Comcast IDs First DTA Market

Comcast Corp. (Nasdaq: CMCSA, CMCSK) has identified Portland, Ore., as one of the first markets that will fuel an all-digital migration with one-way digital terminal adapters (DTAs).

"Portland is getting ready to go as we speak with the new DTA boxes, which are now in stock and in test homes," Comcast chairman and CEO Brian Roberts said this morning during the MSO's third quarter earnings call.

Comcast is expected to deploy DTAs aggressively as part of an all-digital strategy that will enable the operator to reclaim spectrum from about 40 analog channels, reusing it for Docsis 3.0 and expanded high-definition television (HDTV) and video-on-demand (VOD) services.

Comcast anticipates migrating 20 percent of its footprint to all-digital by year's end, and has said previously that it might need as many as 25 million DTAs to complete the migration over the next 12 months to 18 months. Comcast said it plans to deploy millions of DTAs in the fourth quarter alone. (See Comcast Doctoring Digital in Detroit , Comcast Pursuing $35 Digital Dongle, and Comcast Confirms Digital Dongle Project.)

So far, Motorola Inc. (NYSE: MOT), Thomson (NYSE: TMS; Euronext Paris: 18453), and Pace Micro Technology have been identified as Comcast's DTA suppliers. Cisco Systems Inc. (Nasdaq: CSCO) also has a DTA on the roadmap. (See Pace Pix , DTAs on Parade , Thomson Confirms Comcast DTA Order, and Cisco Doubles Up for Cable.)

Even with a self-install option, Comcast anticipates that its DTA markets will require additional truck rolls and elevated levels of marketing. Those costs are "all baked into our plans, but it does have an effect on the profitability of that system when it's going through that conversion," Roberts said.

Comcast COO Steve Burke later downplayed concerns that the DTAs will provide access to the operator's expanded basic digital signals without encryption -- at least for the foreseeable future.

"In many senses, it (digital video fed through DTAs) will be more secure than the analog distribution," Burke said. "We will not be using encryption initially, and that's fine in terms of our programming contracts." Those DTAs, however, could activate so-called "privacy mode" encryption via a firmware upgrade, but doing so could force the operator to seek out a special set-top waiver from the Federal Communications Commission (FCC) . (See Comcast's DTAs: Security Optional .)

Weathering the economy
Comcast's third-quarter results showed the operator wasn't yet effected by a turbulent economy, but it did witness slower subscriber growth in some service categories.

Revenues rose 10 percent to $8.5 billion, with net income reaching $771 million (26 cents per share), versus $560 million (18 cents per share) in the year-ago period. (See Comcast Reports Q3.)

On the service front, Comcast lost 147,000 basic subscribers in the quarter, much worse than a 27,000 basic subscriber loss expected by Sanford C. Bernstein & Co. Inc.

Comcast, however, added 417,000 digital video subscribers, extending that total to 16.8 million and a penetration rate of 69 percent. About 7.3 million of that total also subscribe to the MSO's digital video recording (DVR) and/or hi-def service.

The operator also signed up 382,000 cable modem subscribers, giving it 14.7 million subs. Comcast noted that it was still too early to judge the success of its initial rollout of Docsis 3.0, the baseline for its new 50 Mbit/s and 22 Mbit/s downstream service tiers. (See Comcast Takes 'Wideband' Wider .)

"We have [Docsis 3.0] customers now, but measured in the hundreds," Burke said. "The good news is, technically, it works beautifully… but in terms of customer reaction, it's just too early."

Comcast signed up 483,000 digital voice subscribers, extending the total to 6.1 million, or a penetration rate of 13 percent. Growth in the category slowed (the MSO added 550,000 VOIP subscribers in the previous quarter), and Comcast noted that it's growing weary of churn caused by customers who cut their hardline in favor of getting voice services only from a wireless carrier.

— Jeff Baumgartner, Site Editor, Cable Digital News