TELECOM Digest OnLine - Sorted: Cable Providers Plan More ervices

Cable Providers Plan More ervices

Seth Sutel (
Sun, 9 Apr 2006 13:46:10 -0500

By SETH SUTEL, AP Business Writer

In the world of cable television, the real excitement these days has
more to do with what comes over the cable lines than what shows are on
the schedule.

Rolling out high-tech offerings like digital phone, high-speed
Internet and video recorders is where the real money is being
made. Now, the cable guys are racing to add even more fancy services
in hopes of keeping customers from switching to satellite or the
emerging video services being offered by phone companies.

As they gear up for their annual convention this weekend in Atlanta,
big cable companies like Comcast Corp., Time Warner Inc. and
Cablevision Systems Corp. are taking a hard look at ramping up new
products like video-on-demand, high-definition channels and
next-generation video recorders that run off a network instead of a
hard drive contained in the set-top box.

Cablevision, a Long Island-based cable company, has already led the
pack in getting subscribers to sign up for digital phone service that
runs over cable lines - a so-called "triple play" when bundled
together with video and high-speed Internet access.

Now, Cablevision says it will make a trial run for a networked digital
video recorder, a product that cable companies have wanted badly
because it could drastically lower the costs of offering DVR services
by storing the recorded shows on its own network instead of on the
more expensive set-top boxes.

Sanford C. Bernstein analyst Craig Moffett said in a report to
investors Friday that the network DVRs are sure to be a hot topic at
the convention but are too new to have been incorporated into the
formal agency.

Cablevision announced its network DVR test in late March, and Time
Warner and Comcast quickly endorsed the idea. However, programming
providers are sure to have concerns about copyrights as well as the
likelihood that even more ads could be skipped over.

For the moment, selling voice services remains a top priority for
cable companies. Not only does it make more money for them, but it
also helps keep customers around.

Not all companies are faring equally, however. Cablevision has been
way ahead in signing up phone customers, but Comcast has a "long way
to go," UBS analyst Aryeh Bourkoff said on a conference call Friday.

Oppenheimer & Co. analyst Tom Eagan calls the uptake of voice service
the "big question" for the cable industry this year, which he
estimates could go from 3 million people at the end of 2005 to 6
million by the end of 2006.

For the stock market, however, the big fear is the looming challenge
from phone companies as they ramp up offerings of video and high-speed
Internet. Cable stocks have been sluggish over the past year in good
part out of those concerns, but Eagan called those worries overblown.

"They have to take it seriously, because they have to take any
competitive threat seriously," Eagan said. "The question is, will this
technology finally work? The telcos have been trying to get into video
for 10 years. We'll have to see if they have budgeted for the costs
of acquiring and servicing all those customers."

Telecommunications company RCN Corp., for example, was forced into
bankruptcy protection two years ago as it struggled with costs to
build out a network offering video and phone services. RCN is back on
its feet, but the challenges to these new competitors remain

Executives from Verizon Communications Inc. and AT&T Inc., two of the
major telecom companies that are starting up video, were cautious in
interviews Friday about revealing details of their plans, citing the
extremely competitive environment.

"We're not ready to tip our hand yet as to how many customers are on
the network or what they're buying today," said Michael Grasso,
assistant vice president of consumer marketing at AT&T.

Grasso said AT&T is spending about $4.4 billion over three years to
upgrade its networks, and hopes to have the bundled video-phone-
Internet service available to 18 million people, or about half of its
customer base, by the end of 2008.

Marilyn O'Connell, who is in charge of marketing Verizon's video
offerings, declined to disclose several key details such as how many
customers had signed up to receive TV from Verizon so far. However,
she did say the response so far from consumers has been "very, very

Verizon, which uses a more expensive method of wiring homes directly
to fiber optic cable, rather than connecting fiber as far as a
neighborhood "node," as AT&T is doing, says it expects to have its
video services available to 15 to 20 million homes by 2008 or 2009.

Copyright 2006 The Associated Press.

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