Comcast Places Call for Profitability

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Comcast Corp. will work to make its telephony operations profitable in 2003, cleaning up much of its bad debt and its sales operations, said senior vice president of telephony Rian Wren.

The Philadelphia-based MSO inherited 1.418 million circuit-switch subscribers from AT&T Broadband across 18 markets when it acquired the operator late last year.

"But the growth was much too quick," said Wren, and that resulted in a host of problems Comcast is now attempting to alleviate. The growth "caused the business to overheat the supporting operational processes," he said, which even included subscribers receiving the service but not getting billed.

Still, the phone business will drop between $820 million to $825 million into Comcast's revenue coffers in 2003, he said.

The company lost 19,000 subscribers in the first quarter, a bit lower that expected, and it expects to end the year at 1.3 million lines.

"The overall objective is to improve the profitability and refocusing to quality versus quantity," Wren said. "We're looking for a better margin profile customer."

Comcast plans to simplify its telephony packaging in 2003, with a comprehensive service package that offers choice, said Wren. Marketing channels will be streamlined, he said, with targeted promotions and discounts aimed at high-value customers.

Wren said AT&T was in such a rush to gain subscribers to meet promises it had made Wall Street that adequate screening and collection procedures were not in place. Bad debt ranged as high as 15%, which Comcast reduced to 8%, he said.

Comcast has also attacked telephony margins from the cost side. The MSO renegotiated contracts with former Broadband parent AT&T Corp which weren't market-based or flexible, said Wren. (Those deals were made at a time when AT&T Corp., struggling to show growth with Wall Street, struck deals with its cable subsidiary for circuit switches and backbone networks.)

"We renegotiated those deals and got significant cost reductions," Wren said, saving $5 per telephony subscriber. Comcast also centralized customer care, which dropped those costs from $12 to $6 per telephony home.

The drop in costs resulted from eliminating customer-care outsourcing and bringing those functions in-house.

"That allows the markets to focus on the core business-systems platform," he said.

By August, Comcast plans to replace its provisioning and network surveillance systems, which will result in cost reduction from $10 to $5 per subscriber.

Voice-over-Internet protocol tests are underway in Detroit and Philadelphia, said Wren. VoIP would provide Comcast with an avenue to transition today's circuit-switch customers over to that platform, eventually, and to launch cost-effective IP service in new telephony markets once the technology is proven.

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