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Price Cartel Talk Masks Malone's Ambition

Stocks in this article: AAPL NFLX TWC CHTR CVC

The telecom merger frenzy that precipitated speculation of a similar rationalization of the cable industry, after all, has raised the prospect wireless video service may rise in coming years, as prices fall.

When AT&T made its push for T-Mobile in early 2011, antitrust experts were in uproar that the DoJ and Federal Communications Commission could allow the industry's number four player to be taken over, leaving only a loss-making Sprint (S) as a competitor to AT&T and Verizon (VZ). Consumer fear was was palpable that a telecom duopoly would leave Americans with ever-rising iPhone bills when AT&T and Verizon shuttered unlimited data plans, shortly thereafter.

The DoJ blocked the merger, paving the way for a consolidation among also-ran players like Sprint, T-Mobile, MetroPCS and Clearwire that unequivocally makes the wireless industry more competitive on price and service, as the smartphone market matures.

It would be preposterous for cable industry consolidation to then put streaming media at risk after consumers shifted usage from wireless to broadband networks.

There are some pending court cases, notably Verizon's fight against the FCC on Net Neutrality that could put usage based pricing on the scrap heap, according to Moffett of MoffettNathanson. Were ISP's like Verizon to win, however, it could indicate a weakness from incoming FCC Chairman Tom Wheeler.

More importantly, the actions of ISP's indicate usage based broadband pricing is not on their minds. Reports signal Time Warner Cable is increasingly becoming a part of a Apple's plans to bolster AppleTV. Such partnerships rely on streaming video, and consequently affordable broadband.

Only the grandest of conspiracies would have Time Warner Cable signing video deals that would be undercut by its plots to charge for broadband usage.

It is more likely savvy industry minds, such as Liberty's Malone, see their hand as particularly strong in consolidation.

Pay TV margins are being squeezed by rising costs for broadcast, movie and sports content, just as user growth slows to a near halt. Growing broadband users, however, provide just enough to offset falling pay TV margins, according to Moffett.

In Charter Communications, Malone has a stake in one of faster growing cable industry players, meanwhile his reputation could even give investors the confidence to trade in their Time Warner Cable shares for those of a smaller competitor.

Malik of GigaOm raises strong points in asking whether consolidation would play to the detriment of the ordinary broadband user. If usage based pricing is the rationale for cable industry consolidation, consumers and scores of Americas fastest growing companies should be outraged.

For now, however, such analysis masks what may be a far more boring and Wall Street-oriented story of consolidation in a slow growth industry.

-- Written by Antoine Gara in New York.

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