Comcast: Keep your enemies close

Keep your friends close and your enemies closer, so the saying goes. Charter and John Malone must be reflecting on that now. Comcast had – reportedly – been in detailed discussions with Charter as to which bits of Time Warner it would buy if the former’s bid for the latter was successful. Then, after a few rumblings they weren’t seeing eye to eye, Comcast drops the bomb; boom! We have an agreed deal to pay $45 billion all in shares and make a combined company of 30 million subscribers.

The maths of the deal means that while Time receives no cash, the effective value achieved is near its $160 a share target, and its stockholders end up with 23 per cent of easily the US’s (and, therefore, the world’s) largest cable company. The dealmakers have agreed to sell off a few million subs to keep them below the 30 per cent market level once set in stone – though defeated in the courts in recent years. They obviously feel ‘it’s the decent thing’ and will help get the mega deal past regulators.

M&A in the land of the free means you are free to create megacorps with massive market power, even if that means the competition is a little less free to operate and the consumer a little less free to choose. But, as Comcast would doubtless argue, all markets have at least one other viable fixed broadband provider as well as plenty of mobile, and there are still DTH providers and OTT.

It is true that given the geographic autonomy of US cable the picture per subscriber, or per town, doesn’t seem to change much. Indeed, the massive scale of the new company might help genuine NGN development as a plethora of new services come to demand more than the 300Mb DOCSIS3 can provide. And that will be good for all, including the major OTT providers who are increasingly keen on being inside the platform tent relieving themselves in the direction of newer arrivals.

A driving force for this deal, and any similar ones, has been to accrete sheer market share power against premium content owners (Comcast has the luxury of playing both sides of the fence here). The combined company will be able to drive better deals with the content owners it must carry and frighteningly tough deals with the content owners who must be carried by them. That will leave those content owners clawing back their profits from rival providers – like IPTV and DTH.

When any provider becomes more (too?) powerful, it narrows the points of access for innovation in terms of content and sometimes even for technology. Biggest probably is better for the big who just got bigger, but not so much for everyone else.

Nick Snow Posted by on Feb 13 2014. Filed under Broadband, Business, Cable, Guest Blog, M&A, Off Message.

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