Bring on the Telcos

Comcast chief vows to grow business despite intense competition
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As the cable industry gathers in Atlanta for the annual National Cable Show this week, executives will be looking to Comcast Chairman Brian Roberts for his take on a host of pressing issues, from telco entry into video to new video-on-demand services. Some investors on Wall Street see cable as on the defensive; Roberts contends that he's playing offense. As chief of one of the nation's largest cable operators, he believes he can take more phone customers from telcos than the telcos can take away in video customers from cable. He shares some of his views with B&C's John M. Higgins.

What are you thinking about the industry right now? What are your top priorities?

We are at the beginning of a fantastic period. Comcast Digital Voice, our phone service, is now really beginning to pick up pace. Couple that with having high-speed data with faster speeds, with Comcast On Demand being up to 6,000 shows, with DVRs, and with high-def getting close to 15-20 channels in all of our major markets, and we have a great complement of services that are clearly, clearly the best. So you're going to see wonderful success. We've really hit a rhythm. We're going to have, I hope, a fabulous year. And with first quarter just ended, it feels like we're off to a great start.

Outside the business, you would think cable is in the middle of a terrible storm, rocked by competition from telcos and satellite TV (DBS).

That's the hard part, to close your ears to that. I said at the beginning of the year, we're going tonot focus on the stock, and I mean it. The company has really picked up speed in a great way. We can have a record year and set the stage for even better years ahead. You can look at the results of Cablevision Systems and see incredible phone results; you can see really exciting results at Time Warner and Cox. Comcast is going to soar with new-product sales that are going to hopefully really be better than anyone could be realistically anticipating if you were just judging us based on the stock.

You haven't designed video-on-demand (VOD) to be a big moneymaker. Is it giving you what needed from it?

That and more. We had nearly a billion and a half orders last year. Now we have broadcast content from NBC and CBS. The IFC Films deal gives us theatrical movies on the same day and date as movie theaters, let alone with DVD retailers. I expect to start trying to get the theatrical window narrowed almost completely in some experiments. There is almost no content that isn't available on-demand now. We have music and karaoke and dating and real estate. And we also have 500 free movies, NFL football games and news. We felt it was really important to clearly distinguish ourselves as the premier video provider to a consumer who has a digital box.

Will VOD ever become a significant revenue source for this company, or is it just primarily glue to keep your customers from defecting to DBS?

It will be primarily a value proposition—you can call it glue—that allows us to make our products the best.

Right now, you have prime time shows from broadcast networks on-demand but only in a few cities. How long will it take to get that in more markets?

I don't know. What's happened since the iPod announcement with Desperate Housewives is, the floodgates are now open and the content companies are over that initial quandary of, “Do I change the business relationship with the consumer through the traditional windows of television programming that we've lived with for 30 years or longer?” Now they are doing it. And you're going to see a variety of implementations.

You said your “competitors” can't readily do this, but that's just DBS. I guess the inference there is that telcos are not competitors yet.

It's clear the Bells have made their intentions known, and they are aggressively seeking law changes and lobbying and doing all the things that they are doing.

People outside the industry seem to think the telcos are going to steamroll over the cable guys and take half the market and that they're going to be gigantic video players. I've lived through this a couple of times, so I'm less confident of that.

There's no point talking a lot about it. It's more important that our company execute well, and the rest will take care of itself. We're not planning to sell the company; we are focused on consumer experience. We're finished with the integration of AT&T Broadband, we're finished with a lot of the technical work to be ready. Now we're in the exciting part.

This is the fun of communicating to the consumer why you want to partner with Comcast, why you want to trust us to be the center of your home entertainment and your communication system. And we've got to really focus on service and execution to make sure that our network is the most reliable and to make sure that the experience we deliver is better than what we advertise.

The telcos want to get around the city-by-city franchising, either getting national or at least statewide franchises. You're not opposed?

So long as it's a level playing field and doesn't create new regulations on our industry—either intended or unintended—I don't see why this industry doesn't take the view that we're ready for more competition. And so long as the relationship with the cities remains fair to the cities who have had a significant voice in what does and doesn't come in and out of their community. There's a legitimate question about build-out, that there shouldn't be any discriminatory behavior in which neighborhoods do and do not get the new services.

In the local franchise in Philadelphia, it says we must build every single home. If there was going to be a new entrant and they only wanted to build certain areas and they were targeted based on demographics, is that okay or not? That should be a public-policy discussion. We can have a point of view, but in the end, I think it's up to somebody else to make that decision.

