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Google Fiber a Godsend for Comcast

Stocks in this article: GOOG CMCSA TWC VZ T

Seen from a pure technology perspective, the Time Warner Cable deal should cement Comcast's position as the dominant player in both content and the local Internet.

Cable's broadband technology has proven itself over time superior to digital-subscriber-line technology from the phone companies. That is why Comcast and Time Warner Cable are first and third in local ISP services.

Verizon (VZ) and AT&T (T) have responded with FiOS and U-Verse, which brings fiber closer to subscribers, but their TV offerings are considered inferior to those of the cable operators and they have failed to gain much headway.

Because of its purchase of NBC Universal, Comcast is also a major supplier of content. When it "buys" NBC content, cable channels or sports, it's buying from itself. It can now extend that advantage to Time Warner Cable, which since its spin-off from Time Warner Inc. (TWX) in 2009 has lacked vertical integration.

In recent sports rights negotiations in Europe, owners of infrastructure such as British Telecom have been trumping traditional networks. Control of more content is moving in infrastructure's direction.

At its current price of a little over $51 a share, Comcast sells at a price-to-earnings ratio of about 20, Time Warner Cable at about 21. Google, by contrast, sells at over 33 times earnings. Comcast will tell regulators that its merger makes it the best competition for Google in advertising and that Google's presence in local service gives it the competition regulators say it needs.

Expect that argument to get a good hearing. Comcast's position in Washington looks dramatically improved by Google Fiber.

At the time of publication, the author owned shares of Google.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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