Comcast Internet users outnumber cable subscribers

Published 7:00 am Tuesday, May 5, 2015

Cable television has ceded to the Internet — and the timing couldn’t be worse.

Comcast, the nation’s biggest cable firm, said Monday that its subscribers for high-speed Internet have surpassed cable television customers for the first time. The trend has already shown up at slightly smaller cable companies such as Charter Communications, and analysts expect the entire cable industry will follow suit sometime this year.

The transition has been years in the making and brings unprecedented challenges to the industry. Cable providers face ever intensifying competition for eyeballs from online services such as Netflix, HBO Now, SlingTV and Amazon Prime, which at the same time are putting massive traffic demands on high-speed networks.

Meanwhile, Washington has hardly proven to be a friend to cable, putting in place stringent new rules to prevent cable companies from interfering with the Web content that goes through their pipes while also squashing a major merger between Comcast and Time Warner Cable.

Perhaps the clearest sign of the cable industry’s identity crisis is the renaming of this week’s annual trade gathering in Chicago. At the conference, which used to be called “The Cable Show” and now will be known as “INTX, the Internet & Television Expo,” the chief executives of the biggest cable firms, programmers and new online services will gather to announce new partnerships and technologies — and grapple with the new landscape.

“What is the cable industry? That is the question and that is why we have changed the name because we don’t see this as just the cable industry anymore,” said Brian Dietz, spokesman for the National Cable & Telecommunications Association. “Our attitude is that the door is open for everyone: friends, competitors and there are even friendemies.”

Indeed, streaming services such as Google’s YouTube and Dish Network’s SlingTV will have booths. And there will be a lively debate over new business models, such as slim cable bundles.

Verizon FiOS, which is not a member of the association, upset many within the entertainment and television industries with its recent launch of smaller, cheaper channels packages. ESPN has filed suit against Verizon for breach of contract, saying the television operator didn’t negotiate new licensing terms for its “CustomTV” service.

There will also be awkward and maybe even contentious meetings. Comcast chief executive Brian Roberts will deliver the opening keynote, the first public appearance since the company’s failed attempt to acquire Time Warner Cable for $45 billion.

The next day, Tom Wheeler, the chairman of the Federal Communication Commission, which blocked the deal, will speak before members of a trade group that has filed suit against his agency for the “net neutrality” regulations that bar high-speed Internet providers from interfering with Web content or auctioning off the best Web speeds to the highest bidders.

When asked about the failed Comcast-Time Warner Cable merger during a conference call with investors, Roberts said: “Of course we are disappointed.

“It was a unique, one-off situation, but really, we have moved on.”

Roberts’s remarks came as Comcast reported $2 billion in profits for the first quarter, a 10 percent increase over the same period a year ago. The improved earnings were largely built on robust growth in its high-speed Internet business. Revenue increased 2.6 percent, to nearly $18 billion. The company spent $99 million on its failed bid for Time Warner in the quarter.

Given the rapidly changing landscape, analysts say the company will need to provide a clear path forward for future growth as cable television continues to face challenges.

“Over the course of the next year, as Comcast rewrites its own script in the wake of its failed attempt to buy Time Warner Cable, Comcast will have to craft a new story,” Craig Moffett, an analyst at Moffett Nathanson, wrote in a research note. “In the adrenaline-fix-every-10-minutes world of cable investors is simply being the ‘best operator with the best assets’ enough?”