THE COMCAST PROBLEM

The following article was extracted from Time magazine.

Thanks to John Sapponaro for the reference.

Dave Israel

----------------------------------------------------------------

REF: http://www.time.com/time/magazine/article/0,9171,1848728,00.html

COMCAST'S Challenge

BY: Bob Diddlebock

---

The Comcast Kingdom's new 56-story castle in Philadelphia's Center City is gilt-edged--a gleaming obelisk, from its flushless urinals to the sumptuous cafeteria named for the company's 88-year-old co-founder Ralph Roberts.

---

"The tallest [building] between New York and Chicago," gushes the hometown Inquirer.

---
Erecting a corporate monument is often the kiss of death. But Comcast leases the building, perhaps a more fitting tribute to Roberts, a suspenders-and-belt salesman who parlayed a tiny system in Tupelo, Miss., into the nation's largest cable-TV operation, with 24 million subscribers and $31 billion in annual revenue.

---
Despite not-bad first-half financial results, these are cautious times for Roberts and his son Brian, 49, the corporation's CEO. Cable companies like Comcast and Time Warner Cable (which is being spun off from Time Warner Inc., TIME's parent) are getting competition from all directions. As Brian Roberts put it in a speech that said as much about Comcast as it did about his industry, "There have been moments in time when cable has been at a major inflection point. This is one of those moments."

---
Topping Roberts' list of challenges: calling Verizon's and AT&T's billion-dollar bets on delivering TV service through fiber-optic lines.

---

Verizon has signed up 1.4 million video subscribers, a good many of them in the Northeast, where Comcast rules. By 2010, Verizon expects its video, phone and Internet effort, dubbed fios, to reach 18 million households. AT&T is following along the same track, while EchoStar and DirecTV continue to add satellite-video subscribers.

---
Other nagging issues:

---

the Federal Communications Commission has castigated Comcast for shortchanging some broadband customers when it comes to delivering the service they pay for. The National Football League has long been sparring in and out of court with the company for not carrying the NFL Network as a basic channel.

---

Also, subscribers have been furious about weak customer service despite robust cable bills, which, industry-wide, have risen at twice the rate of inflation since 1996.

---
Then there's Wall Street.

---

Comcast stock, priced not long ago at $18.35, is trading around 10-year lows. Until recently, some shareholders like Glenn Greenberg, whose Chieftain Capital Management owns 1.5% of the stock, had loudly argued that the company was underperforming.

---

Their major concerns: Comcast was paying too much for acquisitions. Return on assets was way too low. And Brian Roberts wasn't hard-nosed enough.

---
Comcast got the message. The company is paying a 25¢-per-share dividend, buying back $7 billion in stock, paring capital expenditures and canceling a scheme to keep paying Ralph Roberts after he dies. Greenberg now says Comcast is coming around, "The company is doing what shareholders want in a very smart way."

---
Give the Robertses credit. They're staying in the game at a moment when Time Warner is spinning off its 15 million cable subscribers.

---

Since its failed bid for the Walt Disney Co. in 2004, Comcast has returned to its roots as a program distributor, smartly upgrading its cable systems so it can offer hundreds of digital channels as well as high-def TV, video on demand, and broadband and telephone service.

---

The company is also shelling out $1 billion--along with other companies like Time Warner Cable, Google and Intel--to fund a wireless Internet venture formed by Sprint Nextel Corp. and Clearwire Corp.

---
Since it became clear that Verizon is a threat, Comcast has also stepped up its marketing. That includes discount packages featuring, say, cable TV, Internet and telephone service for $99 a month.

---

While Comcast has lost 195,000 basic-cable customers in the past two sluggish quarters, it has added 1.2 million telephone subscribers, bringing that total to about 5.6 million, as well as adding 770,000 lucrative broadband customers.

---
Other initiatives in what the younger Roberts terms "Comcast 3.0" include rolling out more services to small businesses and hiring more customer-service representatives.

---

But don't expect major deals in the near term. Roberts, who earned $20.8 million in 2007, allows that Comcast has a long way to go but says he's the guy to get it there:

---

"I can't think of a business, industry or company I want to lead as much as this one."