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More choices, higher rates than ever
By Akweli Parker
Inquirer Staff Writer

In the year since its purchase of AT&T Broadband made it the nation's largest cable company, Philadelphia-based Comcast Corp. has shown that the deal was good for its own bottom line.

Its stock is up 21 percent, and operating-profit margins at the cable systems it took over improved from 25 percent to 33 percent in nine months - with an ultimate goal of matching the 40-plus percent margins that are common in Comcast's own systems.

But has the gargantuan acquisition been as friendly to cable customers?

Certainly they are getting more than ever before: New services such as video on demand, high-definition TV, and high-speed Internet access have been made widely available throughout Comcast's territory in the last year.

Rates, however, have continued their upward climb, and critics worry that Comcast's size makes it more unlikely than ever that other companies will be able to challenge it on its own turf.

Comcast's own assessment of its first year as the nation's leading cable company: So far, so good.

"We called this year our Super Bowl," Comcast president and chief executive officer Brian L. Roberts said, describing the company's effort to transform AT&T Broadband from a creaky assortment of largely analog systems into a fleet of more profitable digital networks.

By the end of this year, Comcast will have upgraded 95 percent of its cable systems to accommodate hundreds of digital channels plus high-speed Internet service - significantly ahead of its own projections.

It added more than 70,000 cable subscribers in the first nine months of this year, compared with a loss of more than 406,000 in the first nine months of 2002.

If AT&T Broadband defectors did not think Comcast was a change for the better, "why would so many customers come back?" Roberts asked.

The merger has not led directly to many changes locally, because the Philadelphia area already was widely served by Comcast. The company has about 1.8 million customers in the region.

Rates here have pretty much followed tradition. Earlier this year, bills of customers in the Philadelphia area went up by nearly 6 percent - a typical annual increase for Comcast.

Employment in the area did not change much, although Comcast created about 300 executive-level jobs in Center City, filling many of them with what Roberts said were the best AT&T Broadband employees.

In former AT&T systems elsewhere in the country, change has come quickly.

Among other improvements, "we brought 10 call centers into AT&T systems," Roberts said, reversing AT&T's cost-cutting move of outsourcing customers' calls to Canada.

With a local presence, "you have somebody that can relate to the customer better," he said.

"We want to be part of the community. We don't just want to be a national chain. We want to be a local company that has the advantages of being national."

Some towns embittered by AT&T's empty promises to upgrade its cable networks have been encouraged by Comcast's swift action.

"Almost immediately, Comcast met with us to give us a timetable for when they were going to do the upgrade," said Cindy Smiley, cable coordinator for Woodstock, Ill.

Comcast and Woodstock officials began talks in January, and the upgrade was finished in June, Smiley said.

Cable staples such as the Cartoon Network, ESPN2, Fox News and MSNBC have been added. Customer calls are being answered more quickly. New customers no longer have to endure a four-month waiting list. High-speed Internet service is available.

"Our system is much improved," Smiley said. "Comcast has a long way to go to rebuild the trust of people. AT&T had put them so far in a hole."

San Jose, Calif., another former AT&T system, has mixed feelings about Comcast's performance so far.

"They are rebuilding the system in the city, and they are clearly committed to San Jose," said Tom Manheim, the city's public outreach manager. "That's the good news."

But rates are up sharply: Comcast just told subscribers there that rates are increasing by an average of 7 percent, on top of a 6.5 percent increase by AT&T Broadband that took effect in January. The newest increase will push the price for standard cable from $38.34 to $41.07 per month.

And Manheim also complains that Comcast reneged on a deal, struck earlier by AT&T, to connect city and school offices with high-speed fiber-optic lines. The network could be used to transmit closed-circuit training for public servants or to conduct school classes.

"We had a handshake deal with AT&T. Since Comcast came in, they have literally taken that deal apart," Manheim said.

Comcast said its subscribers should not have to subsidize such electronic goodies.

Regardless of whether consumers appreciate the new technologies or abhor the new rates, Comcast's size makes it less likely they will ever see real competition for their cable dollars, said Jay Halfon, president of the New York Public Research Group Fund and author of a recent report critical of the cable industry.

Halfon concedes that Comcast made dramatic improvements in the cable systems it bought from AT&T Broadband.

"I've got to stress, there's no competition in the industry," a problem made worse by combining the nation's No. 1 and No. 3 cable providers, Halfon said.

He said such mergers made it harder for what the industry calls "overbuilders" - newer cable companies, such as Princeton-based RCN Corp., that build competing cable systems and try to woo customers from incumbent cable providers.

When giants such as Comcast enter into agreements with vendors of programming, cable boxes and other equipment, "very often these vendors are then scared to enter into contracts with these overbuilders," for fear of retaliation, Halfon said.

Arizona Republican Sen. John McCain, an outspoken foe of rapidly rising cable prices, recently took note of the issue.

"Consumers in the few markets with a second choice of cable company pay 15 percent less for cable," McCain said last month, reacting to a congressional report on cable prices. "The apparent implication for all other consumers is that they continue to be fleeced by their cable operators."

Comcast says its service is a good value and competes every day with satellite television providers.

"It's cheaper than going to the movies," Roberts said. A night at the cinema for a family of four - once you include refreshments - costs more than a monthly cable bill, he said.

Generally speaking, Comcast says, things have gotten better for its customers and their communities, both new and old. Its annual Comcast Cares Day, during which employees paint, clean and otherwise help out in their communities, involved 25,000 employees last month.

Smiley, the Woodstock, Ill., cable manager, said AT&T showed no such interest in community affairs.

And Comcast is determined to keep pushing its technology forward.

"Every customer in every market will have up to three new products available next year," Roberts said, referring to features that are in some cases already familiar to the company's Philadelphia-region viewers, such as high-definition television and video on demand. Of course, those are perks that require customers to subscribe to digital cable, which carries about a $14-a-month premium over traditional cable.

Coming next year will be personal video recorders - cable tuners with digital hard drives that are akin to the standalone TiVo recorder, which makes it easier than ever to record, store and replay TV programs.

And if the practices of other cable companies that have begun offering similar devices are any guide, it will probably cost more.

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