April 16, 2014

Comcast: Not Just Bigger — Better

Smit’s Comcast Powered By Innovation, Communication
By Mike Farrell — Multichannel News, September 26, 2011

While the financial world focused on Comcast’s $30 billion deal for control of NBCUniversal over the past year, executives in the upper reaches of the Comcast Center — the tallest building in Philadelphia — never forgot the company’s roots.

“Cable is the heart and soul of the financial engine that is Comcast,” chairman and CEO Brian Roberts said in an interview last week.

In the first half of the year (the NBCU deal closed on Jan. 28), cable accounted for nearly 70% of Comcast’s total revenue and 86% of its total operating cash flow. And though the distribution business in general has taken some hits as fears of telco over-the-top video competition rise among investors, Comcast has shown a remarkable resilience, reducing basic-video losses by more than 30% in the first six months of the year through a combination of new product launches, improved customer service and savvy marketing.

Based on its performance in these categories, Comcast is Multichannel News’ 2011 Operator of the Year.

The closing of the NBCUniversal joint venture — a merger of its national programming assets with the General Electric unit — in January gave Comcast 51% control of a major broadcast network and some of the top U.S. cable networks, including USA Network, Bravo, CNBC and MSNBC. It also signaled a changing of the guard for the cable operations.

At the close, former cable chief operating officer Steve Burke, who had steered Comcast through its greatest period of growth, was tapped to head up NBCU as CEO. His replacement was former Charter Communications CEO Neil Smit. Smit joined Comcast in January 2010 as president of the cable division.

Smit has some formidable shoes to fill. Burke was responsible for successfully integrating Comcast’s acquisitions of AT&T Broadband in 2002 and Adelphia Communications in 2006. During that period, Comcast was transformed from an 8.5 million-subscriber regional power in 2001 into a 24.2 million-subscriber behemoth by the end of 2006.

Over the years, competition, high unemployment and nonexistent housing growth have chipped away at that subscriber base, now at 22.5 million customers.

“The single most important thing in 2011 was the transition to Neil (as head of the cable company) from Steve,” Roberts said. “Neil has done an outstanding job. He’s used to be being on a team.”

Smit ’s performance has not gone unnoticed on Wall Street.

BREATH OF FRESH AIR

“Neil Smit was a breath of fresh air at the company,” Pivotal Research Group principal and media and communications analyst Jeff Wlodarczak said. “His presence there and some of the initiatives he put in, as well as the fact that they quite successfully rebranded themselves under Xfinity; they have had some very strong growth relative to the industry.”

In his first quarter as head of the cable unit, Smit, a former Navy Seal, tackled the basic-subscriber challenge — the industrywide hemorrhaging of basic-video customers. Building on programs and initiatives created under Burke, Comcast managed to reduce its basic-customer losses significantly. In the first quarter of this year, Comcast lost about 39,000 basic-video subscribers, about half the 82,000 customers it lost in the same period in 2010.

That improved performance built on better-than-expected fourth-quarter results, when the nation’s largest MSO lost about 135,000 basic customers, more than 30% less than the 199,000 it lost in the fourth quarter of 2009.

The trend continued in the second quarter — Comcast lost about 235,000 basic customers, down 11.3% from the 265,000 it lost in the prior year but greater than the 173,000 most analysts expected.

Smit gives all of the credit for the improvements to his team of divisional managers and the 86,000 employees across the cable company. “They’re the stars,” Smit said. “That’s where the heavy lifting is happening.”

LESSENING LOSSES

Chipping away at video losses remains a priority, he added. “The whole business is focused on retaining customers,” Smit said. “It’s a combination of better products, better services and more targeted marketing. We’ve had three quarters of reduced losses and our ARPU [average revenue per unit] is also up — primarily as we’re selling more advanced services.

“We probably sold in the first half 390,000 HD DVR customers,” he added. “I think there is still room for improvement. At the end of the day, it’s all about focus and execution.”

Smit and his team have focused on a simple tenet: a happy customer is a loyal customer. Creating that happy customer has included beefing up customer service — including reducing service-appointment windows to two hours (in some cases, one hour) across the footprint, reducing trouble calls and truck rolls — and by introducing at least one new product innovation in each quarter.

Comcast wants to “fundamentally transform” the customer experience, Smit said, making it more convenient and reliable. In the second quarter, repeat service calls declined by 15% and repair calls declined by 9%. The company estimates that by the end of the year, it will have reduced service-related truck rolls by 2 million and service- related phone calls by 10 million, compared to 2009.

“We’re making progress,” Smit said.

West Division president Steve White said a big part of customer service is listening to subscribers and tailoring options to fit their needs. In his division, which has more than 6 million subscribers in tech-savvy cities like San Francisco and Seattle, White said efforts have centered on enhancing the self-help experience for broadband, voice and video.

