Having a second listen to the earnings call later this a.m., we are taken aback at the breadth of the their earnings call. On one hand, this should be expected as Comcast spans a wide range of businesses (including global), but it’s rare that so much can be jammed into one hour. Hence the title of our first take on earnings.
When companies discuss their platforms (e.g., Verizon’s +play), they usually talk about how their variant of some larger platform benefits their value proposition. When Comcast discusses their platform strategy, it’s more likely about something they invented, born out of existing connectivity challenges. X1, Flex/ Xumo, XClass TV, even to some extent Peacock are not Comcast’s variant of something – they are uniquely developed ways to experience better communications and content.
Contrast, for example, Flex/ Xumo, with the now defunct T-Mobile’s TVision product (in case you forgot about one of the few Magenta blunders in their Uncarrier history, here’s a helpful reminder). We are critical of Xumo, but Comcast has a chance to prove us wrong because they invented a competitive streaming product that is tightly integrated into their broadband network. Ditto for their aggressive integration of sports content into Peacock (now being copied by HBO Max). No other company in telecom understands the communications “stack” (which now includes licensed wireless spectrum) better than Comcast. Therefore, their earnings calls have the ability to touch on a wide spectrum of topics.
Today, the focus was on broadband, video, and wireless (and, to a lesser extent, theme parks and the impact of the Holywood strikes). There is no doubt that Comcast is going to face more broadband competition. AT&T is building aggressively in Chicago and finishing up their metro-wide build in Houston. That’s going to take a toll (although, with AT&T’s ARPU growth, we wonder if the battle at the low end was worth fighting to begin with). And as we discuss in the Brief linked in the next paragraph, AT&T is beginning to roll out bundle discounts which get close to Comcast’s.
As we discussed in the first “Same as it Ever Was” Brief (here), broadband dominance is going to slow for Comcast, Charter, and Cox. They are not the only game in town, and, over the long-term, no 12-month promotion is going to keep the current base from eventually trying fiber-to-the-home (FTTH) Internet or potentially fixed wireless. “Locking out fiber” is not a viable strategy for the cable industry. Outserving fiber with innovative products and services (and quicker technician response times) is a viable strategy, and Comcast is especially focused on product innovation.
What separates Comcast from their cable industry peers is their ability to understand end-to-end connectivity interoperability (a very Apple-like characteristic). A product like Flex/ Xumo is not required to be a broadband customer, but is nonetheless valued by customers who select Flex/ Xumo over other alternatives because they “work well together.” The ability for Comcast to drive accelerated adoption of these interoperable products and services is essential to creating value.
More to come on Sunday. Highly encourage all Sunday Brief readers to listen to the Webcast and follow along in the transcript here. Extremely informative.
NOTE: We will not post a daily earnings take for Charter unless they produce headline news. We will instead incorporate their call into the October 29th Sunday Brief.