Comcast will increase capital spending in the first half of 2014 to hasten the rollout of its advanced X1 set-top boxes and new wireless gateways that provide public Wi-Fi from customer homes.

Comcast told investors Tuesday its increased spending will likely be offset by increased earnings from more subscribers and room for further price hikes over the course of the year.

First quarter consolidated revenue increased 13.7% to $17.4 billion over the past three months. Almost $11 billion of that comes from Comcast’s cable business. The company boosted cable earnings by 5.3% in the first quarter. Most of that came from a 4.5% increase in the average customer’s cable bill. Comcast subscribers, on average, pay $134 per month. They will pay even more by the end of the year.

Although Comcast’s head of its cable division Neil Smit noted the company implemented lower rate increases during the first quarter, there is room to boost prices further.

“I wouldn’t read any trends into it,” Smit said. “We took rate increases across the smaller percentage of our footprint this quarter than last year as well, but we target different offers to different customers and I don’t think we’re seeing it topping out. In the competitive arena, the offers are in the same ballpark, the promo prices go up and down, but the destination pricing is fairly similar across these various competitors.”

Roberts

Comcast continued to buck cord-cutting trends and added 24,000 new video customers in the quarter, a major improvement over the 25,000 it lost at the same time last year. Comcast believes its new X1 platform and aggressive customer retention efforts are responsible for winning and keeping cable television customers. Ongoing speed enhancements in Comcast’s broadband division won the company 383,000 new Internet customers in the last three months. Broadband is Comcast’s biggest money-maker, and revenues increased a further 9% during the quarter owing to customer growth, rate hikes, and customers choosing higher-speed tiers. By the end of the quarter, 38% of Comcast’s residential customers subscribed to at least 50Mbps service, showing growing demand for higher speed Internet.

Sources tell Stop the Cap! Comcast intends to further expand its trial of usage caps (Comcast prefers to call them “usage thresholds”) to more markets this year. Comcast has settled on 300GB usage allowances for most broadband products in current test markets, charging $10 for each additional allotment of 50GB as an overlimit fee. Comcast has avoided trials of usage caps in areas where Verizon FiOS delivers significant competition. Verizon has no usage caps on either their DSL or fiber broadband products.

Comcast also picked up 142,000 new phone customers in the quarter, mostly from those subscribing to aggressively priced triple play service bundle promotions. Around 155,000 new triple play customers signed up over the last three months.

At the end of the first quarter, 68% of Comcast customers took at least two products and 36% took three products, compared to 33% at the end of last year’s first quarter.

Brian Roberts, CEO of Comcast, said there were several factors that fueled Comcast’s growth during the quarter, starting with its advanced X1 set-top box platform, which offers a better television experience and makes finding things to watch easier. If customers have an X1, Roberts told investors, they are less likely to drop cable television service.

X1

“These positive early results reinforce our decision to accelerate our X1 deployment this year, and we are now adding 15,000 to 20,000 X1 boxes per day, which is double our rate of deployment from just six months ago,” Roberts told analysts. “Additionally, we are now rolling out a new XFINITY TV app, which enables our customers to live stream virtually their entire television lineup on any IP device in the home and watch DVR recordings in the home or on the go.”

Although usage caps remain controversial, Comcast has been aggressive about increasing broadband speeds at least once a year.

“In broadband, we recently increased speeds again for the 13th time in 12 years,” Roberts offered. “Doubling speeds in our Blast products to 105Mbps, while our Extreme tier moved up to 150Mbps for customers in the northeast. And we’re not stopping there. Our focus on wireless gateway deployment is adding utility to our customers while at the same time helping us create the largest Wi-Fi footprint in the U.S. with over one million public Wi-Fi hotspots currently available to our customers.”

Although Comcast’s first quarter capital expenditures increased $51 million (or 4.6%) to $1.1 billion (10.6% of cable revenue versus 10.7% in the first quarter of 2013), the cable company returned even more money to shareholders. In the first quarter, the company boosted return of capital by 35% to $1.3 billion. Comcast repurchased its own shares of stock totaling $750 million and paid $508 million in dividends for the quarter.

In 2014, Comcast will invest 14% of cable revenue (compared to 12.9% in 2013) to accelerate the deployment of X1 and wireless gateways, increase network capacity and continue to invest in expansion of business services and XFINITY Home. But it will spend far more than that placating shareholders. If Comcast wins support to buy Time Warner Cable, Comcast intends to increase its stock repurchase plan by $2.5 billion. The company earlier committed it would spend $3 billion on repurchasing its own shares, for an expected total of $5.5 billion during 2014.

