Comcast joins the ranks of Phila. icons
The company ranks with the city's all-time business giants, and casts a shadow nationwide.
By Tony Gnoffo
Philadelphia Inquirer Staff Writer
philly.com
The Comcast Tower, Philadelphia's future tallest building, is still just a hole in the ground. But already, for better or worse, Comcast Corp. towers over Philadelphia and much of the American media landscape.
While you were surfing its hundreds of channels and grumbling about its rates, Comcast became one of the most important and influential companies in Philadelphia - ever.
Of course, history is full of once-proud companies that lost their way. But at least for now, some historians and business leaders say Comcast should be counted among such former Philadelphia giants as the Pennsylvania Railroad and the Baldwin Locomotive Co.
Hard to believe?
Forget about your cable bill for a moment and consider:
As the nation's biggest and most influential cable company, Comcast pumps the lifeblood of American popular culture into more than one in five American households.
Wall Street values Comcast more highly than any other company based in the Philadelphia area. Its shares are worth $67 billion - more than those of the region's next six most valuable companies combined.
Comcast is maneuvering to own much of the content it once merely delivered. The 76ers and Flyers, E! Entertainment and Style networks, the Golf Channel, Outdoor Life Network - they and others belong in whole or part to Comcast.
Comcast has forged partnerships with technology companies such as Microsoft, Motorola and TiVo to virtually dictate the capabilities of the tools that connect your house to the world.
"We're going to change television for the better for the consumer," Comcast chairman and CEO Brian L. Roberts told investors recently. The company, he said, is poised to give consumers what they want: control over all their communications services.
And while he and others at Comcast have acknowledged that Comcast's service costs more than the competition from satellite firms and the phone company, they say it's worth it. "We have to ... get the consumer to understand that if you get Comcast, you get the best," Roberts said.
Now, Comcast is unveiling its next big thing: telephone service.
In that market, Roberts aims to achieve what was once thought impossible: He wants to steal customers by the millions from Verizon Communications Inc. and other phone companies.
Such audacity should come as no surprise. Roberts and his 85-year-old father, Ralph, the company's founder, who still works at least four days a week, have never been shy about thinking big.
Though it failed, their bid last year for the Walt Disney Co. - combined with Comcast's purchase of a big chunk of AT&T Corp. in 2003 - was transforming on many levels.
Not the least of those, say Philadelphia business leaders, was that it showed that big things can happen in Philadelphia.
"I think a lot of Philadelphia's old industrial giants ... inspired a certain sense of civic pride that they had the moxie to take on the world," said Mark S. Schweiker, the former Pennsylvania governor who heads the Greater Philadelphia Chamber of Commerce. "My sense is that Comcast is on the verge of that kind of prominence and influence."
Certainly, Comcast could stumble in any number of ways: by overestimating the willingness of consumers to change phone companies, by attracting increased attention from regulators who are being told that Comcast is getting too big and too powerful, or by failing to recognize a threat poised by some new technology.
But for now it's on a roll, and many think that's good for Philadelphia.
Comcast will add nearly 1,000 employees to its Philadelphia payroll by the fall of 2007, when it moves into the Comcast Tower. Many will have technical, business and legal degrees. They will earn nice salaries, buy homes, and care about the schools their kids attend.
Comcast now employs more than 5,900 people in the Philadelphia area. On its Web site recently, it advertised 240 job openings the Philadelphia area, almost half in the city of Philadelphia.
It's true that the titans of Philadelphia's past equaled or exceeded Comcast's national reach, and that they created more local jobs.
The Pennsylvania Railroad, arguably the most important of all Philadelphia companies, operated a network that was the technological equivalent of the Internet in the latter half of the 19th and first half of the 20th century. And it employed 279,000 people at its peak in 1918.
Comcast employs just 70,000 nationwide. But consider: More than one in 10 U.S. households connected to the Internet today is connected by Comcast. And the Pennsy was never worth more than a fifth of Comcast's stock-market value - it hit an inflation-adjusted peak of about $13.7 billion during the frenzied market run-up that preceded the crash of 1929.
