Comcast Gets Patriotic

It's a lot like putting another jigsaw piece in place: Comcast (NASDAQ:CMCSA) this week acquired Patriot Media, a small provider of cable service to New Jersey customers.

Patriot, which serves about 81,000 subscribers in the Garden State's relatively affluent Somerset, Hunterdon, Mercer, and Morris counties, will complement Comcast's existing coverage in northern New Jersey. Comcast has long operated a "super cluster" that extends from Virginia to the northern New Jersey portion of metropolitan New York.

Comcast has considered it important to fill its coverage hole, given telephone company Verizon's (NYSE:VZ) push with its own triple-play offering of video, data, and telephone service in the state. That explains why Comcast didn't mind paying up for Patriot -- it's dishing out $483 million in cash, or about $6,000 per subscriber. That figure, which is half again higher than the $4,000-per-subscriber figure generally accepted in valuing cable operators today, also is predicated on the strong demographics of Patriot's subscribers and their tendencies to sign on for additional cable-related services.

Comcast, with slightly more than 24 million video subscribers and 11.5 million data customers, now also provides Internet protocol telephony to about 2.5 million subscribers. It is easily the largest member of the cable group, whose publicly held multisystems operator (MSO) contingent includes Time Warner Cable (NYSE:TWC), Mediacom (NASDAQ:MCCC), Cablevision (NYSE:CVC), and Charter (NASDAQ:CHTR).

However, Comcast, Time Warner Cable, and privately held Cox Communications may recently have been dealt a blow from new FCC privacy rules, which some communications lawyers maintain will preclude the companies from sharing customer data with Sprint Nextel, (NYSE:S), their VoIP telephony partner. The rules, which seem likely to face a legal challenge, appear to endanger the cable MSOs' relationship with Sprint. Indeed, unless the rules are altered, the MSOs would need to obtain cable customers' permission before their information could be shared with Sprint.

So this one warrants watching. I've followed the cable operators long enough to be able to observe that Comcast's Patriot acquisition will be strategic to the company and that the company -- and its partners -- likely will be successful in negotiating the FCC's latest speed bump. And I continue to believe that Comcast should be prominent on the radar screens of Fools with an appreciation for solid franchises and unusually strong management teams.

For related Foolishness:

• Comcast May Face FCC Skirmish
• Comcast: A Rediscovered Highflier
• CBS's Ship Comes In

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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments.