NEW YORK (Reuters) – Comcast Corp, the largest U.S. cable operator, posted in-line second-quarter results, as its high-speed Internet and NBC Universal businesses grew amid a drop in pay-TV subscriber departures.

Comcast, also the No.1 U.S. high-speed Internet provider, said on Thursday total revenue rose 11.3 percent to $18.74 billion in the second quarter ended June 30. Analysts on average had forecast revenue of $18.14 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to Comcast rose 7.3 percent to $2.14 billion, or 84 cents per share, from a year earlier.

Profit was up 10 percent from a year ago to 84 cents per share after excluding items such as investments and acquisition-related items, matching Wall Street estimates.

The company, which lost 8,000 video customers last quarter, reigned in subscriber losses in the second quarter compared to a year ago. It said 69,000 subscribers departed from April through June, but it was less than the 144,000 users who left a year earlier.

Wall Street keeps a close watch on the number of new video subscribers as pay TV operators fight to keep customers amidst intense competition from streaming video services such as Dish Corp’s Sling TV.

Earlier this month, Comcast said it is beta testing a new cable streaming service called Stream, which will broadcast live TV from HBO and about a dozen other networks for $15 per month. The new service lets Comcast’s Xfinity Internet customers stream live TV over phones, tablets and laptops.

Comcast’s high-speed Internet customer additions dropped 12 percent to 180,000, but revenue from the business rose about 10 percent to $3.1 billion.

Business services revenue increased 20.4 percent to $1.16 billion.

At NBC Universal, revenue rose 20.2 percent to $7.23 billion from a year earlier.

Revenue at the film studio rose 93 percent from a year earlier to $2.3 billion, bolstered by its summer blockbusters “Furious 7” and “Jurassic World.”

The Universal theme park business, with its popular “Harry Potter” attraction in Florida, saw revenue rise 26 percent to $773 million.

Advertising revenue at cable networks fell 3 percent in the quarter to $917 million amid a decline in ratings that has hit networks across the TV industry. The NBC broadcast network’s ad revenue rose a modest 0.3 percent to $1.25 billion.

Shares of Comcast, which abandoned its proposed $45 billion merger with Time Warner Cable Inc in late April, closed at $64.50 on Wednesday on the Nasdaq.

(By Malathi Nayak; Editing by Bernard Orr)

The magic of fiber

Ever wonder why Comcast, one of the strongest defenders of classic coaxial-based cable technology, is suddenly getting on board the fiber-to-the-home bandwagon? New research suggests if they don’t, their market share could fall to 40% or less if a serious fiber competitor arrives.

“There’s some sort of magic associated with fiber,” John Caezza, president of Arris’s Access Technologies division, told Multichannel News. “Everyone thinks it’s better than [cable technology].”

The risks to the cable industry are clear: be prepared to upgrade or face customer losses.

Craig Moffett of Moffett Nathanson has never been a cheerleader for fiber to the home service. In 2008, Moffett vilified Verizon for its investment in a major fiber upgrade we know today as FiOS to replace its aging copper infrastructure, complaining it was too expensive and was overkill for most residential customers. He was more tolerant of AT&T’s less-costly fiber to the neighborhood approach, dubbed U-verse, that still used traditional telephone lines to deliver service into the home. Because U-verse did not need AT&T to replace wiring at each customer location, the cost savings were considerable. But the cost-capability compromise left AT&T with a less robust platform, with broadband speeds initially limited to a maximum of around 24Mbps.

While phone companies like AT&T and Verizon were saddled with the enormous cost of tearing out decades-old obsolete phone wiring to varying degrees, the cable industry seemed well positioned with a mature, yet still recent hybrid fiber-coaxial (HFC) platform that was upgraded in the 1990s in many cities. While still partly reliant on the same RG-6 and RG-11 coaxial cable used since the first days of cable television, cable companies also invested in fiber optics to bring services from distant headends to each town, removing some of the copper from their networks without the huge expense of bringing fiber all the way to customer homes.

For Moffett, it was the cable industry that had the network with room to grow without spending huge amounts of capital on upgrades. He has touted cable stocks ever since.

