Comcast Corp. chairman Brian Roberts told investors Tuesday that he has serious doubts about whether the Baby Bells can reap profits from a video market in which cable is fighting for customer loyalty every day with two major satellite companies.
“I don’t know whether they really have a business model to go and bring all of that investment and to be the fourth or fifth provider with no differentiation in service. I really don’t understand it yet,” Roberts told investors at a Comcast-hosted forum in Philadelphia.
Roberts was referring to Verizon Communications and SBC Communications Inc., the two biggest phone companies that are planning to invade cable territories with multibillion-dollar investments in fiber networks either going all the way to the home or just to neighborhoods.
SBC is being more cautious than Verizon, which intends to pull fiber past the doorbell.
“One Bell says the other Bell’s numbers are crazy -- it’s too expensive to build fiber-to-the-home, and the other says, ‘I want to do it on the DSL [digital-subscriber-line] platform,’" Roberts said in the question-and-answer session. “That wouldn’t affect anything we are doing. We can’t control what they are doing.”
Addressing a hot regulatory issue, Roberts cautioned that Verizon and SBC should not be allowed to cream-skim video markets through a rollout plan that targets affluent consumers first.
“In their own investor-presentation slides, they say things like, `We only want to serve the better homes,’” Roberts said. “I think ultimately, legislators and regulators are going to decide, `Is it fiber-to-the-home or fiber to the rich?’”
Cable systems, he added, reach all homes in a community, as required by federal law.
“The beauty of our position is that we have ubiquity with all of our products, with all of our homes [and] with all of our services,” he added. “We’ve never redlined; we’ve never discriminated.”
Another disadvantage facing the Bells is programming costs. As the No. 1 cable MSO with 21.5 million subscribers, Comcast reportedly gets the best volume discounts in the pay TV market.
“Scale should help us and scale should matter. And 40% of all your costs … are programming. I think we can compete on that, and I think we have at least a neutral, if not a huge, advantage on programming costs,” Roberts said.
Comcast is planning to offer voice-over-Internet-protocol service to 15 million homes in 20 markets by the end of the year. Roberts said that because the voice market was less crowded than video, the MSO has a great opportunity to take share from the dominant Bells.
“We come in as second [in phone] and, hopefully, with a better platform,” he said, adding that Comcast’s network “can make a minute of long-distance for a half a penny that previously cost five cents.”
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