Comcast's Roberts Sees Recession Lag Effect

Comcast's Roberts Sees Recession Lag Effect

Operator Not Getting ‘Surging of Orders' in Q2

The economic downturn is continuing to hurt subscriber growth in the current quarter, Comcast chairman and CEO Brian Roberts said at an investment conference Friday.

"It's still a scary time," Roberts said, speaking at Sanford Bernstein's 25th Annual Strategic Decisions Conference in New York.

Comcast posted better-than-expected results for the first quarter of 2009, improving subscriber losses and nearly doubling its free cash flow, to $1.4 billion.

Roberts pointed out that he had said on Comcast's first-quarter earnings call that there was a slowing of subscriber growth in March and into April. But he said the falloff is greater than the typical seasonal second-quarter slowdown.

"It is across all units. We're really not seeing a surging of disconnects. We're just not seeing a surging of orders," he said.

There appears to be a "lag effect" from job losses, housing vacancy rates and lower housing starts, Roberts said: "There are just less opportunities to sell new things right now."

While he chalked up the situation mostly to a general slowing of consumer expectations, Roberts did acknowledge that Comcast is facing additional competitive pressure from telcos and satellite operators.

"It's intensely competitive for the next customer," he said. "It's really hard to separate what is the economy versus competitive... but I think we've anticipated [competition] pretty well."

That said, Comcast's strategy is not to win customers at all costs, Roberts said. "It's not just [customer] units for the sake of units," he said.

One of the biggest initiatives for Comcast in 2009 is to convert more markets to "all-digital" operation, meaning only a few broadcast and PEG channels remain in analog format, Roberts said.

In Portland, its initial market for the cutover, Comcast will be completely done with the digital transition within the next two or three weeks, according to Roberts.

With the all-digital initiative, code-named Project Cavalry, basic video customers who don't want to upgrade to a digital tier are provided a sub-$30 digital terminal adapter that converts the basic lineup to analog.

By eliminating the bulk of the analog channels in the basic-cable lineup, Comcast will be able to introduce more than 100 high-definition channels in the Portland market, up from the mid-30s today, Roberts said. In addition, the operator will introduce up to 30 ethnic channels and be able to allocate four 6-MHz channels to DOCSIS 3.0 services.

"It is critical to get out of the analog business," Robert said. By going all-digital, "this offering, right this second, allows us to super-charge our video product."

Comcast currently has a half-dozen markets in transition, including San Francisco, Seattle and Philadelphia. The operator hopes to convert virtually all of its markets nationwide to all-digital by the end of 2010.

With the spectrum freed up from the all-digital conversions, Roberts also said he doesn't see a major rebuild for the cable network in the foreseeable future, echoing comments made earlier Friday by Time Warner Cable CEO Glenn Britt at the same conference.

Roberts was interviewed by Sanford Bernstein senior analyst Craig Moffett.

Asked about so-called "cord cutting" -- the notion that consumers will cancel pay-TV services in favor of acquiring content via the Internet -- Roberts said he didn't see any evidence it is happening in significant numbers.

However, Roberts added, it's good that the prospect of cord-cutting has prompted a response from cable operators and programmers. Comcast, for one, plans to launch On-Demand Online service through Fancast later this year that would provide the operator's own subscribers additional programming.

"I think having this discussion now, when it's not really happening, is very healthy," he said.

Roberts was bullish on commercial services, pointing to revenue growth from small and midsize business customers of more than 40% in the first quarter.

"Small businesses want to save a couple hundred dollars per month," Roberts said. "There has been no competition except for the incumbent. We're playing offense."

On wireless, Roberts expressed optimism about the company's investment in Clearwire. "They're in an execution phase right now," he said. "They've hired a terrific CEO."

Comcast expects to launch wireless broadband in a couple of markets in the second half of 2009, bundled with wired broadband. The operator has said previously that it plans to resell the WiMax service initially in Portland.

The idea, according to Roberts, is to provide a mobile complement to the core cable-modem service. "I don't think the speeds [of Clearwire's WiMax service] will make it a replacement for wired," he said.