wi Fi seven is not equal. So for example, I'm running this on multiple laptops. Right? I have a WiFi six laptop. I have a WiFi seven with a 160 megahertz channel and one with 320 megahertz channel.

Roger Entner 12m27s

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 Kellogg 12m44s

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

Roger Entner 12m49s

follow that? People live in this with older equipment.

Don Kellogg 12m51s

Right. I I know. But, like, 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 that older equipment versus somebody who just signed up yesterday. Anyway Cool. Alright.

Don Kellogg 13m6s

Well, we'll

Roger Entner 13m8s

We'll talk about next week.

Don Kellogg 13m9s

Yep. Okay.

Roger Entner 13m10s

Alright. Bye bye.