Death of the Comcast deal isn’t the end of broadband consolidation in California

by Steve Blum • , , , ,

It keeps pulling itself back together.

The end of the Comcast – Time Warner – Charter mega-merger and market swap means the cable television market in California will still be split mostly between the four largest U.S. cable companies, which are those three plus Cox. At least for now.

Conventional wisdom says that Time Warner is still in play, and Charter is likely to be the next company to make a move. Unless Time Warner decides to try to buy Charter first. A transaction that big would have to go through the same approval process in Washington and with the California Public Utilities Commission as the now defunct Comcast deal. That would be another opportunity to try and fix one of California’s biggest broadband problems: the communities Charter has redlined out of the digital age by not upgrading its systems to support Internet service.

If Charter and Time Warner merge, Comcast might still be at the table. The original deal had Comcast and Charter swapping systems so they could gain efficiencies by consolidating markets. Right now, Comcast and Charter are side by side in several California regions, including the central coast, and the logic of rationalising those operations still holds.

Comcast will want to avoid regulatory review of any future acquisitions in California, and it might be able to do that by taking ownership of individual systems, instead of buying the parent company. There was no way to avoid CPUC review of the merger with Time Warner, but Comcast might have dodged state scrutiny of the market swaps with Charter if the deal had been structured slightly differently.

Even though one company won’t control 86% or more of Californian cable homes, the market here is still ripe for consolidation, via a merger of Charter and Time Warner operations in the southland and follow on system swaps with Comcast in the north.