Comcast Partners: Time Warner Deal To Create Industry 'Powerhouse'

Partners Thursday said Comcast's proposed $45.2 billion acquisition of fellow cable provider Time Warner Cable would create a new channel "powerhouse" with impressive telecom and cloud assets and a combined, more robust offering for IT solution providers.

The deal, according to partners, also has the potential to reshape the competitive landscape, creating an $87 billion industry giant with more financial muscle and a broader geographic footprint to compete against rivals including $129 billion AT&T and $120 billion Verizon.

"We think it's a really good move by Comcast," said Andrew Pryfogle, senior vice president of cloud transformation at Intelisys, a Petaluma, Calif.-based Comcast and Time Warner master agent. "Both Comcast and Time Warner Cable have demonstrated a very strong commitment to the channel over the past few years, and we have seen explosive growth with both those companies and continue to forecast that moving forward."

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Comcast's acquisition of Time Warner, expected to close by the end of 2014, would combine the U.S.' two largest cable providers and bring Comcast's subscriber base to 30 million users. It's a deal that's likely to be scrutinized by federal regulators, but Comcast has already said it's willing to divest 3 million Time Warner subscribers to help overcome any regulatory hurdles and keep its market share below 30 percent.

If approved, the merger would also come as the traditional IT and telecom channels continue to converge and solution providers face more pressure than ever to embrace cloud services and the recurring revenue model. Pryfogle said 56 percent of the new partners Intelisys signed on last year -- or 246 of them -- were VARs.

Meanwhile, both Comcast and Time Warner have earned a reputation in the channel as telco companies committed to helping IT solution providers embrace the cloud computing and carrier services markets. Both companies, in fact, earned a 2013 CRN Channel Champions award for their Business Class services programs.

Pryfogle said that one of the biggest advantages afforded to Comcast partners through the deal would be access to Time Warner's robust cloud portfolio, which grew significantly through the company's $230 million acquisition of cloud hosting provider NaviSite in 2011.

"[Time Warner] is really, in our portfolio, a leader in cloud infrastructure," Pryfogle said. "It's a really bold move by Comcast as not just an expansion of their cable or fiber footprint -- although that's great, too -- but it's also a really strong move into the cloud."

Pryfogle said Comcast is Intelisys' fastest-growing supplier partner, and that Intelisys recently hit a $2 million milestone in monthly recurring revenue with its Comcast sales.

Ken Mercer, vice president at Telecom Brokerage Inc. (TBI), a Chicago-based master agent, also said Comcast is his company's fastest-growing supplier partner.

"Comcast has just been a huge supporter of the channel and has been the fastest growing carrier we've ever brought on board," Mercer said. "So if [Comcast and Time Warner] get together, it would be a powerhouse, and it would be wonderful for us. We have very high volume with both of them."

CRN reached out to Craig Schlagbaum, vice president of Indirect Channels at Comcast Business, and Brian Snortheim, director of indirect channel marketing at Time Warner Cable, but both declined to comment for this story.

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Partners also view the Comcast-Time Warner deal as disruptive to the broader telecom competitive landscape, and one that would give Comcast a significant leg up over rivals like Verizon or AT&T. For starters, partners said, the deal would allow Comcast to significantly expand its geographical footprint, particularly in areas like New York and Southern California.

"We do business with [AT&T and Comcast], and I think Comcast has a tremendous advantage over AT&T now," said one partner, who asked not to be named. "[Comcast's] pricing is extremely competitive and this expands their footprint dramatically so that they are able to play on a more even playing field with AT&T from a footprint perspective. I think this could be really disruptive.'"

AT&T has been steadily building up a channel presence of its own, since the launch of its AT&T Partner Exchange program last January. And while AT&T solution providers generally applaud the program, the partner said Comcast has presented partners with greater recurring revenue opportunities.

"AT&T spends a lot of money on their channel, but their model is more one-time upfront bonuses," he said. "Comcast is taking a different approach. They are strongly adopting the recurring revenue model and making it possible for partners to build out recurring revenue streams on their network. And our bias is always toward recurring revenue."

When asked for comment, an AT&T spokesman responded in an email to CRN, "AT&T provides choices. This is represented within three distinct channel programs including up-front commissions from the Alliance Channel, a recurring revenue model from AT&T Partner Exchange, and a residual model from ACC Business. Solution providers can find the right fit within our comprehensive channel programs."

Edward O'Connor, vice president of network sales at Total Communications, an East Hartford, Conn.-based solution provider and Comcast partner, agreed that Comcast's acquisition of Time Warner would significantly expand Comcast's U.S. footprint and, ultimately, make Comcast the "800-pound gorilla" of the telecom industry.

"This makes Comcast a much more viable competitor against the AT&Ts and the Verizons of the world, because now they can address those metropolitan areas where, before, they had very little influence," O'Connor said. "I think this will also drive them to increase their product line and dive in deeper to the Ethernet industry [and] do more with fiber-based solutions."

AT&T declined CRN's request for comment.

In a statement released Thursday, Comcast and Time Warner said the merger will generate approximately $1.5 billion in operating efficiencies, spurring speculation that, should the deal go through, it would spark headcount reductions and other restructuring efforts. Intelisys' Pryfogle, though, said he doesn't think the merger would cause either company to scale back on its channel initiatives.

"Naturally, any time you are doing this large of an integration, there are going to be some challenges to work through. You'd expect that," said Pryfogle. 'But we aren't concerned at all about their level of commitment."

TBI's Mercer said the only challenge he anticipates if the deal goes through is merging his Comcast and Time Warner quoting and ordering systems, especially as both companies have been working to improve those systems.

"The only problem will be the ease of doing business, and it's not a people issue or process issue but a systems issue," Mercer told CRN. "But that's the only negative thing I can say about the merger."

PUBLISHED FEB. 13, 2014