Comcast Is Not Dead, It's Thriving

Comcast Corp.  (NASDAQ: CMCSA) has been declared dead so many times   that  CEO Brian Roberts might want to dress up like a vampire for Halloween.

First, the media declared Comcast its own worst enemy because of shoddy customer service.  Then, upstarts AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE:VZ) were going to put a stake through the Philadelphia-based company’s heart.  Comcast, which reported better-than-expected quarterly results yesterday,  has proven the naysayers wrong, at least for now.

Believe it or not, Comcast buckled down after being widely ridiculed for treating people poorly and invested about $2 billion on improving service.  The effort paid off.   The American Customer Satisfaction Index found that Comcast has improved its service each year since 2008.

AT&T and Verizon are making inroads against Comcast but the largest cable company already has a giant head start on them.  During the last quarter,  AT&T reported that its U-verse TV subscribers reached 2.7 million. Most of those customers also take AT&T’s high-speed Internet  service.  During the same time, there were 3.9 million total FiOS Internet customers and 3.3 million total FiOS TV customers.  At the same time, Comcast reported that it had more than 23.7 million video customers, 18 million digital video customers and 16.7 million high-speed Internet customers.

When examining Comcast, investors often pay too much attention to fluctuations in subscribers.  While that is important, the amount customers are paying on those bills also matters.  In Comcast’s case, 32 percent of video customers also bought Internet and phone services during the quarter, up from 27 percent a year earlier. That along with rate increases boosted average revenue per customer by an impressive 10 percent to $129.75.

Though there was some disappointment that the triple play numbers were not better, that does not seem to be hurting the share prices.  The stock has gained more than 20 percent this year.  AT&T and Verizon have barely budged.  That performance is even more impressive when the uncertainty around the NBC Universal deal is considered.

As for the future, that’s a different story.  Newer rivals such as Netflix Inc.  (NASDAQ: NFLX), Hulu and Amazon.com  (NASDAQ: AMZN) are seen as the next big thing.  While these new services may attract diehard geeks and Comcast haters, the biggest challenge they face is inertia.  Many people believe that there cable service is adequate and the thought of watching their favorite movies and TV shows on a small computer screen instead of the enormous flat screen seems alien.  That perception may change, but it will take a while.

The other issue Comcast’s competitors face is that some of them — particularly the newer ones — are not profitable.  This is forcing them to slash prices to entice customers.  That may work too well, taxing their networks causing servers to crash and causing service interruptions.

It’s easy to see how companies who want consumers to throw away their cable boxes could become the very thing that they hate.

–Jonathan Berr