Speeding Innovation On Several Fronts12/19/2009 2:00 AM Eastern
Few cable companies have led the development and and rollout of new products as much as Comcast, and 2009 was no exception.
The MSO has been actively rolling out DOCSIS 3.0 technology in its cable systems, which will let it compete more aggressively with telcos for residential and business customers by offering higher Internet speeds without costly plant reconstruction. It's also long been active in developing interactive advertising and was instrumental in the creation of Canoe Ventures, an industrywide consortium designed to provide advertisers with a national interactive and addressable advertising platform.
Comcast has also been a leader in the “TV Everywhere” concept — the push to give cable subscribers access to programming over broadband as part of their monthly subscription.
Here's a look at how Comcast, under chairman and CEO Brian Roberts, has led the way to speed innovation in these areas.
GOING WIDE WITH DOCSIS 3.0
Comcast has spent a bundle on DOCSIS 3.0 over the last few years, looking to capture the speed title in each of its markets and boost bandwidth for existing broadband users.
Currently, Comcast reaches 34 million DOCSIS 3.0-enabled homes. That means additional radio-frequency channels have been set aside for ultra-fast “wideband” service and needed cable-modem termination systems are in place. The MSO hopes to deploy DOCSIS 3.0 throughout its entire footprint by the end of next year.
The technology will allow Comcast to deliver more products faster and gives it the advantage of being the fastest broadband provider in its market, analysts said. Speed remains a powerful marketing tool and the DOCSIS 3.0 rollout doesn't require digging up any streets — a surefire way to irritate customers and deplete company coffers.
The rollout of DOCSIS 3.0 has been relatively quick. Comcast first tested wideband service in early 2008. At this point, about 80% of customers in Comcast's footprint can take advantage of the faster speeds that DOCSIS 3.0 provides. The company maintains it will have its entire footprint DOCSIS 3.0-enabled by next year.
Comcast's rollout has been so fast that the industry hasn't had time to come up with a better marketing moniker for the service, said Cable & Telecommunications Association for Marketing CEO Char Beales. Still, she is bullish about the prospects for DOCSIS 3.0 going forward.
“We didn't have a business model for the first DOCSIS modem either, and that worked out pretty well,” Beales said. “The only thing I see is that DOCSIS 3.0 is rolling out so quickly we haven't had the time to come up with a good name for it. 'DOCSIS 3.0' doesn't really roll off the tongue. But it is a great opportunity for the industry.”
One of the key features of DOCSIS 3.0 is that it provides the ability to bond digital channels together for more bandwidth, according to analysts. Of course, operators have to free up analog channels, but they have working on that project for some time.
DOCSIS 3.0 also lets cable more effectively pursue business data services, an area currently dominated by telephone companies. Comcast began offering businesses in the Minneapolis-St. Paul area a 100-Mbps tier because company officials said at the time that they thought the fast speed would appeal to businesses more than residents. The product was priced at $369.95 per month, less than the typical 1.5-Mbps T-1 line from a telco for a much faster connection. T-1 lines can run between $500 and $1,200 per month, although that typically includes voice service.
On the residential front, Comcast has rolled out a home offering with download speeds of up to 50 Mbps and doubling speeds for current Performance-tier customers — to up to 12 Megabits per second downstream and 2 Mbps upstream — at no additional fee. But the cost to lease modems for all high-speed Internet customers is going up $2 to $5 per month, partly to recover the cost of the DOCSIS 3.0 rollout. Comcast's Extreme 50 (up to 50 Mbps downstream speed and up to 10 Mbps upstream) is $99.95 per month when bundled with cable-TV service. The Ultra tier (22/5) is $62.95 per month bundled.
DOCSIS 3.0 will likely make it easier and more consumer-friendly to deploy TV Everywhere services, and eventually IPTV services, which will require a significant amount of bandwidth, according to Parks Associates research analyst Jayant Dasari.
“Clearly, the rollout of DOCSIS 3.0 gives Comcast more flexibility,” Dasari said. “It provides more granularity and control to serve up unique streams of video. And the more personalized a customer's service is, the easier it is to monetize.”
What's more, DOCSIS 3.0 gives the cable companies the opportunity to transition away from quadrature amplitude modulation for video delivery to an IP-based architecture, similar to AT&T's U-verse TV, Dasari continued: “It's a good way to compete in the marketplace with companies like Verizon and AT&T.”
ADVANCES IN ADVERTISING
Comcast has long been a leader in cable advertising, and has put a significant amount of time, money and other resources behind the development of advanced advertising opportunities. During the company's recent third-quarter conference call with analysts and investors, Roberts said new forms of TV advertising have great potential. To exploit these emerging technologies, though, a standardized platform must be widely deployed, he noted.
Specifically, Roberts is high on CableLabs' Enhanced TV Binary Interchange Format specification, which is designed to run interactive TV apps on even very low-powered set-top boxes.
“We are very excited about this technology called EBIF,” Roberts told analysts. Comcast will have “maybe half of our homes EBIF-enabled in a very short period of time. The industry as a whole will have a lot of EBIF-enabled homes and interactive applications that will be rolling out. And that's I think when the real money starts to show up.”
Comcast has placed a significant emphasis on Canoe Ventures — owned by six MSOs, including Comcast — which would allow national advertisers to buy interactive and targeted ads across the partners' footprints, using a standardized national platform.
