Comcast and Time Warner Cable earlier this month pushed back the date they expected the proposed $45.2 billion merger of the two companies to be approved – it’s been a year since the deal was put together. Now, BTIG analyst Rich Greenfield is predicting the merger will be DOA.
The reason? The size of Comcast’s and TWC combined broadband market share.
While it was a potential issue when 4 Mbps was the baseline for broadband (Comcast/TWC would have had 35.5% of the market), it’s become a probably insurmountable obstacle now that the FCC has defined broadband as having speeds of 25 Mbps or faster. By the FCC’s new math, the merger would give Comcast about 63% of the market… and that’s not going to fly with regulators.
As Greenfield wrote in his blog, “It is increasingly clear that DOJ and FCC approval/denial will come down to how they view the competitive landscape of broadband and whether greater broadband market share serves the public interest.”
In fact, Greenfield said, BTIG believes “the odds are now in favor of the government formally opposing/blocking the Comcast Time Warner Cable transaction.” He says the merger has, at best, a 30% chance of being approved.
BTIG said cable operators controlled more than 89% of 25 Mbps broadband connections in the U.S. as of December 2013. And, the recent growth spurts AT&T U-verse, Verizon FiOS and Google Fiber have gone through hasn’t changed the equation much; Greenfield believes cable still accounts for upward of 80% of connections 25 Mbps or faster.
“The fundamental question is if regulators were truly worried about video market share in excess of 30% and the monopsony risk, how can they not be even more concerned with the same risks facing the broadband market today? “ Greenfield writes. “…There is simply NO competition at 25 Mbps in the majority of the U.S.”