Despite the gathering regulatory winds around the broadband business and the Comcast-Time Warner Cable deal, Arris CFO David Potts is still full of optimism about the prospects for both the market and the MSO mega-merger.
In a sit-down interview with financial analyst Douglas Clark at the Goldman Sachs Technology & Internet Conference earlier this week, Potts shrugged off the growing concerns on Wall Street that US regulators may nix Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s proposed acquisition of Time Warner Cable Inc. (NYSE: TWC). Asked about the merger's prospects, Potts was quick to respond that, "Once the deals are done, I think you have to believe that they're going to go off, [Comcast and Time Warner Cable are] going to make their networks common, and they're going to have a spend cycle after that which we'll enjoy."
Analysts' confidence about Comcast's proposed buyout of TWC has dropped markedly in recent weeks as first, the companies extended the merger review deadline into August, and second, an Federal Communications Commission (FCC) adopted a broadband ruling that could redraw the landscape of US Internet competition. Now that the threshold for defining broadband has been raised to 25 Mbit/s downstream and 3 Mbit/s upstream (25/3), there are fewer regions in the country where multiple service providers can be said to offer broadband-level Internet speed tiers. In turn, such decreased competition means there's potentially a greater threat of ISP monopolies, prompting the possible need for government intervention in the broadband market. (See FCC Sets 25/3 as New Broadband Bar.)
However, while some industry analysts and pundits have been down on the Comcast/TWC deal, others think approval is still just a matter of time. In part, that optimism stems from the fact that the FCC is racing toward adopting a strong net neutrality proposal that would impose much stricter Title II regulation over Internet services. (See Charter CEO Resigned to Title II .)
In a Bloomberg report, Hudson Square Research Analyst Daniel Ernst expressed that new optimistic view. "The irony is that the strong regulations should improve their chances of getting the deal done," Ernst said. "Once you have a strong set of rules in place, there is no legal reason to oppose it.”
Speaking of net neutrality, Potts said at the Goldman Sachs & Co. conference that he's not that concerned about the FCC's planned regulatory shift to Title II either. "I'm not sure if everybody's really that panicked about it," he said, indicating that he believes consumers will ultimately decide what works best for the nation's broadband networks.
The Arris Group Inc. (Nasdaq: ARRS) CFO also reiterated that he still believes there's an opportunity for the company in Charter Communications Inc. 's Worldbox initiative, which will use advanced new cable set-tops with downloadable content security technology. Even though Charter has already announced two non-Arris vendors for the cable box rollout -- Cisco Systems Inc. (Nasdaq: CSCO) and Humax Co. Ltd. -- Potts noted that Arris has been working on the Worldbox platform and that virtually all cable companies try to diversify their set-top supply chain with multiple vendors. (See Charter Thinks Outside the 'Worldbox'.)
— Mari Silbey, special to Light Reading