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 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)

Comcast has boosted Internet speeds for some of its broadband customers in the northeast.

Xfinity Internet Blast now offers 105Mbps, up from 50Mbps and Xfinity Extreme 105 has been increased to 150Mbps, up from 105Mbps.

The upgrade is free and applies in 14 northeastern states between Maine and Virginia and the District of Columbia. Customers may have to reboot their cable modems to connect with the faster speeds.

Comcast claims a merger with Time Warner Cable will benefit everyone with faster Internet speeds, but the company has increased broadband speeds — especially for premium tier customers — almost annually without the benefit of a merger.

Northeastern Comcast customers have yet to experience the company’s growing reintroduction of usage allowances on its broadband service, now set at 300GB a month in several mostly southern markets.

CenturyLink’s philosophy about offering gigabit fiber broadband speeds in Idaho can be summed up simply as “for business-use only.”

Jim Schmit, Idaho CenturyLink’s vice president and general manager, believes super fast broadband connections are overkill for homes and most businesses in the state.

“It’s like having a fancy sports car,” Schmit told the Idaho Statesman. “It might go 200 miles per hour, but what good does that do if the speed limit is 60?”

Schmitt’s attitude of broadband a-plenty is nothing new. In 2007, he told attendees of the Emerging Directions in Economic Development conference in Boise that “virtually all” Idahoans already had access to high-speed broadband. That was news to the audience, with about a quarter of the economic development professionals attending stating they represented a community that didn’t have it yet. Most of the questions related to how their communities could get the access they’d been told wasn’t available.

Seven years later, the Statesman reports more than a few homes and businesses in the region still rely on slow DSL, satellite and even dial-up access because faster options are just not available.

Idaho could find itself a bystander in the growing movement to deploy gigabit fiber to the premise broadband, despite the fact CenturyLink already has fiber infrastructure available nearby.

“We’re getting to the point where, for businesses in most places, we’re within last-mile connections for most locations,” Schmit says.

CenturyLink is willing to extend its fiber, but only if that fiber line reaches businesses needing gigabit speeds. Residential customers need not apply.

Fiber optics can be found in several office buildings in downtown Boise, which has been good news for established tech companies that need more bandwidth. Three data centers are operational in the city and would likely not be there without fiber.

But for home-based entrepreneurs of future Internet startups, most will be forced to choose between CenturyLink DSL or cable broadband from providers like Cable ONE, which offer slower speeds.

Smaller broadband providers have begun to fill the gap left open by the lack of interest from cable and phone companies. While Google is showing interest in building fiber networks in a handful of U.S. cities, many more communities are realizing they will not get gigabit speeds anytime soon unless they build a publicly owned broadband network themselves or rely on much smaller-scale projects under development in the private sector.

Patrick Lawless, founder and CEO of Boise voice recognition software developer Voxbright Technologies Inc., sees opportunity providing a limited fiber network in Boise. Lawless has plans to build a 2.6-mile fiber-optic loop and deliver television, phone and broadband service to apartment and office buildings in a manner similar to Google’s. It’s a small early effort, limited to a handful of businesses and new residential buildings — mostly apartments and renovated former office buildings or hotels. He plans to charge $99 a month for a package including television, 100Mbps broadband, and phone service.

With the project’s small scope and uncertain cost, CenturyLink says it isn’t too worried about the competition. For now they will continue to bank on offering only the broadband speed they believe customers actually need, and it will be up to a competitor to prove them wrong.

Tracking Cable’s Top Internet Speeds

The National Cable & Telecommunications Association (NCTA) offers this infographic to suggest the deregulated cable broadband industry works well without any interference from meddling politicians.

Their claim: “Ongoing investments have enabled cable providers to continue boosting broadband speeds with top tiers increasing 50% every year.”

The reality: Cable’s broadband speed comes at a very high cost. The majority of Americans cannot buy 505Mbps residential broadband service from Comcast and even if you could, the price tag hovers around $300 a month, with a nearly-$1,000 early contract termination penalty, a $250 installation and $250 activation fee. Customers at other cable providers often find their maximum speed is just 50Mbps and/or their Internet usage is limited by a usage cap.

Google Fiber and some other gigabit fiber to the home providers are offering unlimited 1,000Mbps service for $70 a month with no installation or activation fee if a customer agrees to stick around.

Verdict: The cable industry could do better for much less.