Capital Markets: Investment Precursorstm in Telecom, Internet and Electronic Commerce
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LEGG MASON-CAPITAL MARKETS: INVESTMENT PRECURSORSTM IN TELECOM, INTERNET AND ELECTRONIC COMMERCE Willard Intercontinental Hotel, Washington, D.C., March 9-10, 2000* INDEX IN TRO D U CTION ............................................................................... 254 Scott Cleland (moderator), Managing Director, Legg Mason Precursor Group CABLE OPEN ACCESS ........................................................... 255 Scott Cleland (moderator); Daniel Brenner, Senior Vice Presidentfor Law and Regulatory Policy, National Cable Television Association; Deborah Lathen, Cable Services Bureau Chief Federal Communications Commission ("FCC"); David Olson, Directorof the Office of Cable Communications and Franchise Management, City of Portland, Oregon; Gregory Simon, President and CEO, Simon Strategies, and Co-Director, OpenNET Coalition CO NVERGEN CE PO LICY ....................................................................... 260 Michael Balhoff (moderator), ManagingDirector-Telecommunications Equity Research, Legg Mason; David Baker, Vice President of Law and Public Policy, EarthLink, Inc.; H. Russell Frisby, President, Competitive Telecommunications Association; Lawrence Strickling, Common Carrier Bureau Chief, Federal Communications Commission; Thomas Tauke, Chairman, United States Telecom Association ("USTA "), and Acting Executive Vice President-ExternalAffairs and Corporate Communications, Bell Atlantic; Chairman Patrick Wood, III, Public Utility Commission of Texas W HERE'S TELECOM HEADING? ............................................................... 265 Patrick Brogan (moderator), Managing Director, Legg Mason PrecursorGroup; Kenneth Epps, Senior Vice President for Strategic Marketing, Williams Communications; Reed Hundt, Senior Advisor on Information Industries, McKinsey & Co., and FormerFederal Communications Commission Chairman;Michael Meldahl, Executive Vice President- Telecommunications Division, Montana Power Company, and President, Touch America; Robert Pepper, Office of Plans and Policy Chief, Federal Communications Commission; Scott Cleland, Managing Director,Legg Mason PrecursorGroup FCC CHAIRMAN'S OUTLOOK ................................................................. 268 Scott Cleland (moderator);Kathryn C. Brown, Chief of Staff Chairman William Kennard, Federal Communications Commission W IRELESS DATA OUTLOOK ................................................................... 269 Bradley Williams (moderator), Vice President-Telecommunications Equity Research, Legg Mason; Mark Ein, Founder and CEO, Venturehouse Group; Benjamin Linder, Vice President for Marketing, Phone.com; Kathleen O'Brien Ham, Wireless Bureau Deputy Chief Federal Communications Commission; Thomas Wheeler, President and CEO, Cellular Telecommunications Industry Association ("CTIA ") TECH O U TLO O K .............................................................................. 274 Jaime Roca (moderator), Associate Analyst, Legg Mason Precursor Group; Commissioner Michael Powell, Federal Communications Commission; Royce Holland, Chairman and CEO, Allegiance Telecom, Inc.; David Isenberg, Founder, Isen.com, Inc., Robert Lucky, Corporate Vice President-Applied Research, Telcordia Technologies INTERNATIONAL TELECOM OUTLOOK ..................................................... 279 Rudy Baca (moderator), Global Strategist, Legg Mason Precursor Group; Donald Abelson, InternationalBureau * Prepared by CommLaw Conspectus staff members. Com- conference seminars. A complete version of the seminar tran- mLaw Conspectus thanks Scott Cleland of the Legg Mason Pre- script can be found on the CommLaw Conspectus website at cursor Group for his coordination of this event. It should be <www.commlaw.cua.edu>. noted that this edition includes only excerpts from selected COMMLAW CONSPECTUS [Vol. 8 Chief Federal Communications Commission; Chairman Jean-Michel Hubert, French Telecommunications Regulatory Authority; Wharton "Zie" Rivers, President, Cable & Wireless North America GLOBAL OUTLOOK KEYNOTE ................................................................ 284 Raymond Mason (introduction), President, Chairman of the Board and CEO, Legg Mason, Inc.; Edward Whitacre (keynote speaker), Chairman and CEO, SBC Communications, Inc. W EB CA ST IN G .................................................................................. 