Telcos are talking tough about grabbing cable's customers, but cable executives at the National Show in Atlanta last week vowed to defy the Baby Bells and predicted major growth for their operations.
Cable industry leaders emphasized how well their business is performing as they continue to add high-speed Internet, digital phone and digital cable customers at a rapid pace—all new “revenue-generating units,” in industry parlance. Major operators seem to have arrested their slow loss of basic cable subscribers to satellite, and they are showing modest signs of growth.
Meanwhile, Verizon and AT&T (formally known as SBC Communications) have budgeted billions of dollars to upgrade their phone networks to increase the speed of their online services and launch video. The moves are a counterattack to cable operators' push into telephone service, which is grinding down the telcos' core business.
“If we didn't have a new product to sell right now, we could just sit here and be doom and gloom,” said Comcast Chairman and CEO Brian Roberts at a general session. “There's never been more new products to sell, and that's lifting our boat big time … it's a great time for this business.”
Roberts boldly predicted that major operators would have “double-digit (percentage) growth in everything.”
Cable executives widely expressed skepticism that the telephone companies will actually follow through on all the promises they're making Wall Street and Capitol Hill as they seek regulatory relief. Cox Communications President Pat Esser said he's tired of “aspirational press release after aspirational press release by the RBOCs [Regional Bell Operating Companies]” over the past few years. “It tends to wear on you.”
But the optimism was not reflected by attendance, which dropped 9%, from 17,000 at last year's San Francisco gathering to 15,500. The National Cable & Telecommunications Association said that pre-show registration was on track but hundreds of expected walk-in attendees didn't materialize.
BIG BROADCAST BUZZ
The major news of the show actually came from a broadcast network. After hinting for weeks, ABC announced plans to stream free, ad-supported episodes of some of its most popular shows.
But cable bigwigs were quick to spin the deal in their favor, pointing out that cable's a player in broadband, too, and that ABC streaming video is a good thing for their overall businesses. Thanks to ABC, more viewers will get used to watching hit shows online, they reasoned, and the move will make the ABC shows available to cable's video-on-demand (VOD) business that much sooner.
In fact, cooperation among cable programmers and distributors was another prominent theme at the show. The two are seemingly trying to reassure each other—at least publicly—that continuing to work together is the way to weather the multiplatform-distribution revolution. By continuing to exploit each other's services, the thinking went, they'd all win in the future.
“The world we come from is, there's a big pie, hopefully it's growing, and there are a lot of players in there,” said Time Warner Chairman/CEO Dick Parsons. “You can't own everything yourself. World domination is not an option—it's not even a vision. In the cable industry, you partner with people who do the pieces well, and you share the prosperity and you share the growth and everybody does well.”
Comcast and Sony illustrated that by launching a VOD “channel” at the show. While packaged and promoted like a network, the as-yet-unnamed channel won't actually exist as a standard channel with a linear schedule.
“The companies that look at all this change and get paralyzed by it are the companies that aren't going to do well,” said Comcast COO Steve Burke. “It's a brand-new business model, and one we can replicate and slice and dice and do half a dozen of in a way that was unthinkable three years ago. You can sit there and wish for those days [of basic cable] or you can say, 'What is the next business model, the next great way to create content and put it out there?'”
WALL STREET NOT SOLD
The telco anxiety was evident, however, at a series of private sessions with investors and analysts. A major goal of the National Show is to showcase the industry's technology prowess to Wall Street. Lately, investors have been sour on cable operators, something reflected in their weak attendance this year. Commented Bank of America analyst Doug Shapiro, “The turnout from the financial community was the lowest we've seen in a decade.”
One highlight of the sessions is accompanying chief executives on a tour of the floor. Comcast's Roberts was interested in a new type of VOD service from Broadbus; his interest increased when he learned that Comcast was an investor in the company—one of dozens of small technology investments held by Comcast's venture-capital unit.
“News to me,” Roberts said with a laugh.
On the technology side, there was lots of chatter about the ways cable operators can manage the amount of video they push through their systems. One method is digitally compressing channels now sent as unwieldy analog channels. Another is converting to a “switched” video system that transmits lightly viewed channels much like VOD programming. That takes the load off fiber in the ground—which is expensive to expand—and onto servers and nodes, which are far easier to add.
Cablevision COO Tom Rutledge said looking into switched video gear was a high priority. Mediacom CEO Rocco Commisso was interested in a Motorola demonstration that was one of the show's most popular. The manufacturer has developed an inexpensive box that extends use of a home's digital video recorder (DVR) to other rooms.
So rather than installing $400 DVRs in multiple rooms, a cable operator can put one in the living room, then place $100 boxes elsewhere in the house to share the feed.
Said Commisso, “Anything that reduces the capital we have to spend is great.”
Additional reporting by Glen Dickson