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Comcast (CMCSA)Stock (Media & Entertainment Industry, Internet Service Providers Industry, Cable TV Industry, Telecommunications Industry)
 The video service business has reached near saturation and nearly 85% of television owners pay for either cable or satellite services. Rather than compete head-to-head with the satellite companies for share of a fiercely competitive and stagnant market, Comcast has turned most of their marketing efforts inward, toward their existing customer base. Their primary marketing strategy is to bundle all three of their services--video, Internet, and voice--what Comcast calls their “Triple Play”. By the end of 2008, Comcast will deploy their Docsis 3.0 system to 20% of their cable markets. Docsis 3.0 offers triple play services which includes broadband that has similar download speeds to Verizon's FiOS network. Verizon has released its FiOS network into New York, Comcast's primary market. One key pillar of their Triple Play is their Voice over Internet Protocol (VoIP) service, a technology that offers phone service over Internet lines and is often less expensive to the consumer than standard land lines. The company came to the VoIP game late, however--two years after Cablevision Systems (CVC) and one year after Time Warner Cable, both of which offer similar bundled services. As a result, penetration of voice customers lags behind its two main competitors. Nearly 15% of Time Warner's cable customers also subscribe to its VoIP offering and nearly one-third of Cablevision's customers do. On the positive side, Comcast (<5% penetration) has significantly more room for future growth, especially given its industry-leading cable television customer base.
[edit] History and Company OverviewComcast was founded in Tupelo, Mississippi by Ralph Roberts in 1963. The company was incorporated in Pennsylvania in 1969 and currently is headquartered in Philadelphia. Comcast began as a cable provider but has expanded to offer Internet, voice, and business services. For FY2007, Comcast reported revenues of $29.3 billion and employs over 90,000 people nationwide. Comcast's other holdings include:
 [edit] Business Drivers[edit] Housing MarketWith more than 85% [1] of television owners already paying for cable or satellite services, the number of new potential cable customers is small. New homes provide new potential customers for cable companies and as a result, growth in the cable industry is closely tied with growth in the housing market. Recent deceleration of the housing market could mean a loss of growth in the cable industry. [edit] BundlingComcast's already large customer base--the largest in the industry--means that their best future customers may already be in their base. Given the limited universe of potential new cable customers, a significant growth area is selling to their current cable customers other services, namely Internet and voice services. Comcast brands this strategy their "Triple Play," otherwise known as bundling. Bundling is the marketing strategy of cross-selling customers across cable, Internet, and voice services. Comcast's "Triple Play" and costs approximately $99 per month. Consumers benefit because they have one consolidated monthly bill, and one company to deal with if there are problems. [edit] Government RegulationIn recent years, the consumer advocacy group have pushed for greater regulation of large cable companies. In late 2007, the FCC ruled that Comcast and other cable providers could not establish exclusive contracts with apartment buildings. In the past these contracts have stifled competition by preventing smaller cable providers and telcos from offering service in the same complexes. These new rules could open up as many as 25 million U.S. households to Comcast's competitors. Meanwhile, greater competition could significantly erode Comcast's pricing power. The FCC chairman Kevin Martin is currently pushing the commission to find that cable providers currently provide service to 70% of potential subscribers in areas that they service. If the FCC finds that this threshold has been met, it would open the door to more stringent regulation. Among the measures up for debate, are an unbundling of cable channels and a cap on Comcast's growth. The former would make offering cable service much less economical for comcast, while the latter has obvious negative consequences.
[edit] VoIPVoice over Internet Protocol (VoIP) services use Internet networks to provide more efficient phone service. VoIP service is a part of Comcast's Triple Play bundle, and is also a component of the bundles of their closest competitors, Time Warner Cable and Cablevision Systems (CVC). The graph below shows the progress that each of the three companies has made in terms of getting their current cable base to begin using their VoIP voice service. Cablevision released their VoIP service one year before Time Warner Cable and two years before Comcast, which is why their data spans a longer period of time. Cablevision's early release of VoIP has given them a higher percentage of penetration among their cable subscribers, but the growth of new VoIP customers has already started to decelerate. Comcast, on the other hand, with its late entry into the VoIP market, is farther behind in subscriber penetration. The company's significant lever is their large base of cable subscribers, a significant source of potential growth.  Source: Company Data [edit] Net NeutralityCongress is considering legislation that would allow broadband Internet providers--like Comcast--to charge for preferred delivery of digital content. “Net neutrality” advocates are lobbying Congress to treat all web content the same, as is the current standard. Comcast and other Internet providers claim they should be able to sell premium service to larger users of their networks, since they are investing heavily to build and maintain such networks. If legislation is passed to prevent Comcast from charging premium prices for differentiated delivery, it may have a negative effect on Comcast revenue. [edit] CompetitionComcast's focus on bundling widens the scope of competitors beyond cable companies to Internet service providers and voice companies. Comcast's main competition in cable TV is primarily from satellite providers such as DirecTV (DTV and Echostar (DISH), both of which are just beginning to offer broadband Internet (but not voice). In previous years, Comcast has lost customers to the satellite providers, who have aggressively pursued new customers. In 2006, Directv and Echostar combined to add 1.8 million new customers, while the top ten cable providers combined to added only 200,000 new customers. These numbers reflect in part cable companies focusing their inward marketing efforts on existing customers. The table below shows that industry leading Comcast has the most room for growth for their Triple Play package, since they have the largest initial base. For all three companies most of the Internet and voice customers are also cable subscribers.
 Comcast2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available
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Categories: Media & Entertainment | Telecommunications | Mature | Cable TV | Internet Service Providers |
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