Comcast blames telcos, economy for net-adds dropoff

Comcast blamed a sour economy and increasingly aggressive competition from telcos for a dramatic slowdown in subscriber growth late last year, echoing sentiments voiced by Time Warner Cable two weeks ago.

And although the country’s largest cable operator has vowed to double the footprint of its wideband technology this year for higher speeds, it expects to add fewer high-speed Internet customers in 2009 than the 1.3 million it added in 2008.

Comcast added just 290,000 subscribers in the fourth quarter (for video, broadband and voice services combined), a 60% drop both sequentially and from a year earlier. It also added just 184,000 high-speed Internet customers, 44% fewer than in the third quarter and 52% fewer than it did a year earlier. Subscriber growth became harder to maintain as the economy nose-dived last fall and as telco competitors ratcheted up aggressive promotional activity in an ever-increasing footprint, Comcast said during its fourth-quarter earnings report today.

“We believe the RBOCs priced more competitively, more dramatically lower, to win some share in the short term,” said Stephen Burke, Comcast’s chief operating officer. “But we remain confident that we’ll continue to grow share over time.”

Whereas a year ago, Comcast competed with telco video in roughly 10% of its footprint, it does so now in about 22%. It is fighting back: 66% of the high-speed data customers Comcast added last year converted from DSL versus 44% two years ago.

While price competition has remained stable despite the telco/cable war, the economy is making consumers more price-sensitive – particularly since October, Comcast said. And as a result, they are less likely to upgrade service, for example.

“It’s simply harder to make the phone ring with marketing and sales,” said Brian Roberts, Comcast’s chief executive officer. “Customers appear defensive.”

However phones are ringing more now than they were last fall, he added.

“It’s fair to say in the second and third quarters, we and most of the cable industry did extremely well in terms of high-speed data, and the telephone companies, it appears, greatly increased their promotional intensity and spending in the fourth quarter,” Roberts said. “We’ve always been trying to concentrate on long-term balance and revenue growth and making sure that, long-term, we grow units and preserve [average revenue per user (ARPU)]. You try not to swing too far one way or the other…We’re not interested in putting out offers that generate hundreds of thousands of units which have no economic value.”

Comcast’s ARPU was up 9% to $114 in the fourth quarter, thanks largely to video rate increases (offset somewhat by the loss of 233,000 basic video customers), promotional activity and service bundles.

And the company is not seeing a significant increase in customer disconnections, service downgrades or bad debt.