Case Comcast Corporation

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					Case: Comcast Corporation
Section 5 (2 pm), Group 8 MI021 Computers in Management, Fall 2008 Group Members: Meredith Malm Adam Marchany Tory Marchlik Will McDermott Jiae Moon

p. 1 Whether you want cable television, high-speed internet, or Digital Voice™ telephone service, Comcast has got you covered. Comcast was founded under the name American Cable Systems in 1963 by Ralph J. Roberts, Daniel Aaron, and Julian A. Brodsky as a single-system cable operation in Tupelo, Mississippi.i In 1969, the firm was changed to its current name of Comcast and incorporated in its current headquarter location in Philadelphia, Pennsylvania.ii Since then, Comcast has become one of the nation’s most powerful telecommunications firms. Comcast is the service provider of 24.6 million cable customers, 14.4 million internet customers, and 5.6 Digital Voice ™ phone service customers spread over 39 states and the District of Columbia.iii These Comcast services also hold jobs for about 100,000 employees nationwide.iv The firm owns 11 different cable networks, including E! Entertainment Network, The Golf Channel, and the Style Network,v and three different Philadelphia-based sports franchises, the Flyers (NHL), 76ers (NBA), and Phantoms (AHL).vi In the fiscal year of 2007, Comcast has made about $30.895 billion in revenues, earning a net profit of $2.587 billion.vii Also, at the end of 2007, the firm held about $113.4 billion in total assets.viii Valued at approximately $30.07 per share in mid-January 2007, the CMCSA stock has slowly dropped, valued at $19.63 per share at the end of September 2008, seeing a drop of 34.7% in a span of 21 months.ix Comcast is the nation’s leading cable provider,x second largest internet service provider,xi and fourth largest telephone service provider.xii In the United States, there are approximately 112.275 million television households, with about 64.8 of these households having a basic cable subscription.xiii In the cable television market, Comcast holds about a 38% market share of these basic cable subscribers in the United States. xiv Comcast’s major competitor in the cable television market is Time Warner Cable, the second biggest American cable provider with about 13.3 million subscribers.xv Comcast also competes with major satellite companies such as DirecTV and Dish Network in this market. In the American internet service market, Comcast held a 14.9% market share of internet subscribers in the United States in the second quarter of 2008.xvi Comcast’s main ISP competitor, SBC (AT&T), is the nation’s leading ISP provider, holding about a 15.2% market share during this same period of time.xvii Comcast’s major competitors in the telephone market, include SBC (AT&T), Verizon, and Qwest, the nation’s three largest telephone service providers.xviii Comcast has able to dominate the telecommunications market due to its ability to purchase other competing companies in different areas of the country. Perhaps Comcast’s biggest transaction was its acquisition of the AT&T Broadband cable company in 2002. This transaction brought together over 21.4 million cable subscribers in 41 different states, providing Comcast with most of the subscribers that they have today.xix Another key acquisition made by Comcast included their co-buyout of Adelphia Cable, one of the big cable companies in the MidAtlantic, with Time Warner in 2006.xx These two key transactions made by Comcast have allowed the company to greatly increase its scale, allowing its services to be offered to customers all around the nation. One of Comcast’s most significant competitive advantages is the firm’s ability to offer a bundle of all three of their major services: cable, internet, and Digital Voice™ telephone. This major deal is known as the Comcast Triple Play. According to Comcast, the Triple Play is able to offer “three great services” and “one low bill” for its customers, making life much easier for customers.xxi The Triple Play greatly helps Comcast because it allows the firm to gain customers in all three of its major markets, greatly increasing the company’s already powerful scale. If a