When a company repurchases its own shares, it reduces the number of shares held by the public. That in turn means that if profits remain the same, the earnings per share increase. It also boosts the value of the massive portfolios of Comcast stock held by executives as part of their compensation packages.

[flv]http://www.phillipdampier.com/video/Comcast Introducing the X1 Platform from XFINITY 4-14.mp4[/flv]

Comcast produced this video showing off its X1 platform and new set-top boxes. (1:47)

Time Warner Cable TV subscribers with a set-top box can now access more than two dozen new channels on the company’s TWC TV App, now offering more than 300 channels for in-home streaming.

The newly available channels may vary depending on your local lineup, but generally include a large number of subscription international channels, home shopping, and religion. (Note: ITV Gold is not part of the United Kingdom’s ITV network. It is a network targeting the South Asian diaspora with Bollywood musicals, soap operas, and movies. C1R should probably be listed as Channel One Russia (Первый Канал), so it isn’t confused with C1R.com, an adult video site. Oops.)

1. America’s Auction Net SD
2. BlueHighways TV HD
3. C1R
4. CCTV 4 America (Mandarin)
5. CCTV News English
6. Daystar TV Net (National)
7. Filmy
8. Gem Shopping Network
9. GMA DWLS Radio
10. GMA DZBB Radio
11. GMA Life TV
12. GMA Pinoy TV
13. Infinito
14. ITV Gold
15. Liquidation Channel
16. NASA TV
17. Phoenix North America Satellite TV
18. RAI Italia
19. RLTV
20. Sundance HD
21. TV Asia
22. TV5 Monde
23. TVB1
24. UTV Movies SD
25. YouToo
26. Zee TV

Now you can watch Law & Order reruns in HD on Sundance TV.

The TWC TV App is available for iOS, Android, PC & Mac, Roku, Samsung Smart TV’s, Kindle and the Xbox 360 — you can find out more about it at the TWC apps page.

The only mass interest channel in the list is Sundance HD, although NASA TV is also a welcome addition.

Viewing is free for current cable subscribers, but many of these channels may not be available for viewing outside of the home.

At least 46 percent of AT&T’s wireless customers are now paying at least $100 a month for a Mobile Share account with at least a 10GB usage allowance, a dramatic increase of more than 11 million customers during the last three months alone. AT&T customers used to pay a flat rate of $30 a month for unlimited wireless data. Now they pay much, much more for much less usage.

AT&T’s Mobile Share plans start at $20 a month (plus the cost of the device) and include just 300MB of data. Prices escalate from there (all prices don’t include the cost of the device)

• $20 for 300MB
• $25 for 1GB
• $40 for 2GB
• $70 for 4GB
• $80 for 6GB
• $100 for 10GB
• $130 for 15GB
• $150 for 20GB
• $225 for 30GB
• $300 for 40GB
• $375 for 50GB

AT&T is banking on growing mobile data use to earn the company perpetually accelerating revenue and dramatically higher average revenue per customer. The average AT&T customer does not come close to exceeding their current allowance, but the company’s sales force has proven exceptionally adept at convincing customers to upgrade to higher allowance plans whether the customer needs one or not.

Time Warner Cable reports it has unleashed major broadband speed upgrades for a handful of communities in New York and Los Angeles and is now delivering speeds up to 300Mbps.

After overhauling its network and neighborhood nodes, residential customers in Costa Mesa and West Hollywood, Calif., Staten Island and the Woodside neighborhood of Queens, N.Y., should now be getting faster broadband speeds ranging from 50Mbps for Standard (formerly 15Mbps) to 300Mbps for Extreme (formerly 50Mbps) service.

“These significant speed increases and network enhancements will allow our Internet customers to get the most out of their TWC experience,” said Time Warner Cable CEO Robert D. Marcus. “With this service transformation, our customers can enjoy all the ways they use TWC Internet even better, including streaming video, downloading music and more.”

Time Warner Cable’s senior vice president for corporate development Mike Roudi said Time Warner Cable expects to roll out similar upgrades nationwide over the next two years. But Comcast may have other ideas if it successfully completes its merger with Time Warner Cable by this time next year.

The cable company’s progress in rolling out upgrades is not as fast as their new top broadband speeds. Time Warner only expects to reach 200,000 customers with the new speeds by the end of June. The next areas scheduled for upgrades include:

• California: Covina, Cypress, Hoover, Crenshaw District and Jefferson Park areas of Los Angeles;
• New York: Upper Manhattan and more neighborhoods in Queens and Staten Island.

Time Warner said it expects to complete upgrades in New York and Los Angeles by the end of this year. No timeline was provided to start upgrades in other cities. Affected Time Warner customers will be contacted about replacing their existing DOCSIS 2 modem and getting set-top boxes for the all-digital television conversion that accompanies the upgrade.

