Comcast President Forsees All-Digital Network

Comcast forsees moving to an all-digital network to edge telecom and satellite rivals in an increasingly cuthroat market, the cable giant’s president said this morning.

That would give the company enough bandwidth for super-fast Internet, hundreds of TV channels and advanced video services, including video-on-demand, personal video recording and high-definition.

“I don’t think we’ll run out (of bandwidth) in the next 24 months, but I can see it in the next 3 or 5 years.” Comcast president and COO Stephen B. Burke said at the Morgan Stanley media conference in Boston. “The next answer is to go all digital.”

By that time, the Philadelphia company will have the infrastructure to accommodate the content. About 10 million Comcast customers already have set-top boxes to handle all-digital signals, Burke said.

Others would pay around $40 for each box (prototypes are the size of a ciagarette pack) or Comcast could give them away, depending on manufactring costs and other factors, Burke said.

“Some day there could be a billion-dollar-ish investment to go all digital,” Burke said.

The strategy is aimed at outdistancing regional phone companies and satellite companies who have increased the intensity of their attacks.

For example, Verizon recently dropped the the price of its monthly DSL service by about $10 in some markets to $35. Verizon, as well as SBC, have plans to roll out Wi-Fi access for users as well, something Comcast hasn’t committed to yet.

Cable companies account for over 60 percent market share of the broadband access market, according to research by Deutsche Bank Securities. But with telcos expected to follow Verizon’s price-cutting move, DSL providers could start to erode cable’s solid base, experts say.

Burke, while taking the compeition seriously, isn’t fazed by such analysis. “It’s not affecting our business,” Burke said of rival’s price cuts.

He cited two reasons for that: the ability to upsell Internet service to new customers inquiring about cable TV availability in their area; and strong partnerships with retailers like Circuit City and Radio Shack.

These pacts are especially useful during the back-to-school and holiday seasons, when cable modems are often discounted or given away free to buyers who become Comcast customers.

These advantages are partially due to the fact that Comcast has larger footprint — an edge aided by the acquisition of AT&T Broadband.

The integration of that company is on track, and Comcast is saving money because of its new purchasing power, Burke said. Still, work continues to upgrade former AT&T systems in San Francisco and other markets. When complete, additional marketing may need to be required because the DSL providers’ headstart.

John R. Alchin, co-CFO and treasurer, said Comcast has the money for capital projects. In fact, after being criticized by Wall Street for carrying too much debt, he projects a bump in free cash next year, thanks in part to the pending sale of its stake in shopping network QVC for nearly $8 billion.

Alchin said Comcast will look at several options, including acquisitions, issuing dividends, stock buybacks and reinvesting in infrastructure.

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