Some people want regulators to mandate Net neutrality, keeping the Internet widely open to content companies. Should they?

No, we feel very strongly that there's no reason to regulate the Internet. It's the growth engine of America. There is plenty of competition. There's been no behavior that has troubled anybody. It's a theoretical question, and do you need to pass laws and regulations with unintended potential consequences to innovation? No. We feel that very strongly.

Net neutrality would be very tough for you in the way you operate your phone system, where you prioritize a lot of data packets.

I haven't heard anybody suggest anything that would try to slow down our phone business. But your point is that there might be unintended consequences that haven't been discussed or thought through.

[NCTA President] Kyle McSlarrow is the best person to be leading this industry at this time that I could possibly imagine. He is knowledgeable, thoughtful and the quickest study I think anybody has ever met in terms of really understanding the history of how the industry evolved and why the issues are relevant and what we need for the future. He has drawn us together well, and I think all we've asked is that we have a meaningful seat in the dialogue as they talk about rewriting some of the telecom laws.

How are the negotiations with Disney and ESPN?

I've never commented on any discussions in progress. But [Disney's] Bob Iger's doing a great job of trying to rethink the windowing of the business models. He has an openness to innovate that we would like to find ways to work with. I'm hopeful.

Because that was a major reason that you made a bid for Disney two years ago, you didn't think that you'd get good windows for theatrical movies or ABC product the way that you're doing now.

The world has changed light years in the last 24 months. It has very much been heading toward a viewer-controlled world. Our vision has expanded as an industry. Our Sprint wireless relationship is a really exciting platform. We have VOD, DVRs and perhaps network DVRs. Imagine the world five years from now.

Cable companies are in the best position to make that transition for the consumer, and the content companies are really excited. And whereas maybe there was initial skepticism, the operators see it as a value-added business.

Same with the Internet. There is a great opportunity for video over the Net. And maybe initially everyone was concerned with what might it mean to our primary business, but it's pretty clear it's going to be a growth opportunity both for companies who deliver broadband and for content companies. How can we work together to deliver that experience in a way that protects the content and the copyright holders and is great for the consumer?

Although, ultimately, Yahoo and Google could be packaging the same cable network that you have.

We are going to have more competition, but that doesn't mean we're not going to have a great growth period. And in the end, it's about a customer wanting to pick somebody who can deliver them the best products, make it simple and make it work. I'm not sure anybody can package it as well as cable can. There will be some new forms of competition. But net to net, this is going to expand the pie. Cable has the best value and the best products; what a great position to be in.

What are your own programming ambitions? You've been in small networks for the most part, building them up. Do you want to buy something big? Hallmark? Univision?

We're pretty much focused on growing and building with what we've got. We're excited about on-demand as a platform, actually. We are announcing at the show that we're launching sci-fi as a genre for on-demand, principally with no analog or digital network attached.

You can go down the line—E!, Golf Channel—and there is an energy and a desire to invest. We're not milking these networks; we are taking a lot of money and trying to re-energize and grow the networks.

Can you give me your first impression of some people? News Corp.'s Rupert Murdoch.

Fantastic entrepreneur and tough competitor, tenacious.

Time Warner's Dick Parsons.

Honorable, class act.

CBS' Leslie Moonves.

I didn't know Leslie very well, and we had one meeting. He's really energized to make a change. We said, “How about these shows, trying them out on-demand?” He said, “Let's do it. I'd like to do it in 40 days.” He's driven to revitalize an industry that most people think maybe is kind of a tough challenge.

Verizon's Ivan Seidenberg.

Ivan is smart. I don't know Ivan extremely well. Very likable and determined.

But in almost the same position as Moonves, coping with a tough industry.

I don't believe business at this level is personal. We each have different strengths and weaknesses. They're all talented people that you've just mentioned.

You inherited leadership of this company from your father, Ralph. How do you keep it going for the next decade, two decades? Or do you just sell to Verizon?

One of the most challenging—and ultimately the most satisfying—parts of my job is addressed by that question. I think about that a lot. We have great people here, and we bring in new ones. They're turned on by the Comcast history, the culture. If I can deliver that somehow by keeping that slightly different culture and that family feeling, those smart people will figure out all the answers to these questions you've been asking.

So how do we keep that chemistry going, how to not recruit or how to recruit the best and yet have a professionalism as we go forward that maybe an entrepreneurial startup company doesn't have, and yet at the same time not become bureaucratic? And getting that right, that's the secret sauce.

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