After an appeals court recently struck down the long-standing ban on cable TV firms being able to serve more than 30 percent of U.S. pay TV customers, I figured it would take just a few weeks for the first big cable merger to be announced. That has not happened, but a couple of other interesting after-shocks have been felt:
At least one analyst, Citi's Jason Bazinet, has called for the two largest cable TV companies in the country-Comcast and Time Warner Cable-to merge. He also gave a number of valid reasons why it should happen. If it seems that much of a no-brainer, then it's probably already being discussed, right? The parties in question aren't revealing their hands, but if your biggest foes were telco-wireless giants AT&T and Verizon Communications, and you were the biggest cable TV company, wouldn't you be talking to the next biggest cable guy right now?
Meanwhile, Comcast and another major cable player, Cablevision, reportedly have asked the Federal Communications Commission to end another long-time ban, the one keeping cable TV companies from maintaining exclusive rights to cable operator-owned channels and other programming. For years, the cable guys have had to make that programming available to satellite TV competitors, and the new telco TV players have been pressing for their own share, too.
What we're seeing right now is the cable TV industry testing its new sense of regulatory freedom. The cable guys are trying to figure out what they can gain and what they will risk by getting bigger, while at the same time trying to use a small amount of regulatory leverage they have gained to craft their ideal situation: Vast reach + tight control. Think of what they could accomplish if allowed to become truly national service providers that are not required to make their own content available through competing service providers. Ending the ban on content exclusivity would allow them to have tighter control over content, and force telcos and satellite TV providers to start developing their own content, a cost and creativity challenge for which they currently are not very well equipped.
Sounds outrageous, doesn't it? Yet, the telco-wireless giants have tried to do the very same thing in their service sectors over the years to limit the effect of emerging competition. It's the logical course of action for any once-was or would-be monopoly to take (Full disclosure: I wrote a variation on this theme over at FierceIPTV, though that was before the cable guys said "What the heck, let's challenge the content rule, too.")
Who stands to win? Somehow, I don't think the big telcos will let their cable TV foes beat them at their own game, and while cable has the content edge, the telcos still have a huge wireless edge. Sounds like the making of an eternal battle. Who stands to lose? As usual, smaller telcos and cable TV providers and their customers. Indie telcos making attempts to get much bigger have to deal with the bad role model of FairPoint Communications before they get far enough to tackle their own integration challenges. Indie telcos who don't try to be quite that ambitious (like Windstream Communications) ultimately may still have to deal with being outsiders.
The cable TV world is no longer the only well of video content, of course. There's the Internet, too. Maybe smaller providers can still give their customers enough content variety by leveraging the offerings of companies like Hulu, Move Networks, Vudu, Roku and others. The usable Internet video content should be easy enough to spot-it will be whatever is left growing outside the giant walled gardens of the new monopolists.