Maybe there is hope: -
Comcast Posts Strong Growth
In Cable-Modem Subscribers
In another signal that broadband is finally catching on with consumers,
Comcast Corp. added 169,800 new cable-modem subscribers for a total
of more than 1.3 million, its best quarterly growth in broadband users
ever.
Comcast, which will become the country's largest cable company when it
completes its acquisition of AT&T Broadband later this year, said revenue
at its cable division rose 12% from the third quarter of last year to $1.55
billion.
After a disappointingly slow start that staggered an expectant Internet
industry salivating to serve customers with high-speed connections,
broadband usage has been accelerating to the point where it is reaching
critical mass. For the past 18 months, households signing up for
broadband connections, mostly through cable modems or telephone
digital-subscriber-line service, have more than doubled to reach 16 million,
or 13% of U.S. homes.
Last week, AT&T Broadband, now the country's largest cable company,
and Insight Communications Co., the ninth largest, also reported strong
cable-modem sales. AT&T added 172,000 new subscribers in the third
quarter and Insight gained 21,000, its best modem growth quarter ever.
"These things are flying off the shelves," John Alchin, Comcast's
treasurer, says.
With more than 100,000
households a week signing
up, there should be 20
million homes with
broadband by the end of
next year. That is close to
the magic number
entertainment and
telecommunications
companies have been
awaiting to begin
developing content targeted
at high-speed users more
aggressively. Dozens of
content providers are now
working on programs for
the high-speed user, with
many of them likely to
charge fees.
It comes at a time when many telecommunications companies hoping to
profit from an Internet boom are either under bankruptcy protection or
have such low stock valuations that their survival is in question. Scores of
programming businesses that were established to provide content to
broadband have long since closed their doors. Scores of competitive
phone companies hoping to offer DSL services have been shuttered.
Indeed, the strength of demand for high-speed modems has surprised
some industry analysts because, so far, most of the content on the
Internet is limited to e-mail, text and pictures that is targeted at
subscribers of low-speed dial-up services. Not a lot of content has yet
been developed for the broadband user alone.
But millions of households are disconnecting second phone lines and
ditching dial-up services such as AOL Time Warner Inc.'s America Online
and paying $45 a month just for the convenience of always-on e-mail,
surfing the Web and file sharing, such as downloading photographs.
Broadband also gives them faster access to online shopping, travel sites
and electronic newspapers.
Once households have high speed, they are reluctant to slow down. Cable
companies report that modem subscribers disconnect much less
frequently than they do for, say, digital television.
How did broadband reach the point of gaining traction?
With modems representing the cable industry's greatest growth potential, cable companies have emerged as the principal driver
of broadband expansion. After a $65 billion upgrade, cable-modem service is available to 75 million homes and cable-modem
subscribers are outpacing users of digital-subscriber-line, or DSL, services by almost two-to-one. Cable is expected to end this
year with 10.6 million subscribers, while DSL will have 5.1 million, according to Yankee Group. DSL is available to 60% to 70%
of U.S. homes, according to a Morgan Stanley estimate.
Price is one factor in broadband adoption. Broadband only costs a few dollars a month more than the cost of most online
services plus a second phone line. And cable companies are making plans to roll out tiered-broadband services -- fast, faster and
fastest -- so they can begin lowering prices and attracting Internet users who aren't willing to pay $45 a month. Once the price
gets down to the $30 range, the cost of a cable modem will be little more than the cost of an Internet service.
Jason Bazinet, an analyst with J.P. Morgan, calls that price range "the AOL killer" because once people have given up America
Online and possibly their second phone line, cable modem isn't costing them extra. Clearly aware of this threat, America Online is
developing its own brand of broadband content.
The DSL business is less robust and isn't yet profitable, partly because it has proved to be technically more difficult to ramp up
telephone wires for high-speed. But some DSL providers clearly recognize its growth potential and are exploring ways to capture
market share, such as the high-speed Internet service that SBC Communications Inc. recently announced with Yahoo Inc., that
offers a number of entertainment features and easier access to e-mail. One big question: Will cable programmers offer their
content to DSL or give it exclusively to cable companies to help them continue winning the broadband competition?
A huge volume of high-speed content is coming, to add to the smattering of offerings already in the market. Indeed, content
providers are using a business model for broadband that closely mirrors content for regular cable: The customer pays for
broadband programming. Cable-TV programmers such as ESPN, CNN, Cartoon Network and numerous others are working on
broadband Internet content such as clips from their newscasts or packages of sports highlights that aren't viewed elsewhere.
They see this as a way to strengthen their relationships with the cable companies. While not everyone is charging extra for this
content now, they plan to in the future.
RealNetworks Inc., an Internet-content company, has signed up 850,000 subscribers, most of whom pay $9.95 a month for an
assortment of games, music, sports and news clips all targeted at the broadband user. CNN, a unit of AOL Time Warner, and
Walt Disney Co.'s ABC unit are both charging fees to Internet users who want to watch news videos. Major League Baseball,
Nascar and other sports organizations have either launched high-speed Internet products or are planning to do so.
ESPN is talking about putting together packages of paid programming for broadband users, complete with premium channels
that would give subscribers access to hundreds of hours of sports highlights.
The Cartoon Network just rolled out an online trading-card game called G-Toons. "One year ago, I don't think we would have
green lit this," says Paul Condolora, the network's general manager. "We think the timing is right in the evolution of broadband."
America Online, a unit of AOL Time Warner, also is cranking up its efforts to deliver high-speed content, like video and music
that subscribers can watch on their computer. America Online also has developed a new piece of software, called the AOL
companion, that sits on a computer screen with always-available information like news, stock prices, the dictionary and the
yellow pages.
For years, many at the country's largest online service resisted moving in that direction, not wishing to trade the thinner margins
of broadband for the fat profit margins of its dial-up subscription business. But America Online execs along with many others in
the Internet industry are beginning to recognize that broadband will likely be the dominant form of Web access before the end of
the decade. "In the past, some may have looked at [broadband] as if it was threatening," says Lisa Hook, the head of America
Online's broadband division. "Actually, it's a huge opportunity for us."
To be sure, the big question about broadband lingers: is it possible to make money off more than the hardware? Who is going to
start funding Internet projects again? Indeed, executives say they are proceeding much more cautiously this time.
"We're right now at a point where our thought process is shifting and we're beginning to look at this in a manner that we can
cost efficiently develop and offer [broadband] content to consumers," says Elisabeth Sami, vice president of business
development for NBC.
Overall, Comcast revenue grew 13% from last year to $2.7 billion thanks also to strong sales by its QVC online retail division.
The company reported net income of $75.6 million, or eight cents a share, compared with a loss of $106.8 million in the third
quarter of 2001. |
