Burke Outlines Tech Priorities

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Boulder, Colo.— Although it faces a massive rebuild in former AT&T Broadband territories, Comcast Corp. does have an ambitious "to-do" list for the coming year, including plans to boost data, high-definition TV, video-on-demand and retail distribution.

But the fact the former Broadband systems will be in the shop for some serious repair work means telephony will be put on hold, according to Steve Burke, president of Comcast Cable Communications Inc., the company's cable unit.

Burke outlined Comcast's looming technology and new services plans for a group of journalists and analysts at Cable Television Laboratories Inc.'s annual media briefing here on March 11.

Rebuilds first

Comcast's long-time mantra has been to roll out a new product or initiative every 12 to 18 months, and in the immediate future, the network rebuild will dominate those plans. Comcast's goal is to get 93 percent of the network capable of minimum 550-Megahertz capacity with two-way transmission, Burke said.

By the end of 2003, the former AT&T Broadband territory rebuild will stand at about 90 percent, while Comcast's original territories will be 97 percent rebuilt. In all, that means a whopping 46,000 miles of new network. In California alone, Comcast will spend $500 million, much of which will go to upgrading the key San Francisco Bay area.

"We are going to spend tons of money," Burke said. "It's about putting money where our mouth is — it's probably the biggest bet that we have ever made."

IP trial's on

With the focus on the AT&T Broadband rebuild, video service and data products, the odd man out for now will be IP telephony. While telephony's revenue potential remains strong, the reality is AT&T Broadband lost more than 500,000 basic-

cable subscribers in 2002, and 97 percent of its revenue was derived from video. Thus, it makes sense to fix that problem first, Burke said.

"We don't know if this is a 12-month process, an 18-month process or a 24-month process, but what we have told people is it is going to take a period of time," Burke aid.

But it isn't a complete disconnect for phone service. Comcast will continue its Internet protocol telephony trial in Philadelphia, and the added time will hopefully allow for more integration and fine-tuning of the technology.

"Clearly, it has operational advantages, and we would like to be in a position as we see that business growing to use IP infrastructure as opposed to circuit switched," Burke said.

Even as it upgrades the former AT&T Broadband network, the MSO also will work to roll out new services in its "classic Comcast" territories.

"In a way, we will be running two different businesses that will come together two years from now," Burke noted.

The new-service focus will be on data and digital services, which generated roughly half of the company's 13 percent cash-flow growth last year. Banking on that should help Comcast reverse its strategy in competing with direct-broadcast satellite, Burke said.

"Those are the ways we can go from playing defense to offense," he said. "With digital and high-speed data I think we will be able to compete on offense better in the coming years."

On the high-speed data side, the MSO now claims 3.6 million data customers at a 15 percent penetration rate, and it expects the subscriber count to grow to 5 million by the end of 2003. That means Comcast likely will become the third-largest U.S. ISP behind America Online and Microsoft Corp.'s MSN – not to mention the largest broadband ISP, Burke noted.

Boosting VOD

Digital video also will be a core focus for Comcast, and that includes expanding its video on demand product.

That service in is now front of 600,000 Comcast digital customers in Philadelphia, and so far the service has "the same kind of contagious, 'wow' word of mouth as high-speed data was five years ago," Burke said.

Also square in Comcast's gun sights: high-definition TV, which Burke noted "is starting to surprise us and it will surprise the world as the price of HDTV sets goes down."

Comcast recently purchased an HD production truck and video equipment, and starting last month its Comcast SportsNet began televising Philadelphia Flyers hockey and Philadelphia 76ers basketball games in HD, with a goal of 100 games for the Philadelphia and the Baltimore-Washington, D.C. markets.

That brings up another Comcast priority for 2003 — increased retail distribution, particularly tied to HD service.

"You can't have people going into retail stores and buying a wonderful HD TV set and then saying, 'Where can I get content for this?' and having the salesperson say, 'The only place to get it is from satellite,' " Burke said.

Hedging on ESPN HD

But there are some limits to what Comcast will do in HD. When asked if the MSO would carry ESPN's new HD sports programs, Burke made it clear that would happen only if there wasn't an added carriage price tag attached.

"It depends on what the price is — if it is embedded within the ESPN price, yes," he said.

Similarly, Comcast has not started into digital video recorder offerings, opting instead to use the digital boxes it has deployed now to roll out VOD. But Burke said Comcast does aim to have DVR service rolled out by the end of the year.

"We see it as a business, but we are obviously a step or two behind Time Warner [Cable]," Burke said. "But we are hearing good things."

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