A deal for Charter to buy Time Warner...

simply aren’t enough synergies to support a reasonable valuation without ‘running it better.'” Rutledge told MoffettNathanson that the primary benefit of such a deal would be “his ability to run TWC’s business better than TWC’s management can,” Moffett said. That could mean that a Rutledge-run TWC would feature characteristics of Rutledge’s tenure at Cablevision and Charter, such as simplified pricing, a focus on bundling and “moving to aggressively exploit cable’s infrastructure advantage by first going all-digital,” said Moffett. Though Rutledge is “the best operating executive in the cable industry,” Moffett said, it might prove challenging for him to turn around Time Warner Cable. That means it could be more likely for Comcast to purchase Time Warner Cable, Moffett said. The FCC would have to approve such a deal, and that okay could be unlikely, Moffett said. The new company would have 33 percent of U.S. pay-TV subscribers, 60 percent of cable subscribers and 36 percent of all broadband subscriptions, said Moffett. “A company of that size would arguably have de facto control of what content could and couldn’t exist in the U.S.,” Moffett said. “Would the new FCC decide that concentration of that scale is in the public interest?” Cox Communications is another possible “white knight” for TWC, Moffett said, but it’s not clear if the owners would be interested. “What is clear, however, is that consolidation now really is afoot,” said Moffett. Analysts at Stifel Nicolaus agreed in an email to investors that a Comcast and Time Warner Cable combination would have a difficult regulatory path. “Government approval would be possible, but it would be costly, with serious risk,” said Stifel. “This would be a brawl.” The Department of Justice and FCC would likely “raise objections about the potential for Comcast-TWC bullying of competitors and suppliers, given the extent and linkages of their cable/broadband distribution, programming control, and broadcast ownership,” said the analysts. However, the operators could argue that the new company wouldn’t have as many total subscribers as AT&T or Verizon, and that previous FCC attempts to cap ownership in the cable market at 30 percent have been thrown out in court. “Comcast-TWC would only have about 33 percent of the market,” said Stifel. If such a deal were approved, it’s likely DOJ and FCC would extend the Comcast-NBCUniversal conditions to Time Warner Cable and also extend their duration, said Stifel. “But we believe the DOJ and FCC would probably want to go further, and at least strengthen the conditions.” Though the parties could work out conditions that might make the deal palatable, the government would likely seek “crippling conditions/divestitures or move to block the deal outright,” said the analysts. “Comcast-TWC could fight any DOJ challenge in court, and possibly win, but we believe it would be a lengthy and risky endeavor, complicated by possible FCC opposition that’s difficult to overcome."