Could this be Comcast’s next target?

As Wall Street continues contemplating mom and dad at the FCC and Department of Justice calling off Comcast’s elopement with Time Warner Cable, some analysts believe Comcast will have to spend the money now burning a hole in its pocket on something.

“Given the strength of Comcast’s balance sheet and an insatiable appetite for acquisitions, we do not believe Comcast would be content with its existing portfolio (no different than after they failed in their 2004 attempt to buy Disney),” wrote Richard Greenfield from BTIG Research.

Greenfield has grown increasingly pessimistic about the Comcast-Time Warner Cable deal since realizing regulators were not going to follow the usual procedure of rubber-stamping approval with mild, short-term conditions to appease politicians. As President Barack Obama highlights telecommunications public policy in his second term, the cable industry (and broadband in particular) has come under unprecedented scrutiny and visibility in the press.

This winter, the FCC redefined broadband speed to mean a connection offering at least 25Mbps. That virtually eliminates DSL as a meaningful competitor, and would hand a combined Comcast/Time Warner Cable over 55% of broadband homes in the United States. The FCC’s approval of Net Neutrality and regulating broadband as a public utility led the audience in attendance to give a standing ovation to Chairman Thomas Wheeler and the two Democratic commissioners voting in favor of the policy change. The public sentiment is clearly against industry deregulation and unfettered deal-making, particularly when it involves Comcast, one of the most-loathed corporations in America.

Greenfield

Greenfield notes momentum is on the side of consumer groups fighting for Net Neutrality, oversight, and an end to cable industry consolidation.

Assuming Comcast’s deal with Time Warner Cable fails, what can Comcast spend its money on without running into a regulator buzzsaw?

Comcast could easily continue a mergers and acquisitions strategy if it avoids attempting to dramatically increase its cable footprint. For instance, Comcast could still choose to sell some of its less important cable systems to Charter Communications — already part of the proposed Time Warner Cable transaction — and make up that subscriber loss by acquiring Cablevision, which provides service in the important suburban New York City market. Of course, the Dolan family is notorious for not selling to anyone, and a considerable number of extended family members are employed as executives in the company.

Cable operators have returned to a strategy of hedging their content costs by spending billions to acquire content producers and sports teams in hopes of moderating their price demands. In the 1980s and early 1990s, large cable operators insisted on owning a piece of nearly every cable network shown on their systems. Today, having an ownership stake in the cable networks one negotiates with at contract renewal time is a helpful advantage.

Comcast has several attractive acquisition targets Greenfield believes it can consider:

• Time Warner (Entertainment): Not affiliated with Time Warner Cable, owning Time Warner (Entertainment) would gain Comcast important cable networks like TNT, HBO, and the Warner Bros. studio.
• Netflix: Acquiring one of the best assets cord cutters have might prove difficult with regulators in Washington, but buying the ultimate TV Everywhere experience could deliver a digital platform that puts Comcast’s own online content portal to shame. The deal would also come with the talent that made Netflix an international success. If Comcast were to acquire Netflix, it would combine a superior streaming platform with an enormous content library.
• Acquire online video content sites and producers: Linear live television continues to be challenged by an array of on-demand content and video clips from various websites like Vice — videos that could be further monetized by matching Comcast’s advertising sales team with online media.
• Next generation online video set-top box manufacturers: The traditional cable box is dead to a lot of subscribers who prefer the simplicity (and price) of Roku and other similar alternatives. Current cable boxes are huge, expensive, and simply lack the creative imagination of the competition. If Comcast can’t beat Roku, it could buy it.
• Buy Sprint or T-Mobile: Greenfield believes Comcast lacks a wireless component in its product lineup as consumers increasingly move towards portable devices. Comcast would be financially foolish to build a network from the ground up, so acquiring an existing one makes more sense. AT&T and Verizon Wireless are likely out of reach, but Sprint and T-Mobile are not. Both carriers’ parent companies seem ready to sell, if the price is right. Of the two, Sprint might be willing to sell first. Sprint’s owner — Japan’s Softbank — has discovered the United States is a huge country that can swallow up endless amounts of investment and still leave it saddled with a second-rate network.

Greenfield is only speculating and there are no indications Comcast is seriously considering a next move should the Time Warner Cable deal be killed in Washington. But it does signal Wall Street does expect Comcast to do something.

No approval for the Comcast-Time Warner Cable merger proposal in New York for yet another month as the state Public Service Commission has once again delayed making a final decision until the end of February.

“Pursuant to a request from Department of Public Service staff in the above-referenced matter, Comcast Corporation and Time Warner Cable Inc. agree to action by the Public Service Commission on the Joint Petition at a Commission Session held on or by February 26, 2015, with a final order being issued no later than March 3, 2015,” is the word from Comcast and Time Warner Cable’s law firm.

A conservative group has launched an assault on the Comcast-Time Warner Cable merger, accusing the cable company of cozying up to the Obama Administration and the political left in its news coverage to win corporate favors.

“Comcast needs Obama administration approval to merge with Time Warner Cable, giving it access to two-thirds of American’s homes,” Conservative War Chest spokesman Mike Flynn said in a statement. “The last time Comcast needed a government favor we got Al Sharpton five nights a week. What will we get in exchange for a deal worth billions to Brian Roberts and other owners of Comcast?”

