Merger Could Lead to Tech Transformations

Comcast’s TWC Buy Will Boost X1, DTA Business
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Time Warner Cable systems — not to mention other MVPDs — will be in store for transformative changes that will reach deep into the MSO’s video platform and many of its other services.

In many ways, Comcast will look to replicate at TWC the technology strategies and upgrade plans it has been executing internally for years.

“That playbook has given us real momentum at Comcast Cable,” Brian Roberts, Comcast’s chairman and CEO, said last Thursday (Feb. 13) during a call with reporters, adding later that access to a bigger footprint “gives us room for growth and innovation of new products.”

Following is a snapshot of what Comcast has in mind.

X1 for Everyone

Comcast, according to industry sources, has been concerned that, even at its current size, it is not massive enough to achieve the efficiencies and scale it wants for the ecosystem driving X1, its next-gen video platform that features an agile, personalized user interface.

Comcast is pursuing an X1 licensing initiative to help it achieve this goal, but acquiring TWC gets Comcast there without being forced to swing a bunch of side deals. Additionally, a pending deal with TWC might cause X1 licensing discussions between Cox Communications and Comcast to accelerate, and could possibly attract Bright House Networks, whose tech strategies have historically tracked with TWC’s, to the X1 fold.

Calling the Cavalry

While Comcast moved ahead aggressively with “Project Cavalry,” an all-digital initiative fueled by the deployment of tens of millions of digital transport adapters, TWC was content to sit on the sidelines and rely instead on switched digital video, a different approach that also aims to free up bandwidth.

TWC has since changed its tune, announcing last month a more aggressive analog-reclamation initiative that will first target New York and Los Angeles before spreading to other markets through 2016. With the operational experience it brings to the table, expect Comcast to speed up those plans and offer a revenue bump to the industry’s batch of key DTA suppliers — Arris, Pace, Cisco Systems, Arris, Evolution Digital and Technicolor.

Waxing Wi-Fi

Comcast and Time Warner have been out in front with the deployment of Wi-Fi access points, contributing their fair share toward the 200,000-plus public hotspots rolled out by the members of the “CableWiFi” Wi-Fi roaming alliance (Bright House, Cablevision Systems and Cox are the other members).

But Comcast has been far more aggressive with the deployment and activation of soupedup DOCSIS 3.0 Wi-Fi gateways that are capable of emitting a separately provisioned, quasi-public wireless broadband signal that’s available to other Comcast customers who happen to be roaming within the radius of those signals. TWC has been weighing a similar “Home As A Hotspot” strategy, but has yet to pull the trigger on a big rollout. That will likely change once Comcast is in charge.

Bigger Business?

Together, TWC and Comcast raked in more than $5.6 billion in business services revenue in 2013. The combination of the two MSOs would help Comcast keep this valuable growth engine stoked while also establishing key connects to other major markets, including New York and Los Angeles. While Comcast has historically been hesitant to chase after very large enterprise business customers, leaving that lucrative market to companies such as AT&T and Verizon Communications, this newfound reach could put Comcast in position to reconsider that strategy.

WINNERS & LOSERS

If Comcast succeeds in acquiring Time Warner Cable, that’s a good thing — depending on who you are. A breakdown of who benefits and who bleeds.

WINNERS

Brian Roberts: He bests his one-time mentor, John Malone, and emerges as a savvy, driven deal-maker.

Time Warner Cable: The stock was at $94.37 in May; now it’s $144.81. Enough said.

Arris: After buying Motorola Home last year, it has a big presence on the network and in the home at both MSOs.

Pace: The U.K.-based source of boxes for Comcast’s X1 platform had scant business with TWC, but now stands to land new business when Comcast expands X1 to TWC territories and continues all-digital upgrades.

Reference Design Kit: The future of the Comcast-spawned software for IP-capable video devices seems assured if TWC stays out of the hands of Charter, which has been blazing its own next-generation video path.

LOSERS

John Malone: He loses out on his goal of quickly growing Charter, bested by a fast draw by Brian Roberts.

DirecTV and Dish Network: Comcast gains scale advantages in programming costs over both satellite-TV players. Post-deal consolidation concerns could dampen chances they merge.

FCC: It faces a politically-charged decision process in the midst of heavy lifting on a spectrum incentive auction, Open Internet order rewrite, and the IP transition.

Netflix: With 30 million subscribers, Comcast/TWC has more scale and leverage to justify paying more for streaming rights for its emerging Streampix.

Samsung: TWC’s go-to set-top supplier in recent years, it’s position is jeopardized if Comcast continues to lean more heavily on Arris and Pace.

Cisco: It’s been a top shop for TWC going back to Scientific-Atlanta. Comcast has been a Motorola/Arris shop. Do the math.

Verizon FiOS TV: With X1 coming to TWC markets, the telco will need to accelerate its next-gen IP video platform and integration of Intel Media’s “OnCue.”

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