RCN buys Wave to expand its regional broadband empire

TPG Capital today said that it will pay nearly $2.4 billion to acquire Kirkland, Wash.-based Wave Broadband, which it will merge with RCN to form the country's sixth-largest cable company. Some notes after speaking with TPG partner David Trujillo:

Big but small: Trujillo says that taking on market leaders Comcast and Verizon isn't in the cards for RCN, but that growth will continue to come for players of all sizes. "The reason we like broadband companies is that they're the picks and shovels of everything else related to that scene. When people buy higher-resolution devices or want better digital music fidelity or add pieces to a connected home, all of that is a secular trend in broadband's favor."

Geographic diversity: Pacific Northwest-based Wave gives the platform more geographic diversity, following RCN (Acela corridor) and Grande (Texas). Not only does this help protect against regional economic troubles, but also will let TPG better test different pricing and promotions in different parts of the country.

Net neutrality: Trujillo says that the deal price was not at all affected by the FCC's net neutrality rollback plans, nor did the Obama-era rules affect RCN's infrastructure investments.

Overbuilds: RCN overbuilds in some markets, which means that it sits on top of existing infrastructure rather than bringing broadband to underserved markets. Trujillo's rationale is that the "ROI is so good on these overbuilds," in part because new housing developments and apartment complexes are regularly being built in such markets.