Liberty Global A Feisty Bandwidth Liberator

Mike Fries, the chief executive of Liberty Global, the world's largest cable operator, spoke in an exclusive interview with Handelsblatt about the impact of Brexit, E.U. regulation, content providers like Netflix and Google, and the lessons learned in Germany.
Mike Fries wants an even bigger chunk of the European market for bandwidth services.

Mike Fries, 53, has been chief executive of Liberty Global since 2005. He was previously head of cable operator UnitedGlobalCom, which merged with Liberty Media International the same year.

Liberty Global operates in 14 countries, including Germany, the Netherlands and the United Kingdom. It has 27 million customers and 37,000 employees, and posted sales of $18.3 billion in 2015.

Ahead of the British referendum, Mr. Fries had made it clear he wanted Britain to stay in the European Union. But when Handelsblatt recently caught up with him at the Cable Congress in Warsaw, he said the Brexit vote, which went the other way, would not derail his industry.

 

Handelsblatt: Liberty Global spent about 500,000 pounds (€586,000, $648,000) to support the campaign against Great Britain’s withdrawal from the European Union. But in the end, the British voted for the “Brexit.”  What does this mean for your company?

Mike Fries: We respect the decision. We would have liked it to be different, but we will adapt to circumstances. And I believe that we will be successful. Our business is growing. There are no immediate changes. In fact, it’s still “business as usual” for us. Of course, we will be paying close attention to what happens in the next few years. It will take some time before the full meaning and impact of this decision becomes clear.

There will always be national borders. We still buy different media content in each country, partly because of the different national languages.

If it doesn’t affect your business, why did you invest so much money in the campaign?

We don’t invest for the short term, but plan decades ahead. And in the long term, we believe that it is better for Great Britain to remain part of the E.U. It has no impact on our business today.

And what does it mean in the long term?

There are still too many unknowns. There are scenarios in which everything works out fine. Our business is very local. We look at it on a street-by-street and city-by-city basis. We will certainly continue to see demand for high internet bandwidths. Not much will change for consumers.

And the digital single market, the rules of which the European Union is in the process of developing?

There are various aspects to consider. First, there is the fact that we already have standards and uniform regulation. This will not change in the future if Great Britain leaves the European Union. The technology, media content like films and series as well as customer behavior will remain unchanged.

But doesn’t a digital single market with Great Britain make it easier to sell products and services?

There will always be national borders. We still buy different media content in each country, partly because of the different national languages. And people watch different things, too. A uniform TV market will never exist, because customers’ tastes and desires vary. We must always be sensitive to conditions in local markets.

The European Union is generally highly regulated but you still wanted Britain to remain in the bloc. Why?

The advantage of E.U. regulations is that they provide a level playing field, so the same rules for everyone. If we have to draw up rules in each individual country, it becomes more difficult to develop a strategy and products, or to build relationships with content providers or suppliers. This is why we supported the “Remain” campaign. A single uniform market provides considerable benefits. Of course, we have already established identical structures in Great Britain. But on the fact of it, I would say that the E.U. has created a valuable market for consumers and companies. We believe in that.

So you would even say that regulation is a good thing?

We ultimately benefit from regulation. We are the disruptors in the telecommunications market. Who should regulate us? Governments, which still own large segments of telecommunications companies? I’m not so sure about that. If the European Union hadn’t helped us grow and be innovative, national regulators probably wouldn’t have done it.

 

Liberty Global benefits from all sorts of content being transmitted over its network.

 

What role does your business in Germany play?

It’s a success story. We are learning a lot from it.

Such as?

This is a highly competitive market. We are learning how we can place products. Our head of German operations, Lutz Schüler, who is also a member of the Liberty Global board of directors, often gives us suggestions on how we can tailor our services more heavily toward the customer. We are also building a stronger infrastructure and bundling products with partners like Maxdome by Pro Sieben Sat1. We have also gained some experience when it comes to pricing.

What do you mean?

We were somewhat overambitious for a while, putting a lot of bandwidth into a package product and raising the price for that by 20 percent. Our sales figures dropped after that. Now we have lowered the price a bit and sales are up again. This has also taught us a lesson for other countries.

Do you learn anything from the data you generate?

In some countries, we are already using data that show what customers are watching where. This helps TV providers target advertising more effectively. But the point is not to observe what the individual customer is watching, but rather what is relevant in the neighborhood, for example. This is already happening, but not in Germany. Here we have media policy rules that stand in the way of differentiated broadcasting of advertising by television stations. But even in other countries, we obtain the consent of users first.

How much more potential does data hold?

There is still a lot more potential in data, but we take a cautious approach. The goal is to offer customers a better product. We don’t sell data to other companies. In that respect, we will never be like Google, Yahoo or Facebook, which monetize everything customers do.

But you do provide data for advertising purposes.

We use the data if we have the necessary consent, but to do that we don’t have to release the data to anyone else. In the end, this also makes sense for everyone involved. Customers get advertising that is actually relevant to them. Both sides benefit.

What do you think about content providers like Google and streaming services?

We benefit from each other. Especially in a market like Germany, where hardly anyone sees their products and services as substitutes. They don’t cancel their cable or satellite TV service because of their Netflix or Maxdome subscriptions. These are additional products, and we want to offer them to our customers when we can. Besides, customers need bandwidth for that. That’s good for us.

 

Liberty Global in Germany Unitymedia-01

 

Some companies, like Deutsche Telekom, have demanded that these providers pay for transmitting data.

A company like Deutsche Telekom may want this because it doesn’t have a good network. We have the bandwidths and don’t see a problem there. I think the days when the heads of Telekom and Telefónica were demanding additional money are gone. Or at least they should be. We all monetize cooperation. It just upsets us when someone lies.

Who is lying?

Netflix and other providers have complained that their services are running more slowly with us and others. They have created a ranking of internet providers, including the ones in Germany, based on how well their films can be viewed. But when there are problems, it’s often because they aren’t transmitting the data to us correctly. It’s not our mistake. The problem lies with the infrastructure they are using. We have complained and will continue to loudly complain about such cases.

Netflix generates competition between internet providers?

Yes. Netflix wants to force providers to sign a transmission deal with them or to penalize them if they don’t do it. Of course, this irritates us, especially when they make false accusations.

What about agreements on the so-called zero rating that does not charge end customers for data used by specific applications or services through their network in data plans. Have you seen these?

Not many, but there will be more of them. And they’re not a bad thing. Zero rating is good for consumers, although some internet providers may not want to pay for such deals. It is important that all competitors have the ability to sign such agreements if they choose. And if this enables us to offer customers something that is better, faster and cheaper, why not?

Some people claim that this violates net neutrality.

It’s competition. If we sign a contract with a company and another company doesn’t want to pay for that, it can make a deal with another provider. It should be about getting the best deal for the customer.

 

Ina Karabasz covers telecommunications, IT and security issues. To contact the author: [email protected]