I spoke at an investor conference on Tuesday hosted by Capitol Forum. Not surprisingly, the topic of the panel was net neutrality – what else would anyone want to talk about this holiday season.  Also not surprisingly, one of the panelists, a proponent of Title II classification of Internet service, asserted that the cable ISPs were okay with Title II and would continue to invest at current levels in their networks regardless of whether the FCC imposed Title II on their broadband networks.

I was pretty sure my co-panelist was referring to a Washington Post column from Tuesday containing snippets of quotes from executives of Time Warner, Comcast and Charter made at a UBS Analyst event held last week.  I had read that article and I disagreed that that was what the cable executives were saying or that quotes selected supported the proposition of the column.  Before I could get into it, however, an attendee at the conference took the microphone to state that he had, in fact,  attended the UBS conference and that all of the cable executives who appeared there were adamantly opposed to Title II regulation –disagreeing entirely with the characterization of my co-panelist.  I thought that really closed down that topic.  I was, however, wrong.

After the conference, the Washington Post ran a second story titled, “Why Broadband Execs Are Telling Washington and Wall Street Different Things On Net Neutrality” and quoting me from statements I had made after the panel. The story asserted that the cable companies were telling one tale to Wall Street – that the imposition of Title II would have no impact on investment decisions – while telling a different tale to Washington regulators:

“The companies are telling investors that they’ll keep making their networks better, just like always — even if federal regulators adopt aggressive Internet rules. But that’s not what regulators are hearing from the companies, who are telling them that those same rules would depress investment in the network and hurt consumers.”

So, now I was really intrigued to see exactly what these executives said at the UBS conference.  I obtained a copy of the Comcast transcript from the Comcast website and I listened to the webcast of the Time Warner Cable presentation on the Time Warner Cable website.

What follows is a transcript on the Title II discussion from those websites.  I will let you be the judge of whether the Washington Post column accurately captured the sentiment expressed by those executives.  You can judge whether those executives are telling Wall Street one thing and D.C. another as the Post asserts in not one, but two columns this week.  I do not believe these transcripts support any of the interpretations put forth in the Post columns.  But don’t take my word for it.  You be the judge of whether these executives in any way implied that investment would be unchanged by Title II.

Time Warner Cable Inc.

John Hodulik – UBS Analyst
Got you. The other significant issue for investors on the regulatory side is Title II. There’s been a lot of news in the last week, or at least opinions coming out, trying to get a sense for which way Chairman Wheeler is going to go on the topic.  Where does Time Warner Cable fall out? How do you expect the issue to evolve in Washington and then what’s your view on Title II?

Rob Marcus – Time Warner Cable Inc. Chairman & CEO
I can’t really speak for Wheeler. I can’t speak for the president. Let me tell you what Time Warner Cable thinks about Title II and net neutrality generally.

For a long time now we’ve been very vocal about the fact that we support an open Internet. That means no blocking, no discrimination, no paid prioritization, full transparency. And we are comfortable with the concept of having a set of rules that codifies the principles I just described. We don’t think they’re necessary. We think the marketplace actually would work quite well to achieve the ends that seem to be desired, but if there have to be rules we’re comfortable.

The point of difference between us and the president really relates to what is a pretty technical question of the source of the FCC’s authority to impose such rules. We think that the FCC has sufficient authority under Section 706 of the Telecom Act to do what it needs to do. And obviously the president has advocated a reclassification of broadband as a telecommunications service under Title II and advocated forbearance on the vast majority of the Title II regs to get to the end of open Internet rules.

We think that that is a — that would be a mistake. We think that it’s highly likely to cause all sorts of unintended consequences, create uncertainty, disincentivize investment, and probably at the end of the day end up costing customers more for lesser services. So that’s what we think. What will actually go down in Washington, hard to say.

There’s a lot of politics at work obviously. And I’m hopeful that Chairman Wheeler and the commission will come to a sensible answer here, and we’re happy to help in any way that we’re asked.

John Hodulik – UBS Analyst
Maybe turning to broadband, how do you think of the pricing power you have on the broadband side? You and the rest of the cable industry have been – continue to increase speeds and with all the video being watched it obviously creates more value.

But on the other side of the point, you’ve got potential Title II which I think with all the forbearance we’re talking about won’t put a cap on anything anytime soon. But does that change your view on how much pricing power you have in that business?

Rob Marcus – Time Warner Cable Inc. Chairman & CEO
It really doesn’t. We’ve got a wonderful product in broadband. We keep offering faster and faster speeds. Customers continually consume more and I think that’s probably the best proxy we have for the utility that you see in the product.

We offer tiers of service, different speeds, different consumption levels that appeal to all different segments within the marketplace. And I think all of that bodes very well for our ability to continue to drive residential high-speed data revenue, so I feel real good about the prospects for HSD.

While of course — if in fact the FCC goes down the Title II path that does raise the specter of some authority subject to forbearance of rate regulation.

No one, Title II proponents and opponents alike, have suggested that whatever the FCC does it should include any component of rate regulation.

Comcast Corp.

John Hodulik – UBS – Analyst
Now, the other sort of regulatory topic that is on people’s minds is what’s happening? The FCC has released a Title II. First of all, does that potential initiative in Washington change your view of the sort of long-term ROI potential of these or even your existing cable assets?

Michael Angelakis – Comcast Corp. Vice Chairman and CFO
I don’t think so yet. I think, listen, it’s really important, and we say this every opportunity we have and I’m not sure it’s resonated well is we are big believers in net neutrality. We are actually the only ISP in the country under net neutrality rule that we voluntarily agreed to as part of the consent decree for NBC Universal.

When the President gave his speech and Chairman Wheeler laid out their four principles for net neutrality, we actually have publicly stated for a long time, we actually agree with those principles. So we think those principles which is light-touch regulation make total sense and we’re supportive of the rules back in 2010.

Where we think there is a fundamental difference is the enforceability of the regulatory framework that has been talked about under Title II. Title II is a 1934 style regulation and we think it’s inappropriate and probably harmful to take a 1934 style of regulation and apply it in 2014 or 2015 to the Internet.

I would ask the question for those folks, do you really think the Internet would flourish the way it has over the last 20 years; and many, many companies, some presenting here today, would have actually been developed into such terrific businesses if Title II was the regulatory law of the land 20 years ago when the Internet started. I would beg to differ, I don’t think that would happen. So we believe in the four principles the President and the Chairman Wheeler have laid out. We voluntarily have agreed to those under Section 706 and what happened in 2010. We just think the framework is the most – is an inappropriate framework.

John Hodulik – UBS Analyst
Do you think it would change how you run the business or your ability to lessen your price flexibility, are there any sort of day-to-day issues that you think would change as a result of it?

Michael Angelakis – Comcast Corp. Vice Chairman and CFO
I certainly hope not. I think, the devil will be in the detail and it’s too speculative right now to sort of make those kinds of decisions. We’ve heard a lot about forbearance in those kinds of items and we’re still quite hopeful that Section 706 or something like that will come about, we’ll see. But I think there is more innings to play here, there is more innings on the regulatory side, there is more innings on the political side, there’s more innings on the legal side in terms of ultimate litigation and all those kinds of things.

So it’s still quite messy and I don’t think it’s great for our investor group or how people are thinking about investing, I mean, just the nature of your questions, we want to invest in infrastructure, we want to invest in broadband, we want that to be an important part of our legacy in terms of how we invest in it and build these kind of things and Title II unfortunately is just a negative.

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