[flv]http://www.phillipdampier.com/video/TWC Talks About New Customer Experience in NY LA 4-22-14.mp4[/flv]

Time Warner Cable’s Mike Roudi explains how the cable company is upgrading customers for faster broadband speeds and all-digital television service in this company-produced video. (1:49)

The House Energy and Commerce Subcommittee on Communications and Technology has approved a draft bill that could effectively render current CableCARD technology obsolete  by allowing cable operators to encrypt channels and introduce new security measures that only work with the cable company’s set-top box.

If you look closely inside your cable set-top box, chances are good a CableCARD similar to this is installed inside. But perhaps not for long.

With strong support from the cable industry, the House Subcommittee approved the reauthorization of the Satellite Television Extension and Localism Act (STELA) with language that would end the Federal Communications Commission’s ban on built-in descrambler set-top box equipment unavailable to competitors.

Section 629 of the 1996 Telecommunications Act requires that consumers have adequate access to alternative equipment to view multichannel video programming. In 2003, the FCC adopted the cable industry-developed CableCARD standard that would let customers view encrypted channels without leasing a traditional set-top cable box.

In fact, if you own a cable set-top box manufactured after 2007, chances are you already have a CableCARD without realizing it. It is built-in to your set-top box and decrypts and authorizes your cable television lineup. The cable industry never saw any need to incorporate CableCARDs into set-top equipment because it was designed to handle those functions without needing the extra card. But the FCC’s “integration ban” has insisted cable companies use the CableCARD with hopes it would stimulate universal support of the technology and help facilitate a breakup of the leased set-top box monopoly.

The cable industry has itself largely to blame for the FCC’s actions. Prior to 1992, some cable operators were notorious for saddling customers with expensive set-top boxes that were large and unwieldy. Cable companies regularly raised the rental price of the mandatory equipment in rate increase maneuvers and charged huge penalties when boxes were lost, stolen, or damaged.

Many cable customers never wanted the boxes, preferring “cable-ready” service, which let the television sort out the television lineup without any extra equipment.

But “Cable-ready” televisions were an impediment to the revenue-enhancing possibilities offered by digital cable television that became common in the 1990s. Existing television sets could not receive the digital channels without a set-top box and many customers avoided upgrading service because of the extra costs and equipment requirements. In other areas, signal theft pushed the industry towards encrypting more than just a few premium movie channels. In high theft areas like New York City, cable operators won permission to scramble most, if not all the cable television lineup. Customers needed boxes to receive those encrypted channels.

As early as January 2005, the National Cable & Telecommunications Association told the FCC that independent alternatives like the CableCARD were in direct “conflict with cable’s own market imperatives,” adding there was no economic incentive to support third-party equipment and adopting it would result in increased cable bills.

Powell

Now that CableCARD technology is with us, most cable companies rarely mention it unless customers directly ask. Even CableLabs, the industry engineering group that develops and markets a variety of cable industry technology, has also avoided the subject.

Without any significant backing from the cable industry, most customers never realized they had another option when the cable technician arrived with a leased set-top box in hand. Television manufacturers dropped support for the little-known technology as well.

Cable industry advancements like on-demand viewing don’t work with the standalone CableCARD, creating a disadvantage that further hurt the technology’s chances.

The cable industry argues times have changed and consumers don’t generally want CableCARDs.

NCTA president Michael Powell told Congress that more than 45 million CableCARD-enabled set-top devices are now sitting in customer homes, but only 600,000 of them were requested by cable customers for use in third-party devices. Powell argues supporting CableCARD technology means customers with a leased box are paying for redundant technology. One large cable operator claimed the average set-top box now costs an extra $40-50 to support CableCARD technology.

“Additionally, based on EPA figures, cable subscribers collectively foot the bill for roughly 500 million kilowatt hours consumed by CableCARDs each year,” said Powell. “By all measures, the costs of this misguided rule clearly outweigh its benefits.”

In the end the subcommittee agreed to a compromise by eliminating the “integration ban” that effectively keeps cable companies from switching on new security technology that might not work with CableCARDs but also gives the FCC the authority to create or authorize new independent set-top box technology ‘when needed.’

This means either the cable industry could develop a next generation of CableCARDs that work with advanced security measures or more likely the ongoing advancement of IP-delivery of television programming could make the matter moot. As the cable industry moves towards online streaming of cable channels, various third-party devices like Roku could be used to access much of the cable lineup without worrying about a CableCARD. Recording such programming for later viewing will likely require agreements with copyright-obsessed programmers, the cable industry, and manufacturers, however.