Major cable MSOs must consolidate in order to drive down programming costs and to achieve the scale needed to compete in the long run with Internet giants such as Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG), Liberty Media Corp. (Nasdaq: LMCA) chairman John Malone said in an interview published by The Denver Post on Saturday.
"The industry, without that cooperation, doesn't have enough scale to be a serious player in a global world," Malone said, noting that Google and Apple "are basically thinking in terms of billions of customers rather than tens of millions."
Liberty, which bought a 27 percent stake in Charter Communications Inc. (Nasdaq: CHTR) in March, is reportedly attempting to spark a new wave of cable mergers, beginning with a potential combination of Charter and Time Warner Cable (NYSE: TWC). Malone, who built Tele-Communications Inc. into the largest U.S. MSO before selling it to AT&T (NYSE: T) in 1998, said he wasn't able to make another run at the U.S. cable business until he reduced his stake in DirecTV (Nasdaq: DTV) last year. He said that "involved having to put a substantial amount of stock into a trust."
Malone said he sees potential for U.S. cable operators to offer much faster Internet speeds similar to a 500 Gbps product that Liberty Global's (Nasdaq: LBTYA) UPC Broadband subsidiary in the Netherlands plans to launch this summer. The wideband service will expand to other cable systems in Europe next year.
"We think that demand for those services will be there. That's the bet that you basically make when you invest in U.S. cable right now," Malone said.
The cable pioneer said he also expects U.S. operators to eventually market usage-based Internet tiers similar to those sold by wireless providers. "To be fairer to the consumer, it would be better if we get over to volume-based rather than speed-based pricing," he added.
- The Denver Post has this story
Malone says broadband tiers could hurt Netflix; calls Dish CEO Ergen 'kamikaze'
Report: Charter hired Goldman Sachs to fine-tune Time Warner Cable offer
Charter CEO Rutledge sees consolidation leaving industry with 2 major MSOs
Malone floats scenarios for Time Warner Cable – Charter merger
Warren Buffett quadruples investment in DirecTV; Berkshire buys Liberty Media stock