Comcast Chief Executive Brian Roberts used a gift-giving analogy as he reflected on his company's expansion into telephony and high-speed Internet access. On a conference call discussing first-quarter results, Roberts said selling those two products in a package with subscription TV"”the so-called triple play"”is 'changing the company and keeps on giving.'
Does it ever. Comcast (CMCSA), the largest U.S. cable company, said it added a record number of high-speed Internet users and signed up more than twice as many phone subscribers as it did a year earlier. Comcast's digital phone service just turned into a $1 billion-a-year business. The gains helped lift sales 32%, to $7.4 billion, and fueled an 80% jump in profit, to $837 million.
Rapid expansion
But for rivals, Roberts' transformation of Comcast into a telecom provider has a lot to take away. Comcast is on track to leapfrog Vonage (VG) as the No.1 nontraditional U.S. phone-service provider, and it's luring a good number of the customers fleeing traditional phone companies like Verizon (VZ), whose subscribers are disconnecting local lines at a rate of about 350,000 per quarter. Comcast sells calling to 7% and fast Web services to 26% of the homes in its territory. In the next three to four years, Comcast expects to be selling these services to more than half the homes on its turf.
But Roberts isn't stopping at a triple. He's swinging for the fences by expanding in such markets as small business and adding a range of new products and services"”from wireless calling to online entertainment. 'We are going to be a very different company in three to four years,' says Dave Watson, executive vice-president for operations at Comcast Cable. 'We just feel we have this moment in time where we can gain market share and move faster [than others].'
For starters, the company is stepping up efforts to court small and midsize businesses"”a market that could generate $3.8 billion in sales for Comcast by 2011, up from $660 million now, says David Joyce, an analyst at Miller Tabak. On the conference call, Comcast executives declined to elaborate on their small-business plans, other than to say the company will make a push soon. 'It's potentially quite a huge line of business,' Joyce says.
Wireless and online services
To beef up mobile services, Comcast has begun to offer a wireless service called Pivot in select markets through a joint venture with Sprint Nextel (S) (see BusinessWeek.com, 11/3/05, 'Sprint Nextel's Watershed Deal'). Comcast has been touting its wireless plans for months, but active marketing is due to begin in some markets within weeks.
Comcast hopes to one-up existing wireless services by incorporating its own strong suit: TV. Comcast customers in a given city, for example, will be able to access local news clips. 'You see faces that you know,' says John Garcia, president of the joint venture. 'We think that's a nice differentiator.' The service will also eventually let users retrieve home voice mails, view TV schedules, and control digital video recorders via cell phone.
Another area of growth: online services. Comcast already uses its own site as a portal for such content as E! Entertainment Television. But even though Comcast.net ranks fourth among most-popular destinations for Comcast subscribers, traffic to all Comcast's sites has dropped 5% in the past year, according to comScore Media Metrix, which tracks Web traffic.