High-Speed Internet Drives Comcast's Q1

Comcast Corp. (Nasdaq: CMCSA, CMCSK) is still losing basic video subscribers, but it's more than filling the gap with new subscriptions for high-speed Internet and VOIP services.

Comcast did not have much new to say about its deployment of Docsis 3.0, but solid high-speed data results were the story for the MSO's first quarter, which saw revenues climb 14 percent, to $8.4 billion, while net income dipped to $732 million, versus $837 million in the year-ago period. (See Comcast Reports Q1.

Comcast added 492,000 high-speed Internet subs in the quarter, extending its total to 14.1 million subs, or a penetration rate of 28 percent.

On the earnings call this morning, Steve Burke, the president of Comcast's cable unit, said roughly two thirds of those adds were made up of DSL converts.

Burke attributed the growth in part to the combo of the MSO's new "economy" tier and its higher-end "Blast!" product. (See Comcast Has a 'Blast!' in the Bay .)

The economy product takes direct aim at DSL. It's priced at $24.95 per month and caps the downstream at 768 Kbit/s and the upstream at 384 Kbit/s. The economy tier "is making the phones ring," Burke said, adding that many of the customers who originally ask about the economy tier end up taking a higher level of service. Still, subscriptions for Blast! "are dramatically outpacing economy," he said.

And forget it if you woke up at o'dark thirty this morning to listen in on the call hoping to catch a few new pearls about Comcast's Docsis 3.0 rollout. The company held firm that it will prepare up to 20 percent of its footprint by year-end, though Burke noted that the percentage "might be a little bit higher." So there was that.

As for an update on how things are going in the Minneapolis area, the first market to get Docsis 3.0 from Comcast, Burke would only say that "it's too early to tell what's going on in the Twin Cities."

But he did acknowledge that Docsis 3.0 allows the MSO to boost capacity for less than they can with earlier-generation network gear, reflecting much of what cable modem termination system (CMTS) vendors have relayed about their new denser downstream blades. (See CMTS Downstream Prices Plummet.)

Another source of strength in the first quarter was IP phone services. Comcast added 639,000 digital voice subs in the period, giving it 5.1 million -- a 12 percent reach. Comcast still had 66,000 circuit-switched phone subs, but expects to wind that down completely by mid 2008.

Basics still seeping through the cracks
Despite solid gains on Internet and voice, Comcast, however, could not replicate Time Warner Cable Inc. (NYSE: TWC)'s accomplishment in the first quarter -- add basic video subs.

Comcast lost 57,000 basic video customers, or 0.2 percent of the base, during the quarter. But it more than made up for that by adding 494,000 digital video subs, extending its total to 16.0 million, and a penetration rate of 65 percent. That compared to 13.7 million, a 55 percent penetration rate, a year ago. Roughly 6.9 million, or 43 percent, of Comcast's digital video base had digital video recorders (DVRs) and/or high-definition television service. That's up from 5.2 million, or 38 percent, in the year-ago period.

— Jeff Baumgartner, Site Editor, Cable Digital News

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