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Out Of The Doldrums

Anyone looking for evidence that the cable industry is about to shake off its three-year economic hangover need look no further than the convalescent state of the trade show scene. Attendance at this year's SCTE Cable-Tec Expo suggests renewed confidence in spending.

The official head count at last week's show in Philadelphia was 10,600, a slight increase over last year. Though well under the 2001 mark (24,000), any upward tick is a victory.

More concrete evidence of a return to increased capex spending could be found in Comcast president and CEO Brian Roberts's keynote address Monday. The cable king brandished his scepter at DBS, declaring that the Philly-based MSO would use all the means at its disposal to rout this pretender to the throne.

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"We're not accepting losses to satellite," a defiant Roberts declared. Comcast will attack the dish-mongers on the data front, he said, rolling out wave after wave of cable modems to stem the flow of churn and help draw new subs.

Faster data rates will ensure that Comcast customers stay true, Roberts said, underscoring the MSO's recent entry into the tiered HSD parade. "We shouldn't be satisfied with 1.5 mega-bits," he said. The op rolled out its mach-speed Comcast Pro 3.5 Mbps service to newly integrated AT&T Broadband customers early this year. Next to HD, the zippy Pro is Comcast's "hottest" new development, a source close to the company said.

Roberts also advised his interlocutors to delve deep into the on-demand space and mentioned that Microsoft chairman Bill Gates was particularly interested in IP over cable.

In all, Comcast expects to spend over $4 billion this year - much of it earmarked for the continued upgrade of the old AT&T systems - a figure that should spur other MSOs to break out their own checkbooks. "We've decided to step on the pedal of capital spending," Roberts said, adding that Comcast would no longer play catch-up to the rest of the industry.

If Wall Street can keep its wits about it, Comcast's capex expansion should trickle down to the vendors who supply the equipment that keeps cable chugging along. Most of the gadget folks at the show were heartened by Roberts's words and the general tenor of the event.

"It feels like things are finally starting to loosen up," said Buddy Snow, Harmonic's VP of marketing, convergent systems. "The capex tide may be turning."

A source close to two of the top five MSOs went so far as to pick a time frame for the eventual loosening of the purse strings, predicting a spending increase in "Q3 of this year."

Others were even more bullish, insisting that those who have begun to spend are reaping the rewards today.

"The MSOs who have built out their infrastructures are now in the position to take advantage of that direct conduit into the consumer's home," said Scientific-Atlanta director of product marketing Bob Scott. "We believe that capex will be based on demand-driven, success-based applications built on these advanced platforms. The money's just sitting there, waiting for someone to come along and pick it up."

In other words, you have to spend money to make money.

Cisco Systems is doing just that, beginning with a number of enhancements to its longstanding CMTS line. Its new Broadband Edge platform allows for up to a tenfold performance improvement and enables the efficient delivery of VoIP. The fact that Cisco is looking to leverage its network advantage to make waves in VoIP has smaller vendors looking over their shoulders.

"Syndeo and Cedar Point have to be quaking in their boots," said one observer from the optical transport sector.

Paul Bosco, Cisco's VP of marketing, was more succinct: "Unless a white knight comes around, the start-ups are doomed to fail."

Representatives from both Syndeo and Cedar Point refuted Bosco's claim, each saying that his respective company was in sound financial shape.

THE NEXT QUESTION:

*Will an ability to spend in a down market speed cable's move toward consolidation?

Technology Industry

Out Of The Doldrums

Cable World, May 19, 2003

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