ANALYSIS: Media Watch - More consolidation predicted in wake ofAT&T Comcast deal

With AT&T's decision to sell its cable television unit to Comcast,

a protracted three-way bidding war over the nation's largest cable

operator finally came to an end. Comcast's winning $72 billion

bid will create a new company, named AT&T Comcast, which will have

access to 22 million subscribers in 41 states, including 17 of the 20

largest US cities. Comcast will triple in size and become twice as big

as the second-leading cable provider, AOL Time Warner.

In announcing the deal, Comcast founder and chairman Ralph Roberts told

The New York Times (December 20), "This transaction is the most

rewarding and important step Comcast has taken since I started the

company nearly four decades ago. Combining Comcast with AT&T Broadband

is a once-in-a-lifetime opportunity that creates immediate value and

positions the company for additional growth in the future."

The same article quoted AT&T chairman and CEO Michael Armstrong's

rationale for selling: "This is a leap forward in realizing a vision

that thousands of AT&T people have worked toward - bringing greater

choice in affordable broadband video, voice and data services to even

more American homes.

AT&T Broadband and Comcast can accomplish more together than we could


A number of media outlets viewed the transaction within the larger

context of its meaning for the cable industry. The consensus voiced in

the media is that further consolidation can be expected. Comcast's

hometown paper, The Philadelphia Inquirer (December 22), quoted an

industry analyst as saying, "There's no question that consolidation is

the name of the game in this media business right now."

Pundits suggested that the industry would further consolidate until

about three companies control most of the market. However, some reports

suggested that a number of players in the industry, including Cox

Communications, Cablevision, Charter Communications and Adelphia had no

plans to sell anytime soon.

The proposed union prompted concerns regarding the potential impact that

the combined company's monstrous size would have on consumers and

television programmers. The Denver Post (December 21) wrote: "The

consumer ultimately loses here. Any time major companies merge, you have

the possibility of these companies taking advantage of consumers and

acting in a monopolistic behavior. It's basic Econ 101 here."

News of AT&T's decision to sell AT&T Broadband also sparked coverage of

the now-familiar criticism of how Armstrong bungled his strategy to

provide voice, data, and video through cable lines. The Washington Post

(December 20) cited industry analyst Scott Cleland's comments that

Armstrong "paid too much, spent too much, and didn't deliver results

fast enough." But there were also a few more charitable assessments of

Armstrong's vision, suggesting that the idea was correct, but it was in

the implementation that AT&T erred.

A few media outlets addressed the AT&T Comcast news within the context

of EchoStar's pending bid for Hughes Electronics, the parent of

satellite TV company DirecTV. EchoStar chairman Charlie Ergen earned a

few media placements through his comments that the regulatory approval

of the EchoStar-Hughes deal would be the best way to compete against a

company as large as AT&T Comcast.

Preliminary indications in the press suggest the AT&T Comcast deal will

be approved, but AT&T Comcast will need to pay close attention to

criticism of its size and behavior, while also watching the industry

consolidate in order to better compete against it.

Evaluation and analysis by CARMA International. Media Watch can be found


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