Also, as Wharton School marketing professor Bernard E. Anderson noted, none of Philadelphia's previous business titans emerged at a time when corporations were leaving the city. And few of them had the potential to change the entertainment and communications landscape of the nation - or the city's image around the country.
"The presence of Comcast in Philadelphia and their plans to construct the city's tallest building clearly give the city a bold symbol in the new economy," Anderson said.
Some think that Comcast looks good because it's a big fish in a shrinking pond. Plunk Comcast in the Philadelphia of the 1920s or 1940s, and "it would be one of the major companies" in the city, allowed Temple University history professor Herbert J. Ershkowitz.
"But there would be a lot more competition," he said. "I think Comcast would be less important today if we weren't such a basket case."
Although people who live in the Philadelphia area may admire the Roberts' business acumen, many bristle at the company's rates and customer service.
Comcast's cable rates have consistently grown faster than inflation. But that's an unfair comparison, Ralph Roberts says, because Comcast continually improves the content and amount of programming it offers. And, notes Brian Roberts, "people get to make a choice every day: They can get their TV elsewhere. They can get their broadband elsewhere. But they make a value decision, and they stay with Comcast."
Comcast also has scored poor on recent customer-service surveys. A recent report by the University of Michigan ranked Comcast near the bottom in terms of customer service compared with other cable companies. But Comcast has launched an aggressive improvement effort in which managers' annual bonuses are tied to measurable improvements in customer satisfaction. A customer service center that Comcast opened in Voorhees in 2001 is about to expand for a second time to handle the growing volume of calls generated by its new services.
Nor is the company without its critics on the national level. Several advocacy groups have said they will attempt to block Comcast and Time Warner Inc. in their joint bid to buy the cable systems of bankrupt Adelphia Communications Corp. because it will give them too much control over the cable landscape.
Comcast executives would demur at acknowledging such power. "It's not about size," Brian Roberts said of Comcast's almost constant deal-making. "It's about innovation. It's about having some control over the innovations that will give our customers amazing new products."
Wall Street, too, has been unkind to Comcast; the company's shares have traded in a narrow range between $30 and $35 this year.
One reason is the overall market's lethargy. But some analysts harbor nagging fears about how Comcast will perform when it has to compete with Verizon and SBC Communications Inc. in its core video business; the phone companies both are in the early stages of building networks to provide TV service over fiber-optic lines.
The analysts "want to wait and see," said Ralph Roberts.
In the meantime, Comcast may soon get back into the cell-phone business that it left in the early 1990s. It and other cable companies want to offer what many in the telecommunications business refer to as the "quadruple play." That's the ability to sell phone, cable and Internet access - plus cell-phone service, in a single package to consumers.
Comcast has said it may join a consortium of cable companies in creating a partnership with one or more cell-phone providers. Or, Comcast may strike such a deal on its own. It could even buy a cell-phone company, though such a move would be very expensive, even for Comcast.
"I wouldn't rule anything out," said Ralph Roberts, who at Comcast is referred to as "the man with the golden gut," for the quality of the business advice he gets from gut feelings.
Stephen B. Burke, Comcast's chief operating officer and president of its cable business, acknowledges, but doesn't share, investors' worries about the phone companies' foray into the video business.
"I think Wall Street is overestimating the effect of the phone companies," he said. "They're going to be the fourth competitor" - after the local cable company and satellite companies DirecTV and DISH Network - in each market they enter. "And we're already competing with satellite every day."
The real question, he said, is: "Are we likely to have more phone customers than they have video customers?"
The new phone-service venture - and an increase in the amount of revenue it gets from each of its customers - is important to Comcast, because cable companies have probably already reached nearly all the households that want cable TV.
"We're not going to stand still," Brian Roberts said. "We're going to use the platform to differentiate, we're going to use the platform to lead."
And he said he is determined not to let Comcast join the great Philadelphia companies of the past by marching into history.
"We do not take for granted for one second our incumbent position with people's television and the Internet," he said. "That's what makes the company relevant, interesting and intellectually stimulating."
Contact staff writer Tony Gnoffo at 215-854-2466 or tgnoffo@phillynews.com |
