Light Reading

Comcast's TWC Coup: 3 Things to Know

Mari Silbey
2/13/2014
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Comcast has never been short on ambition. So, for a moment, don't consider whether there will be regulatory pushback on its deal to buy Time Warner Cable. Consider only what the new Comcast empire will look like and how its rule over the US TV and Internet landscape will affect the masses. (See Comcast Strikes $45B Deal for TWC.)

No. 1. Video subscriber numbers
Comcast Corp. (Nasdaq: CMCSA, CMCSK) has said it will divest itself of 3 million subscribers of the combined company once it closes on the Time Warner Cable Inc. (NYSE: TWC) acquisition. With a net gain of 8 million subscribers, that would bring Comcast's total subscriber count to an estimated 30 million video customers, or approximately 10 million more customers than its closest competitor.

DirecTV Group Inc. (NYSE: DTV) rings in with just over 20 million US subscribers, while satellite TV rival Dish Network LLC (Nasdaq: DISH) has 14 million customers. Telecom competitors AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) have 5.5 million and 5.3 million TV subscribers, respectively. The closest cable company, Cox Communications Inc. , weighs in with about 4.5 million video subscribers.

The Proposed Comcast-TWC Goliath
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.

No. 2. A programming power shift
The combination of Comcast and Time Warner brings more ammo into the combined cable company's court for content licensing negotiations. While content is still king, Comcast will enjoy huge leverage with programmers through its more massive audience reach. The threat of a TV programmer blackout becomes much less potent when you consider that broadcasters would have to withhold their content from nearly one-third of all US consumers. Comcast's sheer size will keep retransmission fees in check.

No. 3. A clear technology agenda
The cable industry is undergoing a major technological transformation. From the evolution of its underlying infrastructure to the shift in the devices that consumers use to connect to cable content, the wave of change is already having an extraordinary impact on the cable ecosystem.

Comcast has been driving the technology agenda in recent years with initiatives like the Reference Design Kit (RDK) and the Converged Cable Access Platform (CCAP). But the merger with Time Warner Cable will give it further influence in determining how technology changes get done. The transition to IP video delivery? Comcast will be in the driver's seat.

— Mari Silbey, special to Light Reading

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gconnery
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gconnery,
User Rank: Light Sabre
2/14/2014 | 7:49:55 PM
Re: Tarnishing content's crown
So many angles to this...

I assume this will get approved, simply because Comcast and Time Warner don't really compete in very many locations.  And presumably they're planning to sell those off?  What are the 3 million?


Yet at the same time it will increase Comcast's power over content providers.  As others have speculated, if you're not willing to do a deal with Comcast agreeing not to provide your content to OTT companies how are people going to see you?

This *could* help to hold prices down.  Certainly Comcast should be in a better position to negotiate carriage fees with content companies.  Of course keeping Comcast's fees in check doesn't mean they'll be lowering our bills, but it might help to reduce the rate at which cable TV bills have been going up.


*Maybe* the FCC will negotiate some terms like network neutrality or something into the agreement.  Won't last forever of course, but better than nothing.

Does this mean the end of SDV?  TW deploys it all over the place, Comcast mostly does not.  Customers with TiVo or some other CableCARD solution hate the thing.  Will TW switch their technology (in the next decade say) to be more like Comcast?

Certainly this increases Comcast/TW's power in negotiations with Motorola/Cisco/Pace etc for STBs and back end equipment now that they are larger.  Expect cheaper STBs that we rent for the same price and aren't any better than what we have now.
KBode
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KBode,
User Rank: Light Sabre
2/14/2014 | 8:50:48 AM
Re: Tarnishing content's crown
I think the one-two punch of a company with the kind of massive scale necessary to to strike uncompetitive licensing deals keeping content out of the hands of streaming competitors -- combined with a company that controls the conduit to the home and can increasingly impose usage caps designed to hinder streaming competitors -- is a pretty bad scenario.

I do think it will get approved by regulators however, with a few highly theatrical conditions applied to give the pretense of control.
kq4ym
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kq4ym,
User Rank: Light Sabre
2/13/2014 | 9:34:18 PM
Re: Tarnishing content's crown
Putting Comcast in the "driver's seat" may prove to be an unwise decision for consumers as well as for the industry as a whole. Letting one large concern take over such a large market often gives the greed factor a great place to breed. Technology may or may not speed along once a monopolistic scenario happens.
DHagar
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DHagar,
User Rank: Moderator
2/13/2014 | 9:32:19 PM
Comcast's TWC Coup: 3 Things to Know
@Carol:  I am with you, this has "monopoly" written all over it.  As they further define and shape the market, there will be fewer competitors.  Being the only game in town is no good for anyone.

DHagar
Carol Wilson
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Carol Wilson,
User Rank: Blogger
2/13/2014 | 9:20:46 PM
Re: Tarnishing content's crown
Yes -- absolutely, a Freudian slip. Good catch, Dan. 
DOShea
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DOShea,
User Rank: Blogger
2/13/2014 | 8:59:40 PM
Re: Tarnishing content's crown
I think you had a Freudian slip there - "aggravating" instead of "aggregating."
Carol Wilson
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Carol Wilson,
User Rank: Blogger
2/13/2014 | 6:15:57 PM
Re: Tarnishing content's crown
The problem is that Comcast can argue -- and document - cable's dimishing share of the video business, It was down to 60% in 2012, due to share lost to satellite and telco providers. 

It may easier for regulators to question the wisdom of aggrevating so much broadband power in a company that also competes on the content side and has great incentive to make life difficult for OTT providers. 
FakeMitchWagner
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FakeMitchWagner,
User Rank: Light Sabre
2/13/2014 | 6:12:46 PM
Re: Tarnishing content's crown
This is a bad idea for the cable and Internet broadband market. It reduces choice and competition. 
KBode
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KBode,
User Rank: Light Sabre
2/13/2014 | 5:22:13 PM
Re: Tarnishing content's crown
Yes I think that's probably about right. :)
Carol Wilson
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Carol Wilson,
User Rank: Blogger
2/13/2014 | 5:20:49 PM
Re: Tarnishing content's crown
I think the New Yorker pretty much summed up how this will work for consumers:

http://www.newyorker.com/online/blogs/borowitzreport/2014/02/a-letter-from-comcast-and-time-warner-cable.html
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