Comcast's Goal: Stem Loss of Basic Subscribers

Three months after acquiring AT&T Broadband, Comcast offered its first public comment on the merger and said it had begun to stem the worrisome tide of defections among basic subscribers.

The combined cable systems lost 412,000 subscribers during 2002, a blow that caused Comcast executives to scramble for ways to stop the bleeding. The company said the reduction was significant following the closing of the AT&T-Comcast deal in November. By the end of the year, Comcast’s cable subscribers were down 1.9% to 21.3 million.

“It’s critical to stop or stem the loss of basic customers … It was an alarming trend and it needed to be dealt with,” said President/CEO Brian L. Roberts. Comcast executives said they didn’t think the loss meant anything was systemically wrong with AT&T Broadband but that it was the first time that any cable company had lost that many subscribers.

The company’s full resources were put behind finding out why the losses were happening and turning them around. Between December 2002 and February 2003, Comcast lost 7,900 subscribers compared to a loss of 170,000 for the companies during the same period last year. The company projects to finish March and the first quarter with a gain of subscribers.

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“We believe at this point we have made a turn and we should be able to continue that turn,” said Comcast Cable President Stephen B. Burke.

Roberts updated Comcast’s post-merger efforts, including a $1.3 billion investment in systems upgrades in 2002 that will be substantially completed by the end of the year. While Comcast has sliced more than 5,000 AT&T Broadband employees since the merger, Comcast plans to increase its remaining work force by opening eight new call centers and expanding seven by the end of the year.

“We feel that customer service for the video side of the business is best handled-in house … This will improve service and improve our ability to sell and manage the business,” Burke said. It’s a departure from the approach of AT&T Broadband.

Digital cable remains a growth area, with 1.5 million subscribers added in 2002 to make nearly 6.5 million subscribers systemwide. It expects to add up to 1 million new digital cable subscribers in 2003. The service is now available to nearly all Comcast subscribers.

Burke said the digital and pay cable hadn’t made the money it should have on the AT&T Broadband side, and Comcast would be concentrating on profitability and not just straight subscriber numbers. The digital services would be repackaged and focused on profit rather than units. Comcast is encouraged by its rollouts of video on demand and high-definition television.

Comcast is also pushing forward with high-speed Internet access, projecting between 1.3 million and 1.4 million new subscribers by the end of the year to a total of 5 million. The company claims it’s the third biggest high-speed Internet service behind AOL and MSN, and the largest broadband provider. It added $600 million in revenue in 2002 and Burke said it’s got the potential to be “as good or better” than the cable business with low churn.

“We’re going to continue to push this business aggressively,” Burke said.

On the broadcast side, Comcast owns the shopping channel QVC, E!, The Golf Channel, G4 Gaming Network and the Outdoor Life Network. QVC’s revenues were up only 6% nationally due to the weak economy in the United States but better-than-expected results for QVC’s international channels. The other networks are expected to bring in high single-digit to low double-digit growth in revenues in 2003.

Burke said Comcast Cable was “very bullish” on the future of local cable advertising, although there’s still some work to be done on the former AT&T Broadband side with interconnects.

“I don’t see any reason why we can’t be double-digit during 2003 unless there’s just a terrible advertising market due to the war,” Burke said.

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