High-Speed Profit

Comcast Turns Back Cord-Cutting Tide, Adds New Video Customers


Comcast Turns Back Cord-Cutting Tide, Adds New Video Customers

Photograph by Joe Raedle/Getty Images

The Comcast (CMCSA) financial juggernaut continued this winter. The largest U.S. cable operator added 24,000 new video customers to start 2014, which marked the second-consecutive quarter of growth after a 6 1/2-year stretch of cable-TV subscriber losses.

Comcast’s quarterly sales and income both topped Wall Street forecasts. The company has credited much of the reversal in the video business to its X1 video platform, an Internet-based system designed to make channel navigation far simpler and more intuitive than past cable boxes. Comcast officials said on Tuesday that the company distributes from 15,000 to 20,000 new x1 boxes to subscribers each day.

Comcast is deep in the regulatory weeds as it seeks approval for a $45 billion purchase of Time Warner Cable (TWC), and the company used Tuesday’s earnings report to restate its case for mergeing with the country’s second-largest cable provider. The deal, Comcast Chief Executive Officer Brian Roberts said, will provide  subscribers with better customer service and give the combined company leverage to negotiate lower fees for programming.

As lawmakers and federal antitrust regulators assess the effects of combining the nation’s two largest cable companies, the deal has drawn fierce opposition from some consumer groups. But as CNET noted today, no large U.S. media companies that have a stake in the outcome—including Walt Disney (DIS), 21st Century Fox (FOXA), CBS (CBS), and Viacom (VIA)—have voiced public opposition.

The loudest corporate opponent thus far has been Netflix (NFLX), which said on Monday that it opposes the merger because Comcast would dominate the high-speed Internet market. Combined, the companies’ footprint would encompass 60 percent of U.S. households with broadband Internet, Netflix said, citing a report issued in February by Nomura Securities. “Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix,” CEO Reed Hastings and Chief Financial Officer David Wells wrote in Netflix’s quarterly letter (PDF) to shareholders. “The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers.”

Netflix battled Comcast this winter over the degraded performance of its streaming service on the cable firm’s pipes; service improved after Netflix agreed to pay Comcast for carrying its video traffic. Netflix is responsible for more than a quarter of all online data traffic, rising to more than a third in peak viewing periods.

Comcast and other Internet service providers argue that Netflix should pay more for its traffic and say that the company is trying unfairly to shield its customers from its business costs. “Netflix should be transparent that its opinion is not about protecting the consumer or about net neutrality,” Comcast spokeswoman Jennifer Khoury said Monday. “Rather, it’s about improving Netflix’s business model by shifting costs that it has always borne to all users of the Internet and not just to Netflix customers.”

Bachman is an associate editor for Businessweek.com.

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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $58.38 USD
    • 0.32
    • 0.54%
  • TWC
    (Time Warner Cable Inc)
    • $152.83 USD
    • 1.68
    • 1.1%
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