Comcast May Be Lone MSO Wireless Bidder

Despite the allure of the FCC's big broadcast spectrum auction next month, only one large US cable operator, Comcast, may end up participating in it.

That's because four of the five biggest US MSOs -- Time Warner Cable Inc. (NYSE: TWC), Charter Communications Inc. , Cablevision Systems Corp. (NYSE: CVC) and Bright House Networks -- are wrapped up in pending merger activity that will likely stretch past the March 29 auction kickoff. With their executive teams tightly focused on gaining regulatory approval of those deals and preparing for technical and operational integration of their cable systems, they will all likely pass on the chance to buy the highly prized 600MHz spectrum, albeit reluctantly.

That leaves just Cox Communications Inc. , the nation's third-largest MSO, as a possible bidder besides Comcast. A Cox spokesman said the company doesn't comment on spectrum auctions.

Both TWC Chairman & CEO Rob Marcus and Charter President & CEO Tom Rutledge expressed some regrets about their inability to bid on the excess broadcast spectrum in their companies' recent earnings calls with analysts.

With federal and state regulatory approval of his company's deals to buy Time Warner Cable and Bright House still very much up in the air, Rutledge said Charter will almost certainly not be a bidder in the upcoming auction despite its strong interest in expanding its mobile presence. While very tempted to follow the lead of Comcast Corp. (Nasdaq: CMCSA, CMCSK) and buy more spectrum, he said the timing probably won't work because the MSO won't yet know what its eventual service footprint will look like.

"We're not exactly in the same place as Comcast," he said. "It's difficult for us to participate in the auction without regulatory clarity." (See Charter Plots Cloud Video, DOCSIS 3.1 Rollouts.)

Similarly, when asked by analysts about the spectrum auction, Time Warner Cable's Marcus said "we obviously won't be participating" because of its pending takeover by Charter. Instead, he said TWC will focus on extending its WiFi buildout. "At this point, that's the extent of our wireless game plan," he said.

The situation is not much different for Bright House, which is also seeking to close its proposed purchase by Charter. As for Cablevision, it's seeking to gain state and federal regulatory approval of its proposed takeover by French media giant Altice , a deal that has run into strong opposition from New York City officials.

That all leaves Comcast, and possibly Cox, as the only big MSOs in position to participate in the upcoming broadcast auction, which is expected to reap as much as $60 billion to $80 billion for the US Treasury as wireless players seek more blocks for 4G and potential 5G service rollouts. While somewhat coy about their ultimate intentions, Comcast officials made it clear that they're interested in playing an active role during their latest earnings call and will file to participate in the auction.

"We are going to evaluate, consider and may purchase, but only if we consider the price is right," said Comcast CFO Michael Cavanagh. Offering up a rowing analogy, Cavanagh and Comcast Chairman & CEO Brian Roberts likened it to "taking a paddle" in the auction and seeing if there are opportunities. Comcast, which is widely expected to pursue a WiFi-first mobile strategy, has already accumulated more than 13.3 million WiFi hotspots throughout the US and has said it intends to execute a 2011 pact to resell mobile service from Verizon Wireless .

Big cable's posture in the upcoming spectrum auction stands in stark contrast to the role that the major MSOs played in the AWS spectrum auction a decade ago. Comcast, TWC, Cox and Bright House all participated heavily in that auction, before eventually selling the spectrum to Verizon Wireless in return for the right to resell its mobile service.

— Alan Breznick, Cable/Video Practice Leader, Light Reading