Comcast Banks on Triple Play

The ability to offer a triple-play bundle of voice, video, and Internet services will pave the way for sustainable growth for years to come. That was the big message Comcast Corp. (Nasdaq: CMCSA, CMCSK) execs delivered Tuesday morning during the MSO's analyst and investor event in Philadelphia.

2006, the year Comcast launched its triple-play package, was "one of the most important years in the company's history," said Comcast chairman and CEO Brian Roberts. Fueled by the bundle, Comcast could achieve double-digit revenue growth over the next three years, he predicted.

The triple play has "put us on a path for significant and real growth for years to come," Roberts said.

Comcast estimates 16 percent of its customers will subscribe to that bundle by the end of 2007, up from 7 percent at the end of 2006. That rate could exceed 40 percent in about three years, according to Steve Burke, the executive vice president and COO of Comcast Corp. and president of Comcast Cable.

Voice catalyst
While cable's traditional video business has produced a growth rate of about 3 percent, Comcast has had to introduce new services to push that number to 10 percent, Burke explained.

One key catalyst continues to be Comcast Digital Voice (CDV), the MSO's IP telephony service. Today, Comcast's penetration with CDV is at about 7 percent, but the company believes it can extend that to 20 percent to 25 percent by year-end 2009.

The company's operating annual cashflow averaged 12 percent before CDV was introduced, and that jumped to 15 percent after its launch, Burke said.

And more growth is expected now that Comcast has completed some of the "wrenching organization changes" required for offering CDV, including the hiring of 5,000 technicians and 6,000 service reps.

Roughly 65 percent, or more than 9,000, of Comcast's techs are trained to complete triple-play installs, according to David Watson, Comcast Cable's executive vice president of operations.

"The good news is that engine is now built," Burke said, but he added that Comcast could hire more than that during the next 12 months to stay ahead of demand. "The triple play really has changed everything."

Questioning the 'Quad Play'
Roberts did not exactly give a ringing endorsement to wireless services and their position as a necessary component of Comcast's strategy.

"We're maxed out… not in need" of wireless services, Roberts said, citing present run rates on Comcast's triple-play bundle.

Still, he insisted Comcast remains "delighted" about the opportunities presented by cable's joint venture with Sprint Nextel Corp. (NYSE: S). Comcast has already launched mobile services in markets including Boston and Portland, Ore.

Other MSO partners in that "Pivot" JV include Time Warner Cable Inc. (NYSE: TWC), Cox Communications Inc. , and Bright House Networks . (See Naming Cable Mobile.)

Roberts was also "pleased" with Comcast's recent spectrum investment via the SpectrumCo joint venture, adding that he believes the value of those holdings will appreciate whether or not Comcast and the other partners decide to use them. (See Cable Consortium Gets Licenses .)

Digging into digital
Comcast's digital penetration is at 55 percent and will hit a "magic point" in 2009 when the rate reaches the range of 80 to 85 percent, Burke said.

It's at that point, he added, that Comcast will "go functionally all digital."

That does not mean Comcast will remove analog video completely from its lineup. Burke estimates that Comcast will keep about 20 channels in analog, allowing it to reclaim substantial chunks of analog spectrum for other services. (See Going 'Mostly' Digital .)

No 'next upgrade'
Although top Comcast engineering execs were slated to outline the company's network and technology strategy later in the day, Roberts did point out that the MSO is positioned to address its capacity needs so they "can be managed as we grow in unparalleled ways today and into the future."

Roberts did not go into specifics, but said, "We don't believe there is a next upgrade," in Comcast's future, a message certainly directed to analysts that might be harboring concerns about Comcast's capital spending. In February, the MSO said it would fuel subscriber growth this year by raising capex to $5.7 billion, from $4.6 billion in 2006. (See Comcast Revs Up Capex.)

Comcast reiterated guidance that expects to add 6.5 million revenue generating units (RGUs) this year.

Cashing in
Since this was investor day, Roberts spent a moment outlining Comcast's investment record. He said a $7,000 investment in 1972, the year the MSO went public, would be worth $3.5 million in today's dollars. That statistic might be of some help were there a time machine available in Comcast's lobby.

— Jeff Baumgartner, Site Editor, Cable Digital News