286 David Hoover (moderator), Associate Analyst, Legg Mason Precursor Group; Commissioner Susan Ness, Federal Communications Commission; Elizabeth Frazee, Senior Director-Domestic Public Policy, America Online, Inc.; Ian McCallum, Vice Presidentfor Corporate Sales and Development, iCraveTV, Richard Wiley, Senior Partner, Wiley, Rein & Fielding INTRODUCTION in the report.] [Using] a framework of twenty-five questions, we ran[ked] thirty countries [that] MR. CLELAND: Welcome on behalf of Legg comprise 85% of the international telecommuni- Mason and the Legg Mason Precursor Group. cations services market to see where they stacked The one thing I hope you noticed about the up for relative growth. agenda this year is a much greater emphasis on [First,] [t]here is a huge disparity among the globalization. That was purposeful. We believe countries in their relative hospitability to that the globalization trend is real. We have been growth[,] the building blocks for the new econ- working on it for about a year, year and a half. omy. [Very few countries have all the factors in [W] e had been thinking about hiring a global- place, such as] getting telecom factors right so ization strategist and looking for one for a long that internet growth can [flourish] [and] getting time. I am pleased to announce that-and I internet factors right so that e-commerce [can de- would like to introduce Rudy, if he would come velop]. Basically, we have identified what we call up here-Rudy Baca has joined us a few months the "broadband four," which are the United ago as our globalization strategist, and I am going States, the United Kingdom, Canada and Ireland. to have him tell you a few things. Hejustjoined us We've got others that have a relatively less hospita- from the FCC International Bureau. Prior to that ble ranking, down all the way to a couple of rec- he worked for FCC Commissioner Quello, and he ommendations where we say the investors should has been involved in many international negotia- be very, very careful in these countries, even tions around the world. though they have proclaimed themselves open to [W]e decided to hire a globalization strategist growth. Relative to other countries, the low-rank- [because] [w]e wanted to have somebody looking ing countries do not have those factors in place at the world through the globalization trend. It that [will] make relative investment growth hospi- was extremely [difficult] to find [the right person table and will provide a return on investment[s]. for the job]. We spent a lot of time looking [and] [The] second big conclusion is that the in- believe [Rudy is one of the best people to tackle ternet is now, and will remain for the foreseeable globalization issues]. future, much more U.S.-centric than most people And we're really excited that you can find a realize. Therefore, people cannot simply take the copy of his report. It is an outstanding piece of U.S. growth experience and [apply it] to other research called "The Building Blocks of Growth in countries. The U.S.-centric pattern is comprised the New Economy; a Guide to Global Investment of various factors, such as deciding of the servers. Precursors in Telecom, Internet, and E-Com- Seventy-five percent of secure servers are sited in merce." I am going to have him describe a little the United States. [O]ver 90% of the websites are bit of it to you for about five minutes. in English, reinforcing [the] bandwidth capacity [We believe Rudy's report has shed some light into and out of the United States. in an area that has long been a black hole for un- [Very few people realize the impact of pricing derstanding.] Essentially, he has created a frame- barriers.] [B]ecause of artificial pricing barriers work [for] analyzing different countries [and from country-to-country in certain regions, Eu- their relative level of hospitality towards growth in rope in particular, it is often much cheaper to the new economy], [as] we know investing is all sen[d] th[e] packetized information from Bonn about relative values. MR. BACA: [We reached two big conclusions 2000] Legg Mason to New York and back to London, than sending it level, where you have eleven thousand jurisdic- through Bonn to London directly. tions trying to do regulation on this technology. So these changes are worth watching, as Ms. Lathen has said and the Chairman has indicated. CABLE OPEN ACCESS It is important to see how these market develop- ments work, but this is all a new space for both the MR. BRENNER: Let me present the cable cable players and for some of the ISPs-certainly point of view as it [exists] today. I think that the for AOL, as [it] figure [s] out how the architecture key position of the cable industry during this en- should work. tire debate has been that the government should [Thirdly,] [1] et me also say that the cable indus- not regulate questions of access or pricing of ser- try is a very diverse industry. It is not just AT&T. It vices in the broadband space on cable. The cost of is not just the @Home partners. [I]t is not just regulation, in terms of the slowdown and the Time Warner. There are other large companies. complexity of that type of regulation, is simply not Those