The group has bought airtime to run two-minute ads detailing its case that Comcast-owned NBC News has become a partisan supporter of the current administration and if its parent company’s merger deal is successful, it means Comcast’s power and value to the left-wing will grow even greater.

“Of course, Comcast’s proposed merger with Time Warner is an attempt to further not only its commercial hegemony, but its political agenda,” the group writes in a lengthy 68-page letter addressed to NBC affiliated local stations in at least five presidential swing states–Florida, Michigan, Nevada, Ohio, and Pennsylvania. “And to that end it spent $12 million on Washington lobbyists in 2014 alone, not including what Comcast spent in the final three months of the year. Conservatives should embrace this opportunity to show a commercial and political mega-giant that the truth and the support of the American people far outweigh entrenched power and massive amounts of money.”

“We intend to demonstrate to Comcast/NBC/Universal that [conservatives] have not thrived for six decades – we have not come all this way – just to cede our national and, indeed, global victories for the cause of freedom to a group of grasping corporate operatives seeking commercial and political power. So, the focus of the conservative movement needs to be not on the politicized and partisan faces of NBC or the hired slanderers at MSNBC – criticizing them just makes them more important than they are – but on the corporate ‘suits in the suites’ who are the truly culpable parties.”

“Hence, we hope Mr. Roberts [CEO of Comcast] had a pleasant visit with the President of the United States when he stopped by his home. But he and his colleagues should also know that in the form of public messages, like this letter, they will be getting less pleasant coverage from the conservative movement.”

The group isn’t directly attacking the merger deal as a central focus of their campaign. Instead, they are seeking a restoration of “the traditional journalistic standards that have been squandered in recent years by NBC News and its corporate owners.”

“I hope the affiliates have a stiff drink ready when they read the report,” Flynn added. “Reviewing the trite liberal gruel that comes out of Brian Williams and Chuck Todd, for example, is not for
the faint of heart.”

No NBC station has yet acknowledged they have read the lengthy letter and it isn’t known if they will consent to airing the group’s advertisement that directly attacks the integrity of the network to which the station is affiliated.

[flv]http://www.phillipdampier.com/video/CWC_Save NBC News.mp4[/flv]

The Conservative War Chest produced this two-minute ad it intends to run on NBC stations in at least five states condemning what they perceive as a politically motivated left-wing bias at Comcast-owned NBC News. The group fears approval of the Comcast-Time Warner Cable merger will only increase the damage of anti-conservative bias in the NBC newsroom. (2:00)

If regulators believe they can turn Comcast and Time Warner Cable’s mega-merger into a consumer-friendly deal in the public interest, they are ignoring history.

No matter what conditions regulators place on Comcast to approve its merger with Time Warner Cable, they will be toothless, television industry insiders told the New York Post.

Insiders suggest the Federal Communications Commission has been largely impotent enforcing conditions it required in earlier merger deals, including those Comcast promised to fulfill in its earlier merger with NBC Universal.

Among Comcast’s broken promises cited by The Post:

• Comcast failed to live up to its promise to market its low-cost broadband service, Sen. Al Franken (D-Minn.), an outspoken critic of the NBCU deal, told the FCC earlier this year;
• Comcast paid a fine for not marketing A standalone $50 broadband service widely enough;
• The giant cable provider’s hollow commitment to Net Neutrality didn’t stop it from excluding certain XFINITY video content from its data caps;
• They discriminate against non-Comcast owned cable channels, especially those that compete with network Comcast owns or controls. Examples include The Tennis Channel and Bloomberg TV.

Industry insiders claim the larger Comcast gets, the more the company spends on clever lawyering and lobbying to keep itself out of legal hot water with Congress and regulators. That has begun to worry programmers like Discovery Communications, who filed objections to the merger deal.

Discovery officials warned the FCC Comcast’s takeover of Time Warner Cable would deliver an NSA-like treasure trove of viewer data to the nation’s biggest cable company. Comcast already monitors its customers’ viewing habits with tracking software installed inside set-top boxes that monitors what customers are watching at any given time. Comcast has refused to share that data with outsiders, and uses it primarily to pitch potential advertisers.

Comcast’s size already gives the company unprecedented power over cable programming rates during negotiations. Making the company even larger worries Discovery, which expressed concern that:

• Comcast’s use of its bigger muscle to impose prices, terms and conditions that are overly favorable (for instance, preventing programmers from selling over-the-top rights or refusing to give competitors to its own services wide distribution);
• The possibility that the cable giant could impose broader “most favored nation” clauses in agreements;
• That Comcast could exercise control over national and local ad sales markets to the detriment of programers who also compete there.

In a rare moment of honesty in hundreds of filings in support of the Comcast-Time Warner Cable merger from various groups, politicians, and non-profits that have received substantial contributions from Comcast, the president of the Pennsylvania State Mayors Association admits the primary reason his group supports the merger is that Comcast has given them piles of money:

In my opinion, Comcast has been an exceptional corporate sponsor which has given substantial support to my municipality and mayoral association.