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Digital Won’t Drain Capital

5/09/2004 8:00 PM Eastern

Capital expenditures are expected to continue to decline, even with new products like digital video recorders, cable telephone services and the push to convert networks to all-digital technology expected to drain at least some money from cable companies’ coffers, a panel of chief financial officers from top MSOs said last Tuesday (May 4) at the National Show here.

Comcast Corp. co-CFO John Alchin said that in the next five years, the nation’s biggest cable company plans to spend $1.5 billion to $2 billion on the all-digital conversion alone. But compared with the $40 billion Comcast has invested in its network since 1996, that is a relatively small amount. Alchin said Comcast’s capital-expenditures budget, at $4 billion in 2003, is expected to drop to between $3.3 billion and $3.4 billion this year.

“I don’t want to make light of this because $1.5 to $2 billion is not chump change. But it really is compared to a $40 billion investment,” Alchin said.

He added that Boston and Los Angeles will likely see the conversion first in 2006. The rest of Comcast’s markets should be going all-digital two to three years after that, he said.

Cox Communications Inc. CFO Jimmy Hayes said new services, like voice-over-Internet protocol, DVRs and HDTV, will cost money but have relatively quick payback periods. But Hayes was not willing to give a time frame for Cox’s all-digital conversion. He said only that it won’t be this year.

“The problem would be if you went all-digital platform at the wrong time,” Hayes said. “Today would be the wrong time.”

Insight Communications Inc. CFO John Abbot said that his company would likely start its digital conversion in 2006, and that the switch will enhance products the MSO already is providing to a smaller group of customers..

September