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Comcast sees lucrative times ahead

President Brian Roberts says that good times--as well as profits--are ahead for the cable company and the industry as a whole.

4 min read
DENVER--Comcast president Brian Roberts says that good times--as well as profits--are ahead for the cable company and the industry as a whole.

At the CableLabs financial analysts' briefing in Denver yesterday, Roberts outlined five significant areas of growth for cable companies while firing a few shots at companies such as America Online, which are trying to wrestle a position in the broadband market.

Roberts took the occasion to try and convince financial analysts that cable is the next industry that will undergo a transformation, similar to the one that turned the high-tech industry into the U.S. economy's growth engine.

"Cable is undergoing a major transition to a digital network, capable of delivering multiple technically sophisticated interactive services. Like the PC 15 years ago, cable is now ready to take off," he proclaimed, simultaneously noting, however, that it will take time for that lift-off to actually occur.

"It won't happen in one big bang. Like the PC evolution, there will be a steady progression of significant steps forward," Roberts said, noting that the industry has already invested $20 billion since 1996 to support services such as digital cable and high-speed Internet access.

In his speech, Roberts outlined significant growth opportunities that stem from the industry's infrastructure upgrades. The marriage of new set-top boxes and high-speed Net access will allow a stream of new applications for cable, as well as for the PC industry.

Next-generation set-top boxes are slated to offer everything from video-on-demand to interactive television programs that let people buy merchandise related to TV content. And that's a concept that has executives in the communications and PC industry simply salivating.

Roberts said the model for e-commerce already exists. QVC reported $2.3 billion in revenue last year, with $5 billion in revenue overall from television programming. QVC's Web site alone recorded $40 million in revenue and a profit, he noted. Comcast owns a 57 percent stake in QVC, according to a company spokesman.

To elevate shopping over the Internet "to a higher plane," cable companies have to leverage the TV plus the Internet via applications on newfangled set-top boxes. However, any regulations that force cable companies to prematurely open up their networks to competing service providers could stall developments, he cautioned.

"Some of cable's competitors have watched all these developments with great interest [and] want to slow us down. A number of them have been banging on the doors of [regulators], urging them to adopt rules that would turn our networks into common carriers," Roberts said in an oblique reference to America Online.

"I hope they will come to understand that it's a huge mistake for anyone in this industry to ask the government to start regulating [network access]." Once started, there's "no way to stop regulations from hurting every single company trying to expand in this broadband future," he warned.

Some ISPs such as AOL had lobbied the Federal Communications Commission to push cable companies to allow "open access" other services providers. Companies like Tele-Communications Incorporated, which owns a majority stake in @Home, a broadband cable access service, do not allow other ISPs to offer their services independently over cable.

In a report to Congress, regulators said that broadband technologies are being rolled out in a "reasonable and timely manner," and declined to dictate whether cable companies should open their pipes to competitors--so far.

Roberts, however, sees an incentive to work with AOL, considering that the leading ISP claims more than 14 million customers. A partnership is not outside the realm of possibility, he said, noting that he has held conversations with AOL in the past.

Roberts related an exchange with Bob Pittman, AOL's president, who said earlier this year at an industry event that the company plans to spend $10 billion to rent a network for a stake in broadband.

"I turned to him later and said 'That's a good start to the negotiations,'" Roberts quipped, sparking laughter in the audience.

Among other significant near-term opportunities, Roberts said:

  • High-speed Net access is one of the more lucrative near-term opportunities, with 19.5 million homes passed by cable, and potentially able to receive high-speed Internet service. Roberts said the subscriber base of @Home and RoadRunner--currently at a combined 500,000--could double in 1999 alone.

  • Digital cable is helping the industry compete against satellite providers by offering more channels and improved reception. Roberts said 70,000 customers signed on for the added-cost service in the last six months, Comcast expects to double that number as it makes the service more widely available in the next six months.

  • In the future, Roberts sees telephone service over cable networks as a big revenue opportunity--potential that AT&T was banking on when it acquired TCI last year.

    "This industry is going to be a serious player in telephony," Roberts promised.