Moffett

What worries Moffett now isn’t Google, Frontier, CenturyLink, or even Verizon. He’s concerned about AT&T.

As part of its commitment to win approval of its merger with DirecTV, AT&T promised regulators in June it would expand AT&T U-verse with GigaPower — AT&T’s gigabit fiber to the home upgrade — to at least 11.7 million homes, nine million more than it has ever promised before. Comcast has a 32% overlap with AT&T U-verse, compared to Time Warner Cable (26%), Charter Communications (32%), Bright House Networks (25%) and Cox Communications (25%). Comcast had promised faster broadband with the advent of DOCSIS 3.1 beginning as early as next year. But the company isn’t willing to wait around to watch AT&T and others steal its speed-craving customers. This spring, it promised 2Gbps Gigabit Pro fiber to the home service to customers living within 1/3rd of a mile of the nearest Comcast fiber line.

Some in the cable industry complain Google’s huge marketing operation has saddled cable broadband with a bad rap — ‘it’s yesterday’s news, with Google Fiber representing the future.’ The marketing war has been largely won by Google, they say, leaving consumers convinced fiber is the better and more reliable technology, and they need it more than the cable company.

Cable’s defense is to consider some marketing changes of its own — including the idea of dropping the name “cable” from the business altogether, because it implies older technology. But despite any name change, most cable companies will continue to rely on HFC infrastructure for at least several more years, despite claims they are bringing their own middle mile fiber networks closer to customers than ever. Cable operators now serve an average of 400 homes from each cable node. Some cable companies like Comcast plan to cut the number of customers sharing a node to around 100-125 homes, which means fewer customers will share the same broadband connection. But in the end, that will make cable comparable at best to a fiber to the neighborhood network, still hampered to some degree by the presence of legacy coaxial copper cable. The industry believes most consumers will never see the limitations, and for those that do, a limited fiber buildout with a steep installation fee may keep costs (and demand) down to those who need the fastest possible speeds and are willing to pay to get them.

That philosophy may still cost cable companies customers if a fiber competitor doesn’t have to compromise speed and performance and can afford to charge less.

The top 10 U.S. cable companies currently account for 60% of the residential broadband market and 86% of all broadband net additions in the first quarter of 2015, says Leichtman Research Group.

Moffett predicts cable broadband will only capture 40% of share in markets where it faces a fiber to the home competitor (Google, EPB, Greenlight, Verizon FiOS), 55% in markets served by a fiber to the neighborhood competitor (U-verse, Prism), and 60% where the competition only sells DSL (most Frontier, Windstream service areas). Nationwide, AT&T’s newest gigabit fiber commitment could cost the cable industry 2.4% of the whole residential broadband market, Moffett said.

Phil McKinney, president and CEO of CableLabs, believes DOCSIS 3.1 — the next standard for cable broadband — can easily stand toe to toe with fiber to the home providers.

McKinney

“I think it [HFC] has tremendous life, and we are going to be riding it all day long,” Werner said. DOCSIS 3.1 “is definitely going to be our go-to animal. Due to ubiquity, we can go out and virtually serve all of our [customers] very quickly.”

Cable companies claim their speed increases reach all of their customers in a given area at the same time without playing games with “fiberhoods” or waiting for incremental service upgrades common with Google Fiber or AT&T’s U-verse. Customers, the industry says, also appreciate DOCSIS upgrades bring no service disruption and nobody has to come to the home to install or upgrade service.

“The cable industry has more fiber in the ground than each fiber provider in the world,” McKinney argues. “If you look at total fiber strand miles, there’s more fiber under management and under control of the [cable] operators than anybody else combined.”

That may be true, but Moffett thinks it is only natural shareholders may eventually punish the stocks of cable operators that will face competition from AT&T’s U-verse with GigaPower. There is precedent. Cablevision serves customers in New York, Connecticut, and New Jersey and faces fierce competition from Verizon FiOS in most of its service areas. That competition has been brutal, occasionally made worse in periodic price wars. What may be protecting cable stocks so far is the fact AT&T competition will only affect, at most, 32% of the impacted cable operators’ service areas.

