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What a difference a deal makes.
When Comcast first announced its plan to acquire Time Warner Cable in February, its competitor for those subscribers — Charter Communications — bashed the deal in regulatory filings and the press as creating too great a concentration and said it would be such a long and tangled regulatory process that Time Warner Cable’s systems and subscribers would be hurt.
Yet Wednesday, during an NCTA panel called “Great Expectations: A Macro View of Consumers, Content and Communications,” Charter CEO Thomas Rutledge called it “a great deal for the industry.”
The change in tune is because, Monday, Charter made a deal to acquire nearly four million subscribers from Comcast that involved cash and an asset swap. The move propels Charter from fourth- to second-largest in size among all cable companies, even before the Time Warner Cable deal is concluded, making the Comcast acquisition more palatable to Charter.
“It’s a smaller deal from Comcast’s perspective,” said Rutledge. “I think from an organizational industry perspective, it’s a much better outcome because both companies [Comcast and Charter] will be able to compete.”
The merger also is good for Time Warner Cable employees, insisted Rutledge, noting he spent 23 years of his career at that company (even though many employees are expected to lose their jobs as the companies merge operations). “Both are committed to serve communities and customers in a dynamically positive way,” Rutledge said, adding he was confident that all of the TWC employees will find their place in what will be a more “efficient industry that will be successful.”
That comment brought a smile to the face of Comcast CEO Brian Roberts, who turned stern when asked by moderator Jon Fortt of CNBC about charges from Sen. Al Franken that the Comcast-TWC deal will have a negative impact on consumers on the individual level. Roberts responded by downplaying the size and importance of the deal. “When you net all this out,” he said, “Comcast is buying seven million customers,” noting that, compared to the size and revenue of Facebook or Google or Netflix, a combined Comcast-TWC isn’t that big, and that Comcast is just trying to “give the industry a better footprint nationally that will allow us to compete better.”
Roberts’ comment aligns with Comcast’s strategy to get the TWC acquisition approved. Comcast wants to position itself as a competitor to Google and other tech giants rather than just a player in the cable business, where it already is the largest and, after the TWC deal, dominant provider.
Roberts said this deal will “give consumers better service, better features, and there is no question there is real benefit to consumers in making scale, innovation and service better with these larger clusters.” “Clusters” is a cable industry term that means the big companies try to own and control as many subscribing homes in each market as possible by buying out all serious competitors, so they have the scale to maximize the costs of their operations and sales efforts — and boost profits.
The panelists indicated that a lot of that money will have to be spent on research, development and implementing the latest technology, which will cost many billions over the coming years. “Our networks…see our future in speed and capacities,” said Roberts, adding that is what the cable industry has to do “to be a leader.” Bob Stanzione, CEO of Arris, a major cable technology provider, said his company will invest more than half a billion dollars in research and development, mainly to increase the speed and capacity of broadband significantly. Showtime CEO Matt Blank said that’s good news for his company, as it makes it easier and faster for consumers to receive his network.
But ultimately, the consumer should not even be aware of the change. “Consumers should not know about any of our problems,” said Blank. “They should just know that they can get Showtime on any device at any time of day that they want it. And then there will be a lot more Showtime subscribers.”
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