Mandate Yields 2.1 Million CableCARD-less Boxes from Comcast
Comcast connected about 2.1 million integrated security set top boxes before the July 1 integration ban, since the company made moving those boxes to the field its top priority for the second quarter, executives said during a teleconference with investors Thursday. That was twice as many boxes as it installed first quarter, Comcast said, and four times the number it installed a year earlier, wrote Miller Tabak analyst David Joyce. Emphasis on deploying the boxes pushed Comcast digital penetration to 58.5 percent. However, that intense focus hurt retention of basic video subscribers. “When you prioritize digital as much and have as much activity as we did, that prioritization takes your eyes off other things,” said Chief Operating Officer Stephen Burke. But the emphasis on deploying the boxes will pay off, because new CableCARD-enabled boxes cost up to $50 more each, he said.
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The second quarter typically is slow for cable operators, as college students disconnect service to move home for the summer, Burke said to explain Comcast’s loss of 95,000 basic video subscribers. Analysts expected smaller losses. Comcast stock fell more than 6 percent before rebounding slightly.
Comcast promotions aimed at getting analog subscribers to buy digital cable (CD June 18 p6) yielded 823,000 new digital customers. About 621,000 of those signed up for Comcast’s lowest-end digital service and its limited lineup. The rest bought Comcast’s “full” digital package, the company said. Many users already paying for digital service, also targets of Comcast’s marketing, upgraded or added services. About 441,000 signed up for HD programming or PVRs. Among all Comcast digital cable subscribers, 20 percent buy its low-end package and 40 percent its “full” package, it said. The rest also buy advanced services like HD. “What that means is that 80 percent of our digital customers are paying us at least $65 a month,” Chief Financial Officer John Alchin said.
Installing 2.1 million set top boxes in 13 weeks cost dearly, Chairman Brian Roberts said. Customer service call centers experienced increased volume and cable technicians were busier. “It creates a lot of truck rolls, a lot of phone calls and a lot of costs,” he said. Comcast’s effort won’t turn off “like a spigot” now that the ban on integrated security in cable boxes is in effect, but the company will scale back as it shifts focus, Roberts said. Comcast bought out entire inventories of low-end set-tops that were “useless anywhere else, almost in the world,” to get them out ahead of the deadline, he said.
Broadband and VoIP
Comcast signed 330,000 broadband subscribers, about the same as a year earlier. That figure let down some analysts, who had expected modest growth. Progress lagged as a result of changing technology out of the systems that Comcast acquired last year from Time Warner Cable and Adelphia, executives said. They played down concerns about video competition from Bells. “During those conversions, we added a lot less subs than the year before,” Burke said.
Comcast’s broadband business should pick up the rest of the year, Burke and other executives said. “The trends are looking pretty strong,” he said, citing preliminary data from July. And Q3 always sees broadband subscriber growth spike, Roberts said. In another promising trend, Comcast appears to be winning more DSL customers, he said. About 55 percent of new Comcast broadband customers Q1 had switched from DSL. Second quarter, 58 percent of new Internet customers dropped DSL service, he said. Comcast added 671,000 net VoIP subscribers in the quarter. Revenue from its phone business nearly doubled from a year earlier to $420 million, it said.
Comcast quarterly profit grew 28 percent year to year to $588 million, it said. Total sales rose 31 percent to $7.7 billion.