Comcast Innovates New Set-top Box - Analyst Blog

Very recently, the Wall Street Journal reported that Comcast Corp. (CMCSA) is on the verge on introducing an innovative service combining both basic cable TV services and the Internet, through a new set-top box. The new service will be called “Spectrum” and will enable its subscribers to browse for live, recorded, and on-demand online video on their TV sets using the set-top box. Comcast is conducting a trial run of this service in Augusta, Georgia and is expected to start nationwide deployment in early 2011.

Although the new service will not allow subscribers to freely access the Internet, it will at least provide an interface between web video and basic connection to social networks sites. We believe the latest move of Comcast is a desperate attempt to reduce customer churn of its TV offerings. Cable MSOs are quickly losing market share in their core basic video market to giant telecom carriers, satellite TV service providers, and newly developed online Internet video streaming companies such as Netflix Inc. (NFLX).

During the third quarter of 2010, the cable industry as a whole lost almost 741,000 basic video subscribers. Despite being the largest cable operator in the U.S., Comcast alone lost 275,000 subscribers. During the first nine months of 2010, the company lost a whopping 622,000 basic video subscribers. Satellite pay-TV service providers and online video streaming companies are quickly gaining market share from cable operators by offering Mobile TV and other high-speed broadband services to subscribers at a low price.

Comcast is aggressively deploying the DOCSIS 3.0 technology to upgrade its existing customers to high-speed network together with all digital networks. The company already upgraded 83% of its customers to DOCSIS 3.0 and 65% of them to all digital networks. The rest of the deployment will be completed by end 2010. With DOCSIS 3.0, the company is now able to offer one of the fastest Internet speeds available in the market. The company has not only doubled the speed for its customers but also offers new higher-speed service plans.

We maintain our long-term Neutral recommendation for Comcast. Currently it is a short-term Zacks #3 (Hold) Rank stock.

 
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