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November 7, 2007, 12:47 pm

Cable trouble: Downsizing ahead?

By Stephanie Mehta 

With the cable industry in the doldrums, at least one consultant expects companies such as Comcast (CMCSA), Time Warner Cable (TWC) and others may be headed for some downsizing. Shahid Khan, partner at IBB Consulting Group, recently said he thinks the big cable operators are going to spend the next two to four quarters focused on “operational efficiencies.”

“They’ve had the happy problem of growth,” says Khan. “Now that’s slowing down.”

Indeed, Time Warner Cable, whose biggest shareholder is CNNMoney parent Time Warner (TWX), today reported larger-than-expected declines in video customers, and missed some analysts’ profit estimates. Time Warner Cable’s lackluster numbers come two weeks after Comcast reported similarly uninspiring results, prompting investors to sell off the stock. Both companies’ shares are trading at or near their 52-week lows.

IBB’s Khan says the cable operators are in a bit of a holding pattern. They grew rapidly thanks to the offering of residential voice service and high-speed Internet, bundling those services with their core video product. But they’ve yet to debut the next big part of the bundle (and engine for additional growth): wireless service.

Where’s wireless? The cable operators have a joint venture with wireless operator Sprint Nextel (S) essentially to resell Sprint’s service to cable customers, but according to industry sources, that venture isn’t going well. The parties apparently are squabbling about a number of issues, including responsibility for customer service, among other details. It doesn’t help matters that Sprint is without a CEO. The cable guys also have acquired wireless spectrum but haven’t announced plans to build out a full-fledged network using those airwaves.

Meanwhile, the phone companies such as Verizon (VZ) and AT&T (T) are not standing by while cable grabs their phone and DSL customers. The telcos are fighting back with video products of their own, and apparently are having an impact in several key markets, such as the New York suburbs, Dallas and L.A.

And so Khan predicts some “network efficiencies” at some cable operators in the coming year. Our experience is that, when cable guys start talking about operational efficiencies, it usually means layoffs.

But he also sees some new products coming online that can help cable grow until their wireless strategies coalesce. He thinks switched digital video, a technology that frees up additional bandwidth on the cable network, will help operators deliver more high-definition channels over their pipes. And more high-def, argues Khan, should help the cable operators fend off competition from both phone and satellite companies touting their high-def offerings to lure cable customers.

Cable TV (Comcast in particular) is exhortion pushed on citizens by their corrupt politicians. I live in a rented house where satellite TV is not allowed by the landlord. In April, Comcast “upgraded” the programming in my area. The end result was that I lost all HBO channels in the rear of the house. When I called to report the outage, I was placed on hold….for an hour and a half! After playing this game several times, I resigned myself to the fact that I was being screwed and powerless to do anything about it besides disconnecting service altogether. Apparently the trick to getting anything done with Comcast is to know someone “on the inside” and get their direct line. Otherwise, take a day off work and buy a quality speakerphone.
BTW: had both DirecTV and DishNetwork. Great reception 99% of the time. Only extreme( and I do mean extreme! Still had service while the remnants of a hurricane passed through my area!)weather knocked out service and then for only very short periods of time. Cable flickers whenever the wind blows or heavy rain falls. Both satellite carriers had very friendly and responsive support staff.
Cable (Comcast and Time Warner in particular) are horrible. I advise my friends and family to avoid cable and go with satellite (either carrier is better than cable).

Posted By Trey, Monroe LA : December 6, 2007 5:13 pm

When gas went up a couple of years ago we were surcharged by ups, fedex, etc. Gas came down, but the surcharge didn’t. We are now paying for HD channels like they’re special. Soon every channel will be HD and the price won’t drop when its a standard. Another way to keep Murdoch and Ergen on the forbes 400. The average cable bill will double by the time this digital/HD conversion is over. We need to go back to c-band days when you bought the channels you want for pennies. With all the channels being offered by local broadcasters now, we should tell every cable/satellite company that they are not worth it, and maybe cable networks will offer there own solution for providing channels over the net at a reasonable cost per channel. Then the public would dictate cost, not the few at the top of food chain.

Posted By Art, Colorado Springs, CO : November 15, 2007 1:39 pm

The way some people talk about Verizon, you would think their services are free.