“Our team here at Canoe Ventures feels like we are getting a chance to live Brian Roberts' vision,” said Canoe CEO David Verklin. “It's both very exciting and very humbling at the same time.
“Brian has been a vocal supporter of advanced advertising and interactivity for years and has always been a force for change and experimentation — all core to the Canoe mission.”
Roberts is a natural collaborator and was the first to reach out to jointly create Canoe, Verklin said.
“When the Mount Rushmore of interactive television and advanced advertising is created, Brian Roberts' face will be one of those legendary faces carved in granite,” he said.
While Canoe has received the most attention — because it holds the promise of allowing marketers to reach a national audience — at this point, Comcast's local advanced advertising revenue and products are getting a foothold first.
Comcast has been trialing two local interactive advertising programs — in Chicago and San Francisco — that ride on top of the industry's EBIF specification. One trial allows Comcast customers to receive free samples, coupons and services. The second lets viewers set a reminder or directly schedule a DVR recording from an ad promoting an upcoming show or series.
To date, some 8 million Comcast homes, or about 44% of its 18 million digital video customers, have EBIF-enabled set-tops. That number is expected to grow to 14 million soon, said Comcast Spotlight president Charlie Thurston.
“Advertising is in Comcast's DNA for decades and from day one, Brian has been a backer of advertising and Spotlight,” Thurston said. “Brian gave me carte blanche to hire the best managers and gave us money to build interconnects within Comcast's markets. And over the last seven years, he has helped us complete acquisitions including [media-buying software firm] Strata and [automotive e-commerce site] Vehix, which has driven us into new areas.”
Comcast's proposed acquisition of NBC Universal should help the MSO get even more aggressive in the interactive and addressable ad space, predicted Parks Associates analyst Heather Way. Analysts and ad-agency executives expect the merging of NBCU's networks coupled with Comcast's local footprint to give advanced advertising a much needed boost.
But the road to advanced advertising will inevitably be rocky. Canoe last summer ditched its initial product — Community Addressable Messaging — citing technical and business limitations. The system would have let advertisers run a different spot in 370 specific cable zones around the country, with a default ad everywhere else.
Still, Roberts remains bullish on the concept of a national interactive advertising platform.
“I think for the [third] quarter we had about $15 million worth of advertising that we call interactive,” he said during the latest conference call with analysts. “But the big numbers, I think, will be generated when the industry gets together and allows a national advertiser the ability to advertise across the country.”
TAKING TV EVERYWHERE
Comcast is not the only MSO trying to get a version of TV Everywhere off the ground, but it is certainly at the head of the pack in terms of getting a product in front of a significant number of customers before year-end.
Originally referred to as On Demand Online, Fancast Xfinity TV is Comcast's TV Everywhere service offering subscribers programming from networks including HBO, TNT, A&E Network, Travel Channel, HGTV and Food Network.
“Video over the Internet is more friend than foe,” Comcast CEO Brian Roberts told analysts and investors during the company's latest quarterly conference call in November.
It's a mantra he has been repeating ever since announcing the partnership with Time Warner Inc. to build out the Web service in June. Operators have long worried that the delivery of video over the Internet could usurp their dominance in the business. TV Everywhere was conceived as a way of preserving the video subscription model while serving the expanding needs and desires of consumers.
Analysts believe Comcast's decision to acquire a majority interest in NBCU will have a significant impact on its TV Everywhere initiative and could change the entire industry landscape.
“Time Warner has been the initiator of TV Everywhere, but Comcast is definitely the leader in making it a reality,” Parks' Dasari said. “Comcast is positioned well from an infrastructure point of view. The NBC deal will make them a major content provider and this has some interesting ramifications. Five or 10 years from now, Comcast could say, 'It doesn't matter where you live or what other subscription services you have, you can have access to our content.' And that could eliminate the territory exclusivity that cable operators have enjoyed since the industry got off the ground and could redraw the entire industry.”
Other industry observers agree that Comcast could fundamentally shake up the cable business.
“Time Warner Cable, Cox, Cablevision, Charter: Watch your backs and your precious subscriber bases,” ExtendMedia CEO Tom MacIsaac wrote in a blog on Dec. 11. “It's a risky, potentially cannibalistic move for Comcast, but the alternative is that someone else (Apple, AT&T, Microsoft or Google) gets there first. Even so, it seems a sure bet that Comcast would be ready to be ready to respond very quickly and in a powerful way.” ExtendMedia provides software and media services that enable content providers and distributors to create, deliver, manage and monetize online content offerings over many devices.
But answering a question about this issue during last month's quarterly conference call, chief operating officer Steve Burke said Comcast has no plans take its TV Everywhere product out of region. “It really works when it's our existing video customer or someone else that we know that is a customer in our footprint,” he said.
On the other hand, Roberts, in describing plans to launch the on-demand online service nationally in December, appeared to leave the door open for future experimentation: “[I]f this model works as successfully as we hope it will, there will be different flavors and varieties offered,” he said on the earnings call with analysts.
It's clear that the TV and PC platforms are moving closer together and the industry has to have a model in place, said Andy Heller, vice chairman of Turner Broadcasting System. “I think we can reward consumers and they'll be happy to pay for the experience,” he said.