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Britt, Roberts: Not Quite All-Digital Yet

5/23/2006 11:37 AM Eastern

The CEOs of the two top cable operators reiterated their commitments to technological innovation and to recapturing bandwidth through digitizing their networks at an industry conference Tuesday, but both stopped short of stating that their plants would go all-digital anytime soon.

Speaking at Cable Television Laboratories Inc.’s Financial Analyst Conference in New York Tuesday, Time Warner Cable CEO Glenn Britt said that while his company is moving forward on digital-simulcast and switched-video initiatives, the rollout will be predicated on customer needs.

He added that the plan is to offer switched video -- which would free up a huge portion of Time Warner Cable’s network for new services -- where it is needed over the next three years. But he said that because of the prevalence of analog-television sets in customer homes, it would not be prudent to force all customers to have digital set-top boxes anytime soon.

Britt said the beauty of cable’s hybrid-fiber coaxial network architecture is that it allows for both analog and digital signals to be transmitted and received. With just a handful of the 30 million television sets in Time Warner Cable households capable of accepting all-digital signals, he said the incentive to convert to an all-digital network isn’t there yet.

“They’re not going to all of a sudden become digital,” Britt said of those analog sets. “That in itself is a very long time frame.”

Britt was enthusiastic about the prospects for switched video. While he would not commit to how much that initiative would cost -- Bear, Stearns & Co. Inc. cable analyst Ray Katz estimated about $20-$30 per basic subscriber -- Britt said that in Columbia, S.C., the cable operator rolled out switched digital, digital simulcast and “Start Over” for about $16 per home passed. Start Over allows subscribers to jump to the beginning of any show they turn to, in progress, from 60 networks.

Britt also touted the importance of commercial phone services, reiterating that the market for phone service to small and midsized businesses dwarfs the residential market.

“I think what we all are concluding is that we need to get into this business more heavily because it does look like a huge market,” Britt said.

Comcast Corp. chairman and CEO Brian Roberts also backed off on an all-digital initiative at the nation’s largest cable operator, adding that digital simulcast -- currently available in about 80% of Comcast’s markets -- may be the more prudent way to go.

Asked if Comcast would ever get rid of the analog tier altogether or if in the future, the cable operator would always have some form of an analog tier, Roberts said that internally, company executives have debated that 20-40 analog channels would remain until at least 2011.

“It would be better if we don’t have to make the hard decisions like that,” Roberts said. “Let the consumer drive it. If we have to make a big bet and we get it wrong … ouch.”

While Roberts added that several technologies have great potential, for the meantime, the focus will be on rolling out Comcast’s’ digital-phone product.

“I would be surprised if we don’t improve our phone results every quarter this year,” he said. “That’s the kind of goals we have set for ourselves.”

Roberts seemed to downplay the significance of efforts by the cable joint wireless venture with Sprint Nextel Corp. to participate in federal wireless-spectrum auctions. Earlier this month, Comcast, Time Warner Cable, Cox Communications Inc. Advance/Newhouse and Sprint filed an application with the Federal Communications Commission to participate in the auctions, now scheduled to begin in August.

Roberts said the filing was mainly an opportunity to keep the door open to owning more spectrum.

“It is what it is,” he added. “They’re going to auction off the spectrum. Why wouldn’t we look? We, with Sprint, with the other cable companies, by ourselves or whatever. I think we’re in the business of looking at things.”

Asked whether wireless voice was a must-have or a nice-to-have component of the bundle, Roberts said, “I think right today, [it’s] not critical.”

Instead, other products besides a straight wireless-phone service need to be developed to bring customers into the fold. About 100 people from all of the companies in the consortium are devoted to doing just that.

“There are some great ideas, how big they are and whether consumers want them, that’s what we are in the business of innovating,” Roberts said. “Sprint wants it -- they don’t have a wire-line relationship, a television relationship -- we don’t have voice wireless today. If you get your cell phone from your work, pretty much one-half of the room would say it’s not why I buy my home television or my home Internet.”

 

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