Cast Aside?: Why Comcast and Other Cablecos Are Struggling

As the cable industry convenes at the CableLabs’ annual R&D technology-fest in Colorado this week, operators must be thinking sadly: What a difference a year makes.

Just 12 short months ago, rival AT&T Inc. was struggling mightily to meet its 2006 U-verse deployment plan, and Verizon Communications Inc. eagerly was applying for newly allowed statewide video franchises for FiOS. Meanwhile, many assumed, cablecos were laughing all the way to the bank.

Fast-forward one year and you’ll find the cable industry, its suppliers and partners working to drive forward a suddenly backsliding industry that’s facing threats on all fronts.

What’s changed?

For starters, newer and more powerful telco networks are catching up with older and less enriched cable plants. Verizon’s symmetric 20mbps FiOS Internet has overtaken the best cable can provide with no immediate help in sight, and newer TV entrants such as AT&T and Verizon are flexing their massive wireless muscles. These telco TV providers are landing significantly more customers every quarter, taking an increasingly bigger bite out of cable’s one-time secure customer base. Witness Comcast Corp.’s advertising attacks on all providers in seemingly all directions, a tactic that’s perhaps a sign of extreme measures in a now extremely competitive industry.

The trials and tribulations of cable colossus Comcast, the largest U.S. cable operator, are considered by most in the industry to be fairly emblematic of those impacting, or threatening to affect, the overall cable community.

Despite the season, the last few months of 2007 were not exactly a holiday for the kingpin cable operator. On the upside, Comcast and its brethren survived an FCC attempt to regulate the cable industry; still, FCC Chairman Kevin Martin pressed on in hopes of limiting Comcast’s size. (For more about this, read "FCC Order Likely Headed Back to Court.") And, in December, Comcast revised its revenue forecast down and capital spending up, sending its stock plummeting to an all-time annual low. Shortly thereafter, it decided not to participate in a wireless spectrum auction. And on top of all that, the cableco was out-marketed by Verizon on triple-play offerings, with the telco offering a bundle for $99 per month for two years, as opposed to the cableco’s one.

What’s a cableco to do?

"As an MSO, I’d be asking ‘How do we compete against offerings like Verizon’s 20/20 service?’" says Jeff Heynen, directing analyst for broadband and IPTV at Infonetics Research. "‘Is there a way we can not only increase the downstream bandwidth available to our customers but also the upstream bandwidth?’ knowing very well that more and more people want to play online games, upload videos and photos, and participate in peer-to-peer applications."

Verizon began offering 20mbps symmetric Internet access service as part of FiOS in Connecticut, New Jersey and New York as early as last October with plans to deploy the landmark offering in 13 other states where it offers its video-driven, triple-play bundle.

Tom Nolle, president of CIMI Corp., already sees FiOS as stronger than Comcast’s triple-play bundle.

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