Cable control: Will Comcast or Charter buy Time Warner?

UPDATE: Or maybe Comcast and Charter will split Time Warner. See Bob Fernandez' story in the Philadelphia Inquirer here. EARLIER: Time Warner Cable  "has made it clear that if it should sell itself, Comcast would be its preferred buyer," CNBC reports here, citing unnamed sources. (Comcast owns CNBC.) "Comcast has been quietly mulling a deal with TWC for some time," the CNBC report added. Comcast "is seeking advice on possible regulatory hurdles if it should pursue a bid."

Separately, rival cable operator Charter Communications "is close to lining up financing for a bid for Time Warner Cable," notes veteran cable analyst Craig Moffett in a report for MoffettNathanson LLC, citing a Wall St. Journal report. Even with expected staff and cost cuts, "the resulting entity would be frightfully levered" (deeply in debt), Moffett notes.  Comcast, which is less in debt, could be a "white knight" acquirer less likely to fire a lot of Time Warner bosses, he suggested.

A combined Comcast-Time Warner (would they base it in Philly, where Comcast is preparing a second high-rise headquarters tower, or New York, where both companies have landmark offices to merge?) would dominate cable and cable-affiliated broadband Internet and phone service, besides controlling a big block of U.S. television programming delivered through many different media forms.

Can they do that? Noting the high operating profits regional cable monopolies extract from consumers (they have historically kept over 40 cents on every dollar of monthly fees), the Federal Communications Commission and Justice Department used to oppose giving any cable company too big a market share.

But cable companies have argued since the 1990s they are actually competing with phone, satellite and Internet delivery companies and other content companies, not each other (since their geographic territories seldom overlap), and that under that logic even big cable companies should be free to merge.

Moffett has argued that cable has decisively beaten satellite, phone and Internet-based providers at extracting revenues and profits from consumers, and that it's likely the government will eventually regulate the industry's rates and profitability, as it did in the past with landline telephone and electric companies and other so-called natural monopolies that enjoy near-universal consumer demand.

Comcast enjoys close relations with political leaders. Comcast executive David L. Cohen hosted a fundraiser attended by President Obama last week; Cohen is also supporting the reelection of Pennsylvania's Republican governor, Tom Corbett.

-- Joseph N. DiStefano