Intellectual Property Law

Comcast Posts Healthy Gains in Voice, HSD Subs.

By Cynthia Brumfield

The nation's top cable operator Comcast issued its Q2 08 earnings report this morning showing comparatively strong gains in high-speed data and voice subscribers even as basic customer loss accelerated. Weakness on the video front and tepid advertising revenue resulted, however, resulted in lukewarm revenue and cash flow growth.

During the quarter, Comcast lost 138,000 core video customers, compared to a loss of 57,000 last quarter and 101,000 loss during Q2 07. By quarter's end, Comcast served 24.553 million basic customers, representing a penetration rate of 49%.

Digital subscriber growth continued to taper off in the quarter, with Comcast adding 320,000 net new digital customers, down from the 494,000 net adds during Q1 08 and 823,000 net adds during the year-ago quarter.

High-speed data growth cooled too, although not nearly to the same degree experienced by Comcast's main rivals, AT&T and Verizon. During the quarter, Comcast added 278,000 high-speed subscribers, compared to net broadband gains of 492,000 and 339,000 during Q1 08 and Q2 08, respectively.

During the earnings call, President Steve Burke commented on the relative robustness of Comcast's broadband business in comparison to Verizon, which added only 54,000 net new broadband subs., and AT&T, which added only 46,000 net new high-speed customers during the quarter. "These results suggest that DSL may be the new dial-up," he said, adding that two-thirds of Comcast's new customers are DSL defectors.

Burke said that even though DSL is cheaper, "I don?t think it?s about price?the issue is what?s the value that somebody gets and what they?re using the Internet for. When you?re streaming video, you want to have a fast Internet connection?and you?re prepared to pay a higher price to get those speeds."

Digital voice was the strongest performer of Comcast's new product bundle, with the company adding 555,000 net new digital telephone customers during the quarter, still slightly down from Q1 08 and Q2 07 levels. But Comcast's intentional dismantling of its old-fashioned legacy voice business drove down the number of circuit-switched telephone customers by 56,000, resulting in a total telephony subscriber gain of 499,000. By quarter's end, Comcast served 5.653 million telephone customers, representing 12% penetration.

Getting out of the circuit-switched business was one drag on the company's financial results, Burke said. Indeed, Comcast's cash flow advanced by only single digits, rising by 7.6% to $3.36 billion, a departure from the company's usual double-digit growth. Cable revenues (not including online businesses and video networks) advanced by 7.2% year-over-year to $8.1 billion.

Executives stressed during the earnings call that Comcast had outperformed its telco peers during the quarter, at least in terms of wireline customer growth. "We?re doing well and we?re right on plan. When you look at our results compared to our wireline competitors, I think it speaks volumes," Burke said.

CEO Brian Roberts highlighted cable's inherent infrastructure advantage, which allows Comcast to launch broadband services without the costly capital investments narrowband phone companies must make. "Longer term, having a road map without needing a rebuild will give us the ability to innovate both on the data side and the services front," he said. "I think that showed through when you compare our industry with the others."

(Download detailed financial and operational data on Comcast here. The data, which summarizes historical data for Comcast in a convenient spreadsheet, is free although registration is required.)

Full post as published by IP Democracy on July 30, 2008 (boomark / email).