Is Comcast, TWC Dead or Just Sleeping?

Now that the Comcast, Time Warner Cable merger deal has failed, what’s next? I think it’s likely that if Time Warner Cable is still around, the deal might be tried once again in a few years after the industry has transformed itself.

Comcast obviously is still interested in expanding with Time Warner Cable and will try this merger dance again in a few years. This has worked before. Where, you ask? Think about AT&T over the last 10 to 15 years as one example.

A Brief History of AT&T

AT&T was the largest telephone company in the world during the last century. In the 1980s, it spun off the local phone business to seven Baby Bells. Then AT&T the long distance giant competed against MCI and Sprint.

When the Baby Bells started to sell long distance as well as local services, the long distance industry started to fade away.

In the late 1990s Ed Whitacre, CEO of SBC — the smallest Baby Bell — tried to acquire AT&T. That attempt failed.

The long distance sector — and the entire telecom industry — continued to change, and AT&T eventually became much smaller and less important.

In the early 2000s, Ed Whitacre once again tried to acquire AT&T, and that time was successful. SBC also acquired BellSouth and Cingular, and the entire company took the name “AT&T.”

Today, AT&T is one of the largest, strongest and most successful communications companies in the U.S. and, in fact, the world.

Not Enough Players

That is what I think could happen here with Comcast and Time Warner Cable. The marketplace is not ready for this merger today, but perhaps it will be in a few years.

Today the deal made sense for the two companies, but not for the industry and not for the customers. The reason is that there is not yet enough competition for high-speed Internet across the country.

Sure, AT&T U-verse, Verizon FiOS and CenturyLink Prism offer excellent quality television over the Internet using IPTV. Sure, they offer blazing Internet speeds. And sure, companies like AT&T are rolling out their ultra-fast Gigapower Internet service.

However, we are just in the very early stages of this revolution. Today there is little in the way of competition in the vast majority of the United States.

If over the next several years other companies offer ultra-fast Gigabit-speed Internet services in the vast majority of locations from coast to coast, then the time may be ripe for Comcast and Time Warner Cable to try merging once again.

Tomorrow Is Another Day

In the meantime, I fully expect Comcast to continue to improve its core services so it can compete with new threats like AT&T, Verizon, CenturyLink, Google and others for Internet and television.

Of course, Time Warner Cable may not be around a few years from now. I think other companies will be interested in acquiring it now that Comcast has stepped aside. Perhaps Charter or some other company will give it a try.

Mergers and acquisitions will continue in this industry. They have been happening for decades and will continue.

M&A is alive. Many smaller deals will continue to happen. It’s just that now, when there are relatively few companies competing, regulators must be careful which deals they approve.

As for Comcast and Time Warner Cable, No. 1 merging with No. 2 was just not right at this time. Tomorrow may be a different story.