Old-School Telecom Back in Play

Nice, steady rally action is defining the moves today, and the market is trying to put its best rally face forward. I think it still seems strained, but they don't put asterisks next to gains to denote whether they came through strain.

The century-old telecom firms are leading tech today. Yes, Ma Bell's babies still survive, and they continue to leverage their lobbying efforts to stay relevant, even as technology continues to pass them by. Maybe they can get some new regulations to shift more money into their pockets. Or maybe the investments in centrally controlled and broadcasted Internet-protocol TV networks will pay off handsomely.

I expect Verizon's (VZ - commentary - Cramer's Take) pure fiber strategy, which hooks up individual homes in its regions with fiber-optic cabling, will pay off.

As for the broadcast component of Verizon's strategy, into which it's plowing billions as part of its otherwise smart fiber strategy, surely readers know what I think of such business models that depend on bundling 1,000 times more content than end users will ever watch on hopes that consumers won't take control of their own destiny.

Verizon's fiber strategy might pay off, but it's only because consumers will have insatiable demand for broadband access. (When I say "broadband" and I'm referring to a time line 10 years out, I'm talking about speeds that are thousands of times faster than we now consider broadband.) Fiber will deliver that, even if nobody will care what's being broadcast by the programming geniuses at Verizon's corporate headquarters, who agreed with the FCC and countless other entities that think they know what's best for end users.

Regardless, those old-school telecom-service providers are indeed leading tech today. The semiconductors are countering that strength with weakness. And I continue to think that those weakening "tells" trump the rallying "tells."

At the time of publication, the firm in which Willard is a partner had no positions in any of the stocks mentioned in this column, although positions can change at any time and without notice.

ALL CODY WILLARD BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Cody Willard is the manager of a hedge fund and a contributor to the Financial Times and VON Magazine. He is also a regular guest on CNBC's Kudlow & Company and an adjunct professor at Seton Hall.

He earned a bachelor's degree in economics at the University of New Mexico. Willard appreciates your feedback -- click here to send him an email.