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Should regulators bless the coupling of Comcast and Time Warner Cable, some TWC customers will not be invited to the wedding.
In an effort to appease Washington, Comcast is voluntarily abiding by a 30% market share cap the company itself successfully sued to overturn in federal court. That means Comcast plans to voluntarily shed the three million Time Warner Cable customers that would put the company over its self-imposed limit.
Comcast is so confident its merger will win approval, the company is already contemplating what to do with the orphaned customers. Bloomberg News reports Comcast is considering launching a new publicly traded independent cable company to manage the ex-Time Warner customers. It would automatically be the fourth largest cable company in the country, behind the super-sized Comcast, Cox Communications, and Charter Cable. Comcast would use the new entity to claim it was creating a new “cable competitor” in the industry, despite the fact it would almost certainly never compete in markets where other cable companies already offer service.
Other cable companies are already expressing interest in picking up the stranded TWC customers. Among the suitors:
- Charter Communications, which lost its original bid to take over Time Warner Cable;
- Bright House Networks, which now serves markets in the southern U.S.;
- Suddenlink Communications, which primarily serves rural communities and small cities ignored by larger providers.
Comcast hasn’t announced what cities will not be included in the Comcast-TWC merger, and does not plan to decide until at least late spring. Financial strategists are recommending Comcast “spinout” the subscribers to a new entity that would be loaded up with debt to win significant tax savings from the transaction. The new cable company would likely be worth at least $17 billion.
[flv]http://www.phillipdampier.com/video/Bloomberg Comcast Might Spin Off TWC Subs 2-28-14.flv[/flv]
Bloomberg News reports Comcast would be in the enviable position of creating its own “competitor” by spinning off certain Time Warner Cable customers into a new company Comcast would launch. (2:45)
When Adelphi went down the tubes a few years ago Comcast picked up our local cable system. At the time Adelphia was beginning to upgrade our area to digital but Comcast canceled the project once they took control. Since then there has not been any improvements in service. No HD, mostly noisy analog channels and no internet. They raised the price at least once a year to the point where most of their customers moved to Satellite TV. I think Time Warner customers in smaller markets will see a similar situation once Comcast takes over. What they have now is… Read more »
Phillip I don’t understand your opposition to this move. Would you prefer that Comcast keep these customers, so the underlying merged company would be even bigger? Why would you support that?
I can’t speak for Phillip, but perhaps there are other alternatives than the two you proposed: 1 – Comcast keeps all the customers and the merged company is even more huge. 2 – Comcast spins off a new company (allegedly a “competitor” but that would be BS) that takes all the customers, and it automatically becomes the fourth largest cable company in the country. Would it be unreasonable to suggest that maybe a different company could take those subscribers, like a company that would actually attempt to compete in the market instead of a spin-off faux-competitor? I would say it… Read more »
I didn’t propose two alternatives. My two options were either Comcast keeps the customers or not. “Or not” means they don’t keep them. Nowhere did I specify what Comcast would do with them, that was your own inference. If Comcast were to spin them off to an independent third party company, then if the company is truly independent, they would be free to negotiate a merger with an existing company like Charter, etc. So your proposal and my “or not” proposal are just variations on the same theme. But it seems to me Phillip is opposed to Comcast ditching the… Read more »
I obviously oppose the merger. If Comcast kept the customers, it would be bad for them. If they were sold to Charter, it would also be bad for them. I think if you asked most people, they’d prefer Time Warner Cable soldiered on as an independent entity if the alternatives were Comcast or Charter.
It’s too bad a company like Google didn’t bid. They could go a long way owning an existing cable system and gradually build fiber out from what Time Warner Cable already has for its backbone.
Perhaps I misintrepetted your comment. You asked why Phillip would be opposed to “this move” but did not specify what “this move” was so I presumed you were referring to the blog post above, where he says what “this move” is: “Comcast is so confident its merger will win approval, the company is already contemplating what to do with the orphaned customers. Bloomberg News reports Comcast is considering launching a new publicly traded independent cable company to manage the ex-Time Warner customers. It would automatically be the fourth largest cable company in the country, behind the super-sized Comcast, Cox Communications,… Read more »
Ok I can see how my comments could be interpreted that way.
I don’t see how capping their market share works either. So you cap them at 30% of the market, does Comcast intend to never gain any additional customers or market share from competitors in the future? Are they not going to add hundreds of thousands more customers each year and keep creeping up a few percent in every market till they hit 35%, 40%, etc eventually. It’s only going to get easier for them the larger they are, look at how AT&T and Verizon have dominated the cellular market once they were able to leverage their size, captive customer base,… Read more »
If the market in total never grew, your concern might be valid. If the market overall grows, then Comcast could add customers, as long as their share does not increase. But you make a good point. If cord-cutters outnumber new customers, then the market will shrink and how Comcast will be able to hold at no more than 30% of the market might become an issue. I think it’s a moot point anyway, because the total size of the market and Comcast’s percentage of it is just an estimate. Comcast and all the other cablecos might know exactly how many… Read more »