AT&T’s gigabit network has also proved itself to be more press release than performance, with very limited availability in the cities where it claims to be available. Verizon FiOS, in contrast, is widely available in most of Cablevision’s service area.

Still, Comcast is hoping it can hang on to premium customers who demand the very fastest speeds and performance with targeted fiber.

“Gigabit Pro is really for those customers who have got extreme needs,” said Tony Werner, Comcast’s executive vice president and chief technology officer.

The first 2Gbps Gigabit Pro deployments from Comcast will rely on Metro Ethernet that now serves Comcast’s midsized business customers, later migrating to passive optical network [PON] technology Comcast intends to begin installing in new housing developments and apartment complexes.

Multichannel News reports Comcast is now offering a limited promotional price of $159/mo for the ultra-fast broadband service, but to receive the discount customers must sign a three-year service contract with early cancellation penalties and agree to pay up to $1,000 in installation and activation fees.

Comcast claims it will offer the service to about 18 million homes by the end of the year — those within 1/3rd of a mile of Comcast’s existing fiber network.

Tony Werner, Comcast’s executive vice president and chief technology officer would not say which version of PON — GPON or EPON Comcast will use long-term, but a decision had already been made within the company and would eventually be known to customers.

ZTE, a Chinese provider of telecommunications equipment and network solutions, says EPON is the dominant fiber to the home solution in Japan, Korea, China and other Asia-Pacific countries. In other countries, especially in America, GPON is the preferred choice, as it can coexist with earlier PON systems.

Werner added Comcast will quietly deploy fiber to the home service in certain new housing developments.

“Once the trench is open, the incremental economics are close enough that we will do fiber-to-the-home, unless it’s a very small stub off of existing plant,” Werner said.

But for everyone else, it will be coaxial cable as usual unless customers pay that $1,000 fiber fee and are willing to wait up to eight weeks for installation. Comcast will run fiber and install the necessary equipment, including the Optical Network Terminal, only to customers who sign up for Gigabit Pro.

A Philadelphia woman is suing Comcast after its collections department allegedly placed automated calls to her personal cell number once or twice a day for almost nine months to collect a past due cable bill she says was paid in 2011.

Kim Elder and her attorney Craig Thor Kimmel from Kimmel & Silverman, P.C., are seeking a refund for the per-minute cell charges incurred answering Comcast’s collection calls, damages of $500 per call for violating the Telephone Consumer Protection Act (TCPA), triple damages of $1,500 per call due to Comcast’s “malicious, intentional, willful, reckless, wanton, disregard” of Elder’s rights, as well as additional injunctive relief if the court finds Comcast’s actions egregious.

James A. Byrne U.S. Courthouse – Philadelphia, Pa.

Elder’s lawsuit states the automated collection calls began in September 2014, always beginning with a pre-recorded announcement stating the call was originating from Comcast. The call would then be transferred to a collection agent seeking payment for a $527 cable television bill. The complaint states Elder paid that bill years ago and repeatedly asked Comcast to stop the calls, but claims they continued daily through at least mid-June of this year.

First enacted in 1991, the TCPA (among other things) regulates telemarketing calls, the use of automated equipment to make calls, use of automated or pre-recorded voices during calls and the means and manner of sending faxes. Ongoing clarifications by the Federal Communications Commission over the years have tightened the rules to close or curtail loopholes and give consumers easier ways to revoke consent for future calls.

A lawsuit decided earlier this month found Time Warner Cable liable to a Texas woman for almost $230,000 in damages for repeatedly calling the wrong number to reach another customer. Because part of the call was automated, and Time Warner did not stop the calls after being asked, a judge used damage provisions in the TCPA to heavily fine the cable company.

Elder’s case was filed in U.S. District Court in Philadelphia — home to both Elder and Comcast’s corporate headquarters.

Cases of this type are usually required to be designated for arbitration within the court system to guarantee a speedy civil trial if Comcast does not privately settle with Elder and her attorney.