Two nights ago reports emerged that Comcast, the largest cable company in the United States , had a full stock deal in place to acquire Time Warner Cable, the second largest US cable company. The cost? A mere $45.2 billion. There are plenty of reasons this is big news, but only one that really matters. With this acquisition the last two pay for TV giants would form a near monopoly, covering 30% market share with coverage in 19 of the top 20 TV markets. With that market share, Comcast will have insane amount of negotiating power with advertisers and content providers. The SEC will certainly have a look. Regulators just won’t like the deal, it affects too many industries and consumers in a negative way, just like the AT&T and T-Mobile deal that was thrown out in 2011.
But let’s say the deal does go through, I don’t think it matters. The real move of this proposed deal is to combine the broadband businesses, which would strengthen Comcast’s already leading market share in the 83-million-household industry to 37%. It would give the cable industry the overall broadband market lead over telecommunications companies with 58%. I wouldn’t be surprised to see that total market share increase year over year, for the next 10 years. Last year cable providers accounted for 91% of all new broadband customers. And this is why it doesn’t matter. Broadband is over, forget cable TV. The real winners in this deal are Verizon, AT&T and Google. They must be pushing for it to go through.
Verizon, AT&T, and Google have been investing heavily into greater technologies to reach consumers, mainly fiber optics and high-speed WiFi networks. Verizon recently acquired Intel Media- a cloud based TV technology, Edgecast, a content delivery service, and UpLync, a uploading and encoding technology. These all combine into a recipe for Verizon to seriously compete in a wireless TV market. AT&T and Google (and Apple), are probably thinking the exact same thing. As the smartphone and tablet industry continues to scale, and gadgets like Google’s Chrome Cast begin gaining traction, we could be looking at a completely wireless tv and entertainment industry in the next 20 years. Consumers could play and watch content on any device they choose, where ever they want, and whenever they want.
The one big missing piece for companies like Verizon and Google is being able to provide content that consumers actually want, even if its at a more affordable price than a giant like Comcast. Comcast has a better shot at being able to push out more desirable content right now, but successful TV programming being served directly to consumers via the cloud has only even existed for the past two years. The Netflix hit House Of Cards, is just the very first glimpse at what is to come for device agnostic streaming content.
Today Comcast wants to acquire yesterday’s infrastructure in order to control the business of the future. Sound like a good idea to you? Me neither.