Posted By Jim, Philadelphia, Pa : November 12, 2007 10:30 am

fios tech again,almost forgot we will have 150 hd channels sometime in 2008 not sure exactly what quarter of the year,im sorry not to rain on cables parade but you messed up by let a company such as verizon enter your market ,it is a wrap ,and for all of you who complain about the cost of verizon,look at what you are getting to your home for that price ,even if you bill is higher than cable which i doubt,you will be getting better technology,and more content period ,by the way make sure you are not on a promotion with cable ,because when that promotion is up your better be ready for a price hike with them and they will not let you know its coming.tilnext tme

Posted By fios tech ,dcmetro : November 11, 2007 1:51 pm

Fios Tech here hands down fios is here to stay and a force to reckin with,Comcast is smoke and mirrors with there so cold turbo boost, what in the world is that!extended speed tests show actual speed is 6-7 megs,you be the judge ,we are testing 20 megs up/20 megs down in the northeast and 10 megs up/10megs down in mid atlantic region release date late 07 early 08 ,ladies and gentleman we are just getting started our system is geared for 100megs up and down (wow)!Can you imagine setting your DVR with your cell phones ,its on the way .jus thought i would let your mind wonder til next time,

Posted By fios tech,washington d.c. metro area : November 11, 2007 1:39 pm

I don’t know why everyone, (or anyone) thinks that Verizon will be any different than the companies they are complaining about. Verizon is a phone company, aren’t they? Isn’t it (rhetorical) the phone companies that started all of the BS fees and surcharges!! What makes anyone think that any… phone company won’t continue to play that game, since they have managed to get by with it for many years already!
Believe me, you will get a package for 79.95 and with all the BS charges it will be at least 15.00 higher by the time you pay the bill, and I don’t hear anyone (consumer) bragging about what great service they are getting from any of the Landline or Cell companies..

Posted By Gary, St. Louis, MO : November 9, 2007 1:24 pm

The only thing that matters is price. I get my HIDEF DVR from Comcast at a high price but i get the channels I WANT in HIDEF. Directv, or Dish network CANNOT offer that to me. I spend 75.00 a month on Hi DEf DVR with 120 channels. Through satellite that would cost me 120.00. Trust me I’ve checked !!

Posted By BIg Dog Windsor PA : November 9, 2007 7:33 am

As soon as DIRECTV offered local channels, I dropped COX cable. The last straw was when a neighbor disconnected, COX disconnected us instead. Took them THREE weeks to get our service back. Two of our locals always had ghosting. Now Verizon is offering FIOS TV service here in Virginia Beach. Hope COX goes the way of the dinosaurs! By the way, our DIRECTV is crystal clear.

Posted By Dan, Virginia Beach VA : November 9, 2007 7:04 am

oh and 12 months from now you willbe in my shoes when directv says you are not anew customer and therefore cannot take advantge of any of the promotional offers because you had service in the past and your account is still active even tho you don’t have a account balance so you will have to buy your equipment and pay regular subscription prices but don’tet after your “dish winback credit” runs out from your promotion price you will still be paying about 20-30 dollars more for less programming and will still probably switch back anyway just like me!

Posted By herbie, westfield, ma : November 8, 2007 12:25 pm

directv doesn’t let me take advantage of new subsciber deals what are you talking about?????
i haven’t had directv in over 2 years yet the keepaccount open and active with a zero balance and no subscribtion to thier service so when i called them they refuse to let me take advantage of that 69$ sunday ticket package they were offering because they claim i am not a new customer because i had thier service years ago (but in a different apartment then one im in now but same street address!!!!! i don’t know why they do this but either way they are still cheaper than comcast and give me more channels i actually watch than comcast does and in lower tiers too! somcast sucks period!!!!!!!!!!!!!
don’t believe me type “comcast sucks” in google and look at the millions of complaints! directv sucks in heavy rain and heavy storms but comcast has same pixelating problems in perfectly clear days as satalite does in bad weather! plus that dam EAS emergency alert system does a signal test on comcast almost on a daily basis screwing up the dvr recordings on me!
nobody in there rightmind would willingly pay more money for less programming bad customer service etc! unfortunitly since corruption is widespread in this country especially with state and municipal governments comcast and others like time warner have been able to bribe and payoff local governments for the corrupt exclusive rights deals that should be banned forever! i have had time warner comcast directv etc in the past and i can’t wait for this new verizon fios to be available so i can get a better deal without all this bull crap and comcast hidden fees for everything directv i would go to dish network in a second flat if they offered my local stations but thatnks again to corruption some companies can like comcast and directv while dish network can’t give the locals here and seeing as how im in a valley an off air antenea will only tune one of the local stations with minimal fuzz! all these wars going on and our troops fighting for other non american peoples freedoms everywhere while our own freedoms to choose are being trapled right here in america every singly day! unbelievable! i hope all you people that buy comcast stock lose all your money!!!!!!!!!!!!!!!