p. 2 customer has one Comcast service and sees the money he or she could save by getting the Triple Play, Comcast certainly would gain more consistent customers across its three major markets. Comcast has also been able to step into a new market with its DVR/Cable Box bundle. While companies such as TiVo have been considered the pioneers of the DVR market,xxii Comcast has been able to one-up this competition by offering a two-in-one DVR and Cable box. Comcast is able to reel more customers in due to the inconvenience of the TiVo DVR system. Unlike Comcast’s DVR box, the TiVo box is unable to stream in cable television channels, making customers ask themselves why buy a TiVo box and a Comcast box when they could just buy one simple, functioning Comcast two-in-one box.xxiii Comcast has invested millions of dollars into research for new technology that will provide the firm with the next big thing in cable.xxiv Over the past two years, Comcast has been in an arms race with other cable companies for the lucrative market of High Definition cable. With the boom in production of HD televisions, the demand for High Definition programming has skyrocketed. The thousands of miles of conventional cable lines, some approaching 50 years old, simply do not have the power to deliver the hundreds of HD channels that Comcast hopes to use to dominate the market.xxv To solve this problem, Comcast has been working on the “Comcast Fiber Optic Network” for the past year, putting up the new technology as fast as they can. Providing a sharper picture and more bandwidth, the fiber optic network gives Comcast the juice needed to deliver the HD programming.xxvi Comcast also uses technology in its attempts to be the fastest internet provider. Comcast has again invested millions to increase the bandwidth of their internet services.xxvii Bandwidth is a measurement in speed of an internet connection and data transfer. Comcast is now closing in on a speed of 100Mbit/s.xxviii Comcast has also developed a program called Power Boost™ that provides extra bandwidth when uploading large files.xxix This allows Comcast to save precious bandwidth and spread it over customers in a system. Comcast also has plans to upgrade their digital system encoding scheme to an advanced MPEG-2 system. This system will increase digital encoding by more than 50 It will also eliminate the “digital static” that some people witness while watching TV. Due to Comcast’s increasing size and broad customer base, monitoring network performance in a cost effective manner is key to Comcast’s high quality of service standards. To combat this potential problem, Senior Director of Network Operations Brian Harvell chose to use the Vertica Analytic Database 2.0 to collect and analyze subscriber usage data.xxxi On average, Comcast collects 46,000 samples of network performance data per second and about 4 billion samples per day.xxxii The Vertica Analytic Database is a high-speed database management system that organizes data on disk as columns of values from the same section, in contrast to traditional databases that store records in rows.xxxiii This innovation saves bandwidth and makes queries faster. In addition to speed of results, the Database also helps Comcast cut storage costs by compressing large amounts of data by as much as 90 percentxxxiv onto inexpensive, software license tax-free, Linux servers.xxxv The Vertica Database enables the company to make smarter decisions about growing markets and future infrastructure build-out. Comcast has recently realized its tremendous opportunity to expand its business in the small and medium-sized businesses (SMBs) market. Comcast estimated that there were approximately 5 million SMBs in its footprint and has been spending in the range of $12 billion to $15 billion in telecom services.xxxvi At the end of 2007, Comcast hired 750 salespeople and 1400 technicians in the expectation of increasing the number of SMBs customers dramatically.xxxvii

p. 3 With the effort to seize the market, Comcast has launched a new Internet-based communications product in collaboration with Microsoft in 2007.xxxviii This new service would give SMBs an access to services that they were not able to encounter unless it was a large firm with IT staffs. These services include corporate-class email, calendaring and document sharing. Comcast is the first mover or company in the market to offer such service. By 2011, Comcast is planning to confine 20% of the market which would bring them $2.5 billion.xxxix If this new expansion works out the way Comcast planned, it could bring the company a significant amount of success in the future. Regardless of its current dominant position in the market, Comcast is facing the challenge of maintaining this status in a highly competitive industry. Comcast has seen Regional Bell Operating Companies (RBOCs) such as Verizon and AT&T entering the cable market and affecting Comcast adversely in its own Triple Play.xl Although it is currently the number one cable provider in the country, these competing companies are developing fiber-optic networks that will greatly increase data transmission efficiency. These networks deliver data transmission by fiber optic cable directly to your house, while cable TV providers like Comcast use coaxial cable from the main node in your neighborhood to your home. Because of this larger fiber optic network, Verizon’s FiOS (Fiber Optic Service) provides faster and better internet, phone, and digital video services to the subscriber for a better price. If Comcast wants to be able to compete with Verizon, it must update its technology as well. With the rise of the Internet, people now watch many television shows online rather than on the television. Consumers do not have to worry about missing their favorite show or even recording it on DVR when they can easily find it online the next day. Comcast responded to this change by releasing Fancast, a website that functions as both a media guide for television and movies, and a provider of full-length and preview clips of professional content. Fancast has partnered with Hulu, CBS, ABC, and other networks in order to provide a wide range. If you can’t find the video you’re looking for, Fancast will look for what you want to watch on television, in theaters, on DVD, or elsewhere on the web. Based on what you watch, Fancast will recommend shows that it thinks you’d like to see. Comcast promised that soon consumers will be able to control their DVR online so they can record shows on television even when they are not at home, and have the ability to stream video from the internet to a television set.xli Although Fancast must compete with Hulu, iTunes, and Joost, Comcast hopes that as they continue to develop Fancast, its popularity will increase. Comcast has often been criticized for its poor customer service. A media columnist and radio commentator named Bob Garfield even went as far as to create, an online forum for subscribers to log complaints about the company. Comcast heard the voices of the public, and is now taking steps to better its customer service. In fact, it used the site to resolve numerous consumer complaints. According to his site, Garfield has declared “victory” against Comcast.xlii Over the years, Comcast has been able to maintain its success through the use of its powerful resources while preparing itself for the ever-evolving world of the telecom. Thanks to its brand power, powerful scale, corporate power, and development of new and competitive technology, Comcast has become one of the most dominant cable, internet, and telephone companies in the world. If Comcast continues to follow the formula for success while adjusting to the changes in telecom, such as the rise of the internet and the steady decline of cable television and landline telephone services, the firm should continue to flourish in the telecom market.

