08.02.2004 12:00 PM
Cable companies begin to turn financial corner

The nation’s largest cable television companies — weighed down for years by heavy investments and sagging subscriber growth — are starting to turn the corner. But as they do, they are meeting formidable foes in phone companies, reports the New York Times.

Comcast, the nation’s largest cable operator, earned $262 million in the second quarter, after losing $22 million in the same period last year. This was because of an increase in the number of customers signing up for digital video services and an increase in advertising revenue. Comcast’s revenues rose 10.2 percent, to $5.1 billion, compared to last year.

Sales at Time Warner Cable, the second-largest cable provider, increased 10 percent, to $2.1 billion, partly driven by a 25 percent gain in revenues from high-speed data services and digital video services.

However, shares of both companies fell last week due to concerns that the regional Bell carriers are chipping away at the cable industry’s command of the high-speed Internet market, and because cable operators do not have significant business selling phone services.

In recent months, the regional Bells have teamed up with satellite providers to offer television services along with their telephone and broadband lines. Though the cable industry still controls the majority of residential broadband connections, the Bells are now adding more new customers per month. And phone companies such as Verizon and SBC, which own mobile phone carriers, can offer bundled plans that include wireless services, which presents an advantage over cable providers.

Both Comcast and Time Warner Cable are starting to reap the benefits from their spending and building spree started in the 1990s. The cable industry spent about $85 billion combined to upgrade its networks so they could offer not only broadband Internet connections and telephone service, but also high-definition television and video-on-demand services.

That construction is largely complete, so the companies have been introducing new products and increasing their marketing efforts to recoup their investments. Comcast added 1.1 million new digital television customers in the last quarter, but also lost 96,000 basic cable subscribers. The digital television service costs more per month than basic cable television, so the increase in digital subscribers helped raise the company’s revenues and the average amount customers paid per month.

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