Posted By herbie, westfield, ma : November 8, 2007 12:20 pm

The cable companies have a monopoly on services in many areas and I can not stand them. Their prices are extortion considering most people only watch a handful of channels. Why should I pay $75.00+ for 500 channels I don’t and will not watch. Someone please push through a la carte pricing or at the very least expand the availability of telco TV to increase competition.

Posted By KC, Charlotte NC : November 8, 2007 11:03 am

I’m waiting for ATT U-verse to become avaliable where I live. I’m very tired of the small cable company that owns the rights to my neighborhood. Hurry up AT&T!

Posted By Blake, Houston TX : November 8, 2007 8:58 am

Cancelled my Time Warner the other day and dropped off the box at the customer office. All cable TV is gone… time for a life change… instead of watching life… maybe I will try to go out and have one instead.

Other things led to this decision… price of everything going up and $ 75 month for cable was easy to cut this. Of course if companies like Time Warner would stop outsourcing jobs to foreign countries maybe I would have one and could afford cable… but this is what happens.

With the exception of the Daily Show, Colbert Report, and Lou Dobbs plus CNN and other news channels… I won’t miss cable.

Goodbye cable TV. Hello life.

Posted By Patrick, Cincinnati,OH : November 7, 2007 10:09 pm

I have at least 3 channels that I am paying for that are in constant trouble. Then they come back and go again. Everytime I see a time warner truck opening the acceaa hole in the sidewalk I know they are going to SCREW UP SOMETHING ELSE! Time Warner only wants the money, and now only stealing lines from the phone company. They are no longer interested in TV.

VERIZON PLEASE HURRY UP

Posted By John McGowan Rockaway New York : November 7, 2007 4:52 pm

Haven’t really had a complaint with Time Warner thus far, the DVR functionality sometimes lags and freezes, but not enough to truly make it worthwhile to switch. The only thing making me consider switching is the explosion of Verizon Fios here in the Metroplex. Everyone I know either has it, or is going to get it. Both Comcast and TimeWarner are losing customers like it’s going out of style, and it’s simply because Fios looks amazing. The picture and guide is so much more advanced than anything I’ve seen thus far. The only thing that makes me wary is a possible contract, because Verizon already has me in a two-year cell deal. No complaints really, but contracts bug me.

Posted By Chris, Dallas, TX : November 7, 2007 4:31 pm

Herbie, you write as if cable companies were the only businesses who raise prices, who sometimes remove channels - who are ultimately in it for the money. Of course they all do this. Both cable and satellite providers face a major problem because their business models are built around luring new customers in with promotional pricing. They offer no incentive to become a long-term customer; it’s cheapest to switch between them every year or two. I myself just left DirecTV to go back to cable because DTV wanted to charge me $200 for equipment cable would give me for free, and they refused to match the promotional monthly pricing offer from cable. 12 months from now I might be back with satellite if the cable company can’t match whatever DTV promotion is going on then.

Posted By Jennifer, Arlington, VA : November 7, 2007 3:58 pm

Herbie is absolutely correct. I never had so many problems with my cable as in the last year. Time Warner doesn’t care about their customers.

Posted By Phil, New York, New York : November 7, 2007 3:19 pm

it because comcast and time warner suck! they keep raising prices while reducing services! i just left comcast permantly because in 3months my price went up over 15 bucks between cable tv fee and set top box fee while at the same time they stole my favorite channel nfl network away thus provinding with a lesser programming service! the are a buch of greedy ba$!@rds and they desrve every bit of what what is happening out of the 100’s of channels they force you to pay for most people only watch about a dozen of the channels right nowim going to directv it is cheaper the EAS stupid system test doesn’t happen on almost adaily basis like on comcast which consistantly interupts dvr recordings and the set to box!
if you ask me i would say sell all your stock in these 2 companies they are going downhill fast especially with much better pricing from dish network directv and verizon fios soon these moron cable companies will collapse if they continue on this greedy path of raising the rates 3-5 times faster than inflation!

Posted By herbie, westfield ,ma : November 7, 2007 1:29 pm
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