p. 4 Bibliography Goldman, Alex, “Top 23 U.S. ISPs by Subscriber: Q2 2008,” ISP Planet, August 29, 2008 (Retrieved September 30, 2008 from Kharif, Olga, “Say Hello to Unlimited Minutes,” BusinessWeek, February 21, 2008 (Retrieved September 30, 2008 from opDiscussed_ssi_5) Gallaugher, John, “Strategy & Technology,”, Last modified September 13, 2008 (Retrieved October 8, 2008 from Baumgartner, Jeff, “Comcast Spreads the Love,” Cable Digital News, February 14, 2008 (Retrieved October 7, 2008 from Baumgartner, Jeff, “Comcast Closes in on 100 Mbit/s,” Cable Digital News, November 29, 2007 (Retrieved October 7, 2008 from Spangler, T. (2008). Comcast sells net videos. Multichannel News, 29(35), 20-20. Endnotes

“Comcast Corporate Overview- Timeline” (Retrieved September 30, 2008 from ttimeline.html) ii “Comcast Corporate Overview- Timeline” (Retrieved September 30, 2008 from ttimeline.html) iii “Comcast- Corporate Overview” (Retrieved September 30,2008 from ) iv “Comcast- Corporate Overview” (Retrieved September 30,2008 from ) v “Comcast Cable Networks” (Retrieved September 30, 2008 from ks.html) vi “Comcast-Spectator” (Retrieved September 30, 2008 from vii “Comcast Corp (CMCSA) Financials” (Retrieved September 30, 2008 from

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“Comcast Reports- Second Quarter 2008 Results” (Retrieved October 2, 2008 from ix “Comcast Corp Interactive Chart” (Retrieved October 2, 2008 from;range=1d;indicator=volume ;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined) x “Top 25 MSOs,” NCTA, March 2008 (Retrieved September 30, 2008 from xi Goldman, 2008. xii Kharif, 2008. xiii “Statistics,” NCTA (Retrieved October 3, 2008 from xiv “Top 25 MSOs,” NCTA, March 2008 (Retrieved September 30, 2008 from xv “Top 25 MSOs,” NCTA, March 2008 (Retrieved September 30, 2008 from xvi Goldman, 2008. xvii Goldman, 2008 xviii Goldman, 2008. xix “Comcast completes AT&T Broadband Acquisition” (Retrieved October 9, 2008 from xx “Press Release- Comcast and Time Warner to Acquire Assets of Adelphia Communications” (Retrieved October 9,2008 from xxi “Comcast Triple Play” (Retrieved October 7, 2008 from xxii Gallaugher, 2007. xxiii Gallaugher, 2007. xxiv Donald McSweeny (Regional Manager RCH Cable Comcast System- Boston/Southern Mass.), Telephone Interview. 3 October 2008. xxv Baumgartner, 2008. xxvi Donald McSweeny (Regional Manager RCH Cable Comcast System- Boston/Southern Mass.), Telephone Interview. 3 October 2008. xxvii Donald McSweeny (Regional Manager RCH Cable, Comcast System- Boston/Southern Mass.), Telephone Interview. 3 October 2008. xxviii Baumgartner, 2007. xxix “Comcast PowerBoost” (Retrieved October 7, 2008 from xxx Baumgartner, 2008. xxxi “Comcast Revolutionizes Network Performance,” Vertica Analytic Database (Retrieved October 2, 2008 from xxxii “Comcast Revolutionizes Network Performance,” Vertica Analytic Database (Retrieved October 2, 2008 from xxxiii “Comcast Revolutionizes Network Performance,” Vertica Analytic Database (Retrieved October 2, 2008 from

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“Vertica Analysis Database 2.0 is Fueling Business,” Highland Captial Partners (Retrieved October 6, 2008 from xxxv “Comcast Revolutionizes Network Performance,” Vertica Analytic Database (Retrieved October 2, 2008 from xxxvi “Comcast Corporation Company Profile,” Datamonitor (Retrieved October 6, 2008 from xxxvii “Comcast Corporation Company Profile,” Datamonitor (Retrieved October 6, 2008 from xxxviii “Comcast Corporation Company Profile,” Datamonitor (Retrieved October 6, 2008 from xxxix “Comcast Corporation Company Profile” Datamonitor (Retrieved October 6, 2008 from xl “Comcast Corporation Company Profile” Datamonitor (Retrieved October 6, 2008 from xli Spangler, 2005. xlii “Comcast must Die” (Retrieved October 3, 2008 from