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Technology Stocks : Scientific Atlanta -SFA- going up ??? -- Ignore unavailable to you. Want to Upgrade?

To: Allegoria who wrote (837)	6/18/2000 6:43:00 AM
From: Allegoria	Respond to of 1045

Inability to obtain enough set-top boxes from suppliers has been a roadblock for cable firms, preventing them from adding even more digital-cable subscribers. Thursday June 8, 12:26 pm Eastern Time Morningstar.com It's Not Your Father's Cable Industry By Todd P. Bernier There is a sea change happening in the cable industry, as the big companies move away from simply delivering traditional cable services. Recognizing that the delivery of basic cable is a mature industry, the cable firms are launching new broadband products, like cable-based telephony, video on demand, and content on demand. Although these services have long been promised by the cable operators, they are much closer to being a reality, as seen at the recent Supercomm 2000 trade show. Cable firms are investing heavily in their networks, upgrading them to be two-way compliant--a necessity for delivering broadband services. Charter Communications (Nasdaq: CHTR - news), for example, is planning to spend $2.3 billion this year to build out its networks. These huge investments will allow the cable firms to launch even more services, thus enabling them to extract as much cash from consumers as possible. The cable executives believe that their cutting-edge networks will eventually satisfy all of a consumer's communication needs: phone service, high-speed Internet access, and cable service. At Supercomm, a high-tech conference where gadget-loving geeks promote their latest and greatest products and services, the cable operators talked about the need to develop better data-transmission technology. Because digital movies, for example, will require a tremendous amount of bandwidth, the future delivery of broadband services depends on having robust networks. This is why cable operators have invested in digital-compression software technology, which allows for more digital data to be stuffed into the existing bandwidth. More bandwidth equals more pricey services. The companies will need every bit of bandwidth, too, as the demand for digital services soars. Comcast Corp (Nasdaq: CMCSK - news), for example, added 172,000 digital-cable TV subscribers in the last quarter, an installation rate of more than 13,000 new customers per week. This is even more amazing considering that about half of Comcast's network is not even capable of delivering digital services. The inability to obtain enough set-top boxes from suppliers has been a roadblock for cable firms, preventing them from adding even more digital-cable subscribers. Scientific-Atlanta (NYSE: SFA - news), also present at Supercomm, recently announced that it is raising production capacity of its flagship Explorer set-tops to 1.3 million boxes per quarter, to meet the explosion in demand. Cable firms are also moving quickly into cable-based telephony, which involves transmitting phone calls across existing cable networks. Although this service has been slow to take off, the additional capital required to offer voice over cable is minimal. Cox Communications (NYSE: COX - news) stated at Supercomm that it can earn a return on capital of roughly 15% (its break-even point) if only 10% of its customers accept this service. Anything above that rate of penetration falls directly to Cox's bottom line, which will ultimately raise the company's profit margins. Cox is also using this service to promote other services like high-speed Internet access; in fact, 18% of digital telephone customers also subscribe to Cox's Internet service. Cable is quickly morphing into a new-age industry that will be a key component in the delivery of interactive services. Investors looking to make a bet on the explosion of demand for broadband services needn't look any further than cable. Todd P. Bernier can be reached at todd_bernier@morningstar.com.