“We find that a lot of customers want to resolve things themselves,” White said, adding that Comcast has developed several tools, including a Customer Central portion of its website where subscribers can manage their bills and account settings, and locate information to solve problems themselves.

“Those [tools] have come a long way,” White said. “We lead the company in self-install kit installations, because it’s simple, it’s easy and our customers feel more empowered. Our job is to make it easy for them.”

AN EASIER EXPERIENCE

Comcast also has focused on enhancing the overall customer experience through an initiative called “One Welcome.”

The One Welcome concept was first trialed in Comcast’s Central division, which comprises about 8 million customers in 15 states, and focuses on a new triple play customer’s first 120 days with the company, starting with the initial install. Comcast technicians literally walk the customer through all the aspects of the service on the first day, setting up their iPad, caller-ID functions, billing preferences and even elaborate SMS notifications on the status of their household service to their cellphones.

Central Division president William Connors said One Welcome was trialed in about 4 million homes around Chicago and will expand to other major metropolitan areas in the division over the next three to six months and be fully deployed across the company in the next six to nine months. During the trial, One Welcome customers signed up for SMS alerts and iPad service at five to six times the normal adoption rate of those services.

“We can’t wait to look back 30 days and see how we did and make analytical and strategy decisions,” Connors said. “You’ve really got to look at what happened in the most recent hour and then look back at the previous 24 hours … That is the nature of the competitive landscape we’re in.”

Roberts said a prime example of the speed of new product turnaround is Comcast’s iPad app. Initially introduced in May, it reached 3 million users last week.

“We’ve really turned a corner [in the] the summer of the iPad app,” Roberts said. “We didn’t have to roll a single truck, and we improved the experience of our customers.”

Product innovation has been a mantra for Smit, who has set a goal of at least one new product per quarter.

And Smit is no stranger to the Internet: Before working at Charter, Smit worked at AOL, where he learned the intricacies of a largescale Web operation.

So far in 2011, the new-product pipeline has produced products for dynamic ad insertion; home security; Metro Ethernet business services; a 105 Megabit per second data product; Signature Support, a technical support and equipment protection program for home electronics devices; the Xfinity TV app for the Android; the Play Now app, which enables customers to access VOD content on their IPad; and Catch Up/Keep Up, which enables customers to view past episodes of shows with the click of their remote.

Announced in 2011 and coming soon is a Skype applications that allows Comcast customers to make video phone calls through their TVs, PCs, compatible Smartphone and tablets.

“This is the fastest innovation cycle the industry’s experienced and from my perspective, it’s just starting,” Smit said, adding that Comcast’s cloud-based network architecture enables it to introduced new offerings quickly.

“Speeding up the process is going to be critical to the customer experience,” Smit added. “We’re applying what we learned from the Web and the apps and applying it to the TV screen. Working on the cross platform experience with things like recommendation engines is going to be critical. The pace of innovation is going to accelerate.”

Miller Tabak media analyst David Joyce said that Comcast’s product innovation efforts are making a mark.

“They are definitely ramping up their innovation,” Joyce said. “They’re showing that they are much more than just a video company.”

That is a big step for Comcast, which has traditionally been the more video-centric of the larger operators. Several years ago, when other MSOs were concentrating on increasing data speeds and rolling out phone service, Comcast put a greater emphasis on video on demand.

Today, both worlds seem to have converged, at least for the Philadelphia-based cable giant. Comcast has been a big proponent of DOCSIS 3.0 with its ultra-high data speeds — the company has launched a 105 Megabit per second product called Extreme in several markets — and at the same time has more VOD titles (30,000-plus) and its customers access more VOD programming (upwards of 350 million views per month) than any other operator.

Wlodarczak said that Comcast’s early focus on the video side of the business is paying off .

Focusing on content and obtaining VOD and streaming rights early helped set the stage for the MSO’s aggressive push into TV Everywhere, online content authentication that is available across its systems, Wlodarczak said.

Perhaps the biggest reason for the change in thinking at the company is the “One Comcast” initiative, in which division presidents and managers across Comcast’s business lines are encouraged to talk to each other, exchange ideas and find solutions to common problems.

“The whole idea under the One Comcast banner is that we’re each feeding different initiatives on behalf of the entire company and by virtue of that you’re bringing folks to participate in those initiatives from across the company,” Northeast division president Kevin Casey said — regardless of service or product.

Comcast has come full circle since its more acquisitive days, he said, when the priority was integrating all of its newly purchased systems.

“That was a lot of lifting,” Casey said of those years. “Now that we’ve had a couple of years under our belt, [the question is] how do we accelerate our business?”

Mark Robichaux contributed to this report.
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