Behind Cable's Urge to Merge
Remember when Charter Communications Inc. was bankrupt, Tom Rutledge was COO at Cablevision Systems Corp. and John Malone was more or less out of the U.S. cable business?
Those days are so over.
Since John Malone's Liberty Global Inc. took a 27 percent stake in Charter this year, the company has sparked rumors of a buying spree and set off potential merger talks among the largest U.S. cable operators.
First there was news that Malone wanted to acquire Time Warner Cable Inc..
Then Reuters reported Time Warner Cable's interest in possibly merging with Cablevision or Cox Communications Inc..
Nobody is making public declarations, but the scent of cable consolidation is in the air.
There are several reasons behind the latest merger frenzy. First, cable operators are looking for leverage in content licensing negotiations with programmers. Programming costs are on the rise and MSOs need the buying power that comes with a large audience footprint.
Second, cable operators want to extend their broadband reach further, so they can exert even greater control over the pipes that deliver data, video, voice and everything else over IP.
Thirdly, while cable companies only compete for customers on a very limited basis, they do go up against each other for control of the industry's technology agenda. Consider Comcast Corp.'s role in driving development of the converged cable access platform (CCAP) and the reference design kit (RDK) for IP set-tops. With customers in 43 states and the District of Columbia, Comcast carries significant weight with the vendor community and cable standards organizations. (See Cable Show 2013 Hot Tech Topics.)
Malone's Liberty Global closed its purchase of Virgin Media last month, making Liberty the largest cable operator in the world, surpassing Comcast. (See Liberty Global Gets Go Ahead for Virgin Takeover.)
But it looks like the ground has not done shifting yet. Who's up next?
— Mari Silbey, Special to Light Reading Cable