Cable's MVP: High-Speed Internet

BTR_Feature_Art_Internet-11-4-13 It's that time again - financial reports are coming in. Here are some of the highlights from last week's reveals:

Rogers Communications (NYSE: RCI) reported 4% revenue growth for its cable division, including Internet services, which grew 18% compared to the third quarter of 2012. Revenue from the company's video product actually declined 3% for the quarter compared to a year ago.

Rogers' CEO Nadir Mohamed attributed this to ongoing cord cutting and the fact that its IPTV competitor increased its footprint 50% over the last year. He expects that the deep discounts currently being offered by that competitor will "stablilize" over time.

While Mohamed sees cable continuing to be "a very strong business for quite time," he also said customers are increasingly moving toward the Internet as their primary means of information and entertainment. Usage has going up on average 45%. "That's really the driver of the revenues," he said. "It's the shift toward more and more consumption of the Internet bandwidth."

Robert Bruce, president of Rogers' communications division, stressed that Internet is key. Rogers continues to be focused on increasing speeds and currently offers up to 150 Mbps. The company has not implemented traffic management practices, and is concentrating more on winning Internet-only and multiproduct subs.

"In the face of all things that are going on in television, we continue to put a sharp focus on Internet, and that's what the future is," Bruce said.

Comcast (NASDAQ: CMCSA) also saw a loss in video customers - 129,000 during 3Q2013, compared to the year-ago quarter - although video revenue grew 2.9% due to rate increases and customers choosing advanced services, including HD and DVR.

Comcast's overall cable revenue grew 6.2% for the quarter. Here again, high-speed Internet was the largest contributor with a 7.9% jump compared to the third quarter of 2012. The company reported that it picked up 297,000 new high-speed data customers, bringing it to a penetration rate of 38% of homes passed. Approximately 34% of residential high-speed customers subscribe to a higher speed tier.

"We continue to invest in our network to improve and differentiate our high-speed Internet service, and during the third quarter, we increased speeds for our fastest tier to 505 Mbps from 305 Mbps in some of our markets," said Michael Angelakis, Comcast vice chairman and CFO.

X1 currently has been rolled out to about 90% of Comcast's footprint. VOD viewing is up 27%, and VOD transactions are up 20%, said Neil Smit, Comcast president and CEO. About 60% of customers are using apps weekly.

"We're seeing a meaningful impact on voluntary churn," Smit said. "We're going to continue to ramp the product aggressively. We're seeing a good upgrade amount on existing customers as well as new customers on the acquisition side. So I'd say we're pleased overall." X2 is slated for deployment at the end of this year.

Smit also talked about the new Internet Plus product, which he called a "good" Internet product, with "light" video on the side. "It does require video, so it's not HBO without a video offering. It's basically a performance HSD product with a B1 video offering .... As I look at the video landscape, we're seeing windows move around, and we're focused on making sure our customers get a complete offering of products."

With Nielsen C3 ratings being measured for VOD, Comcast disabled fast forwarding in conjunction with its programming partners. "(VOD) provides incremental advertising opportunity as well as ratings," Smit said. "We think that could be a better alternative than DVR."

(Transcripts provided by

Monta Monaco Hernon is a free-lance writer. She can be reached at

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