Liberty Media Chairman John Malone hasn’t lost his lust for Time Warner Cable. That’s the unmistakable message he delivered today at Liberty’s Investor Day gathering when he was asked whether Charter — where he’s the top shareholder — would take another run at TWC if its current $45 billion deal with Comcast falters. “Hell yes,” Malone said, reaffirming his reputation as one of media’s most reliable straight shooters. The answer could be important: A small, but growing, group of investors question whether the Comcast-TWC deal will survive FCC and Justice Department scrutiny.
Malone quickly added, though, that he’s “totally happy” with Charter’s current system swap agreements with Comcast that would make Charter a strong No. 2 cable operator, dominant in 10 states mostly in the mid-West. “In many ways, from our point of view, it’s a better deal than going after 100%” of TWC, Malone says.
Malone also used today’s forum to attack President Obama’s call for tough net neutrality rules, a policy that the Liberty chairman likened to “socialism.” The administration’s outlook — which favors reclassifying the Internet as a regulated phone-like communications utility — was the product of “a political judgment, not an economic or engineering one,” Malone says. “There’s nothing broken about the Internet right now” and it’s “inappropriate for the government to make that resource allocation decision” to bar Internet providers from offering faster service to favored content providers. “I don’t think he’s (Obama) thought it through.”
Even so, Malone disputes the cable and phone industry’s line that tough regulations would frighten investors, and slow the growth of the medium. “We are in a race to get this kind of service into the consumer’s home and lock up that opportunity as fast as we can before other people overbuild us and upgrade networks. So I don’t think it will materially affect behavior.”
In the end, Malone says he believes FCC Chairman Tom Wheeler will find a middle ground that “satisfies some cosmetic concerns” but without reclassifying the Internet. He also bets that ISPs will phase in usage-based pricing. If companies set high usage threshholds now, so it affects few people, “the market will grow into it” as demand for Internet services grows. “In the end I think the consumer pays, whether the consumer pays the distributor or the consumer pays the product supplier – the consumer is going to pay.”
He also expects demand for streaming services to grow as the price of pay TV soars. “So much of the oxygen has been taken out of the room by sports and the rising cost of sports, and it’s putting pressure on the distributors who are attempting to control costs wherever they can…. If 80% of the incremental price passed through is going to sports suppliers, there’s very little room for inflation or budget increases for non-sports” services.
Cable and satellite companies lost a golden opportunity they had about five years ago to gain the upper hand in streaming by offering TV Everywhere services to their subscribers. If the industry had moved more quickly on that then “there would’ve been much less appetite for Netflix.”
Now “the consumer is going to have to sort this out and decide how much [different content] they want.” Programmers will have limited opportunities to reach viewers. “I don’t think we’re going to see 27 different over-the-top services that consumers are going to have an individual relationship with. I don’t think the consumer wants that much trouble in their lives.”