Broadband Cable Association of Pennsylvania


August 2, 2012

Joseph S. Gans Sr. obituary in Hazleton Standard-Speaker

Comcast Corp. reported a 32% increase in second-quarter profits, due in part to its continued broadband growth, and said it is on track to lose less money than previously thought from NBCUniversal's coverage of the 2012 Olympic Games.

NBCUniversal Chief Executive Steve Burke said Comcast could approach break-even on this year's carriage of the Olympic Games, following a previous loss estimate of up to $200 million. NBCUniversal has received strong prime-time ratings during the games' first week, despite receiving much criticism for showing key events several hours later on tape delay. "We are way ahead of where we thought we would be," Mr. Burke told analysts during a conference call. He added that NBCUniversal already had surpassed its advertising-sales goal by $100 million before the games started last week. For the second quarter, Comcast reported a mixed performance at NBCUniversal, which it acquired early last year and has sought to invigorate with investments in new content and its current coverage of the 2012 Olympic Games.

Last year Comcast agreed to pay $4.38 billion to carry the Olympic Games through 2020, in a move that raised questions about what strategic benefits would come from the high-price purchase. Mr. Burke acknowledged that carrying the Olympics would give NBCUniversal more bargaining power in signing affiliate deals in the future. "We feel it's clearly something that's going to benefit our company very broadly," Mr. Burke said.

Overall, growth at Comcast's broadband, business services and advertising divisions in the second quarter helped offset more modest revenue gains at the cable distributor's video subscription business. Net profit for the quarter was $1.35 billion, or 50 cents a share, up from $1.02 billion, or 37 cents a share. Revenue for the quarter increased 6.1% to $15.21 billion. Revenue also benefited from the inclusion of 100% of Universal Orlando. Comcast took full ownership of the theme park in July 2011. Shares of Comcast were up about 3.5% to $33.68 in Wednesday morning trading; the stock is up about 41% over the past year.

The country's largest cable operator by subscribers continued to shed video subscribers, but it slowed the rate of losses for a seventh consecutive quarter. Overall, the video subscription business lost 176,000 subscribers, fewer than the 238,000 customers that departed in the year-ago quarter. Subscriber metrics for cable operators like Comcast tend to soften in the second quarter, as college students and seasonal residents relocate for the summer months. But Comcast and its peers also face a long-term slowdown in the pay-TV business as increased competition and a soft economy see distributors sharing a smaller overall pool of total viewers.

Comcast said Wednesday that it now faces competition from telecom services like Verizon Inc.'s FiOS and AT&T Inc.'s U-verse system in around 40% of its service area. Comcast said it expects the fees it pays to carry networks--one of the biggest expenses for distributors--to increase in the high single-digit percentage range for the full year. So far in 2012, those costs have risen 6.7%. Meanwhile, Comcast's broadband business added 156,000 net subscribers, an 8.4% increase. Comcast and other cable operators are increasingly focusing on broadband, where profit margins tend to be higher than the video business because they aren't burdened by high television programming costs.

Revenue from the video business, which accounts for nearly half of Comcast's overall revenue outside of NBCUniversal, grew 2.8% to $5.08 billion. Broadband services contributed $2.38 billion in revenue, an 8.9% increase. NBCUniversal revenue fell slightly to $5.5 billion, in part due to the poor box-office performance of "Battleship," which contributed to a $83 million quarterly loss for NBCUniversal's filmed entertainment division. The fastest-growing segment at Comcast was its business services division for small and medium-size businesses, which grew revenue by 34% to $582 million. Comcast's advertising business brought in $552 million, a 7.6% revenue increase, as election-campaign advertising begins to pick up.

Also, Comcast sued the Federal Communications Commission to block a ruling that mandated the distribution of the Tennis Channel on its cable systems. Comcast said the requirement may cost it hundreds of millions of dollars. Comcast, in a lawsuit that was filed in Washington, asked a federal appeals court to throw out the FCC ruling, which found Comcast improperly discriminated against the Tennis Channel by placing it in a more expensive sports package. The FCC ordered Comcast to provide the Tennis Channel with distribution comparable to two sports channels Comcast owns, the Golf Channel and NBC Sports Network. Comcast called the ruling arbitrary and unconstitutional. Wall Street Journal, Bloomberg; also see WSJ's report on NBC's Olympics success, and reactions on Twitter

As Google Inc. starts to roll out its elaborate Fiber project in Kansas City, the area's entrepreneurs are plotting how to capitalize on the one-gigabit communications network in creative ways. Tim Sylvester, 31 years old, founded Integrated Roadways LLC, which makes a modular pavement system for high-traffic roadways. His plan: to embed sensors in pavement slabs to capture data about potentially hazardous roadway conditions, such as cracks, potholes and traffic jams. Until recently, Mr. Sylvester figured his company would have to develop its own high-speed network to gather the data. Now, he says, he hopes to use Google Fiber, which will be about 100 times faster than the networks in most U.S. homes, as the basis for his service. "There's been a lot of excitement" here, says Michael Gelphman, founder of Kansas City IT Professionals, a grassroots networking and peer-advisory group. "Google Fiber has gotten the whole city thinking about technology."

