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The Honolulu Advertiser
Posted on: Saturday, April 8, 2006

Cable companies prepare more high-tech services

By Seth Sutel
Associated Press

NEW YORK In the world of cable television, the real excitement these days has more to do with what comes over the cable lines than what shows are on the schedule.

Rolling out high-tech offerings like digital phone, high-speed Internet and video recorders is where the real money is being made. Now, the cable guys are racing to add even more fancy services in hopes of keeping customers from switching to satellite or the emerging video services being offered by phone companies.

As they gear up for their annual convention this weekend in Atlanta, big cable companies like Comcast Corp., Time Warner Inc. and Cablevision Systems Corp. are taking a hard look at ramping up new products like video-on-demand, high-definition channels and next-generation video recorders that run off a network instead of a hard drive contained in the set-top box.

Cablevision, a Long Island-based cable company, has already led the pack in getting subscribers to sign up for digital phone service that runs over cable lines a so-called "triple play" when bundled together with video and high-speed Internet access.

Now, Cablevision says it will make a trial run for a networked digital video recorder, a product that cable companies have wanted badly because it could drastically lower the costs of offering DVR services by storing the recorded shows on its own network instead of on the more expensive set-top boxes.

Sanford C. Bernstein analyst Craig Moffett said in a report to investors yesterday that the network DVRs are sure to be a hot topic at the convention but are too new to have been incorporated into the formal agency.

Cablevision announced its network DVR test in late March, and Time Warner and Comcast quickly endorsed the idea. However, programming providers are sure to have concerns about copyrights as well as the likelihood of even more skipped ads.

For the moment, selling voice services remains a top priority for cable companies. Not only does it make more money for them, but it also helps keep customers around.

Not all companies are faring equally, however. Cablevision has been way ahead in signing up phone customers, but Comcast has a "long way to go," UBS analyst Aryeh Bourkoff said.

Oppenheimer & Co. analyst Tom Eagan calls the uptake of voice service the "big question" for the cable industry this year, which he estimates could go from 3 million people at the end of 2005 to 6 million by the end of 2006.

For the stock market, however, the big fear is the looming challenge from phone companies as they ramp up offerings of video and high-speed Internet. Cable stocks have been sluggish over the past year in good part out of those concerns. "They have to take it seriously, because they have to take any competitive threat seriously," Eagan said. "The question is, will this technology finally work? The telcos have been trying to get into video for 10 years."