Comcast-Time Warner deal hits speedbump on Bright House

Time Warner has a deal to negotiate on Bright House's behalf, but Comcast may nix it to help merger

Financial trends and news by Steven Loeb
August 18, 2014
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You had to know that Comcast's $45 billion deal to buy Time Warner Cable would face challenges. I mean, this is a deal that, if it  goes through, will bring together the first and second largest cable providers in the country. Issues were bound to come up, not least of which was the dreaded "monopoly."

Now we are getting an indication of what at least one of those problems might be going forward: multichannel video service provider Bright House Networks, and a deal that it has with Time Warner Cable for the last twenty years.

As it tries to buy TWC, Comcast has to now decide whether or not it wants to keep a deal in place, under which Time Warner handles Bright House's programming and technology acquisitions, according to a report out from the Wall Street Journal.

Part of the issue has to do with the number of Bright House subscribers. As the sixth largest cable operator in the country, it has 2.1 million subscribers in Florida, California, Alabama, Indiana and Michigan. 

The Comcast-Time Warner merger would bring together a total of 33 million subscribers; looking to avoid accusations of a monopoly, Comast said it would divest at least three million of those total subscribers, in order to keep its market share under 30%. Obviously, adding in Bright House's customers once again pushes it back above that number, making closer to 32%, which could cause potential headaches when it inevitably faces the Federal Trade Commission.

There is good reason for Comcast to drop the deal, as Time Warner Cable does not actually make any money off of Bright House's subscribers; it is only paid an annual fee by the cable company. 

At the same time, dropping the deal could potentially result in higher rates for Bright House's customers, as it would have to do its negotiating on its own, and it will no longer have the influence or size of Time Warner to back it up. If that happened, Bright House would automatically become less competitive against the Time Warners and Comcasts of the world, something that Comcast has already noted.

In a filing with the FCC in June, Comcast noted that if it dropped the Bright House deal then the smaller company would be "at risk of losing the material benefits such agreements provide, include possibly raising costs for its customers and hampering its ability to compete effectively—a result that would certainly not be in the public interest."

Not that I ever feel bad for Comcast, but it seems like the company is damned either way here. If it continues to allow Time Warner to negotiate on Bright House's behalf, then it could be accused of creating a monopoly. If it lets the deal die, it would also be accused of creating a monopoly by, essentially, setting Bright House up to fall.

VatorNews has reached out to Comcast, Time Warner and Bright House for comment. We will update if  we learn more.

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