Mixed Signals

Net Neutrality Decisions, Acronyms, and The Comcast-TWC Merger

Handicapping Future Acquisitions Based on Word Abbreviations? 2/27/2015 9:45 PM

 

At the time and place of the 2015 Consumer Electronics Show (CES) in Las Vegas (LVC), the Washington, DC (WDC)-based Satellite Broadcasting Communications Association (SBCA), conducted an off-site “Leadership Luncheon” (SBCALL). This SBCALL was organized by The Carmel Group (TCG), in conjunction with SBCA (of course), EchoStar (DISH and SATS), and DirecTV (DTV), primarily. The author acted as moderator and a panelist.

 

Reading the Pulse

The question of the pending Comcast (CMCSA)-Time Warner Cable (TWC) merger arose toward the end of the hour-long session, to which each of the five on the stage answered.

 

The gist of former Federal Communications Commission (FCC) Commissioner Robert McDowell’s comments was that the deal gets done before October 2015, and that it is an opportunity for FCC Commissioner Wheeler to exact substantive conditions, and that it goes through despite opposition.

 

Roku General Manager (GM) and Executive Vice President (EVP), Steve Shannon, opined that because Roku has a good relationship with both TWC and CMCSA, that there were a lot of reasons to support the deal (especially with the right rules attached to an approval), but that nonetheless there were some reasons “to be fearful of it.”

 

Yours truly felt at the time that the merger would be approved by the FCC, but only with “significant restrictions.”

 

And perhaps most pertinent to this article, BTIG’s Rich Greenfield noted, “This deal is hated in WDC, but it is not easy to block.” He also wondered where and when the FCC (and others) would draw the line on what and why the deal becomes.

 

FCC Net Neutrality Decision Yesterday (And Other Soothsayers)

Thus, swinging into yesterday’s 3-2 FCC decision to enhance government regulation of the Internet, likening it to a telecom utility, one wonders the impact of that FCC decision on the pending CMCSA-TWC merger?

 

Perhaps a good bell weather was a drop yesterday in the New York Stock Exchange (NYSE) stock listing of CMSA, which was more than a percent.

 

And if Karnak The Magnificent were to look into the envelope supplied by the LVC bookies, he would find there has been an increase in the odds against the merger passing.

 

Moreover, one can’t help but wonder after what it passed yesterday, if the FCC won’t be a bit more emboldened to add additional restrictions to an “approval with restrictions,” and then whether CMCSA would be willing to go ahead with the merger, even with those restrictions.

 

Plus, possibly on the other side of this burning issue is an approval within the last week or so from the telecom governing body in the world’s 8th or 9th largest economy, i.e., the State of California, with was a “go,” for the CMCSA-TWC merger, but also with significant restrictions.

 

Comcast-TWC Merger

What is fascinating is what impact both the probably WDC-related sentiment, and the FCC Monday decision-making will have on the momentum for vs. against the pending CMSA-TWC 12-months old merger announcement.

 

Frankly, it is difficult to measure, but some common sense, lots of conversations with folks in the industry, and a lot of reading about the proposed merger suggests the tides either have or are still turning against it.

 

And the longer it continues to dwell, the more it seems people are truly fearful that not only should there be, as FCC Chairman Wheeler stated it yesterday “ a referee on the field,” but that the Internet should not become another ecosystem of greed and consolidation, not unlike what has been created in today’s pay TV ecosystem. Indeed, the fears that CMCSA would buy outright a Netflix (NASDAQ) and/or start creating similar bundles, is growing. And when you put one company in charge of 40% or more of one communication pipe, it certainly takes away lot of the choice and individuality that Over-the-Top (OTT)/streaming/broadband (BB) providers are so coveting innovating with – and consumers are so loving -- today (and tomorrow, for sure).

 

So, very interesting: who would have thought there’d be such a curious tie between bunches of acronyms and the CMCSA-TWC merger? Yet, in just this past several paragraphs, there were 46 abbreviations formed from the initial letter of each key word. Are the numbers of acronyms surrounding a proposed merger set to become the new barometer for the “yeah” or “nea” of future mergers? (Probably not, yet stranger things have worked in the past.)

 

Jimmy Schaeffler is a telecom/media author and chairman and CSO of the Carmel-by-the-Sea-based streaming/broadband, broadcast, and pay TV/video consultancy, The Carmel Group (TCG) (www.carmelgroup.com).