Over time, Google Fiber hopes to spur a new wave of technological innovation, from telemedicine to cloud computing, that can capitalize on its network's ability to stream high-definition videos and transfer large files. Indeed, some believe Google Fiber is so powerful that it will improve education technology and transform how businesses operate. Internet video streaming, in particular, seems ripe for new applications. Google Fiber's emphasis on Internet-TV technology may also spur a new way to use apps, which are now primarily developed for computers and mobile devices.

But enabling one-gigabit Internet speeds across the country is still a pipe dream. It would take Google a long time to dig the trenches and string the fiber-optic cable so that it can roll out Fiber elsewhere. According to some analysts' estimates, the cost would eventually be tens of billions of dollars. For now, the Google Fiber plan is restricted to the Kansas City area. But Google has privately discussed expanding its offerings to other markets that Verizon Communications Inc. hasn't entered with its FiOS fiber-optic TV and Internet service, people familiar with the matter have said.

Google is also trying to keep a lid on costs by servicing only neighborhoods where a certain percentage of residents preregistered with a $10 deposit. The neighborhoods need to reach certain thresholds before Sept. 9 or Google won't commit to bringing service there. It has also manufactured its own Wi-Fi router, set-top box, DVR and other gear so it won't have to pay other providers. Google declines to comment on the cost of the Kansas City project, which charges households $70 a month not including TV service, but company executives say it expects to make a profit. So far, the company also hasn't started working directly with businesses, says Jenna Wandres, a Google spokeswoman. Instead, it has focused on providing Fiber to individuals to increase residential access to high-speed Internet following its involvement in the government's National Broadband Plan.

But that isn't deterring the entrepreneurs from hatching plans. Jeff Pfaff of Overland Park, Kan., says he hopes to use the service to "push the limits" of a health-monitoring system he's building. It would enable at-home patients to teleconference with doctors and family members via a camera hooked up to a TV set and a remote control. The business, Caregiv, is based on the premise that some elderly patients aren't facile with computers and a TV set is thus a better way to monitor them at home. With a Google Fiber connection, Mr. Pfaff believes he will be able to stream multiple high-definition videos to provide nutrition training and therapy sessions in online groups. The monitoring system would also collect information, such as picking up tremors or patient coughing patterns, he says.

The plan is to provide two remotes, one for the living room and one for the bedroom. Mr. Pfaff expects to start testing the products in residences hooked up to Fiber later this fall. Kirk Hasenzahl, a 44-year-old entrepreneur who runs RareWire, a two-year-old start-up, says he expects Google Fiber to cut his overhead costs. He now pays $1,400 a month for a network that supports a fraction of the bandwidth Google will offer. "I'm eager for it to happen," he says. "Capacity and price competitiveness will be a huge benefit for us." Recently, Google held a focus group with locals, including a graphic designer and a medical transcriptionist, who transcribes voice recordings by physicians, who said they needed faster Internet connections for work. The goal was to help the company learn how Google Fiber can help their businesses, Ms. Wandres says.

The search-engine giant also has begun notifying small businesses like coffee shops and consultants that they can preregister for its small-business service, which is aimed at mom-and-pop shops. If the businesses are in the neighborhoods getting Google's service this fall, ahead of the broader rollout, they may qualify, too, Ms. Wandres says, adding that the criteria for small-business Fiber hookups will be disclosed when that offering is announced in the near future. Some of the entrepreneurs building products and businesses that will capitalize on Google Fiber may have a tough time drawing major backing from venture capitalists. The Kansas City region is still considered fly-over country by investors.

Mr. Sylvester isn't deterred. He is hoping his company can get Fiber early because the sensors in his roads may be able to communicate with self-driving cars, a technology that Google has supported. "Google's biggest marketing push has to be the public, so that's the core reason why they went with the residences," he says. But he points out that in Kansas City, Mo., restaurants on 39th Street, where he lives, already have Google Fiber access even though homes there won't be eligible until September. "This shows they are serious about bringing it to businesses," he says. "I have great confidence that they will make it available to businesses by the time we need it in 2013." Wall Street Journal