Comcast Corp., the largest U.S. cable-television provider, plans to reduce costs to install telephone service in millions of homes by having customers do it themselves.
Philadelphia-based Comcast is testing do-it-yourself kits in San Francisco and will offer them in Boston, Denver and its hometown in the next six months, Cathy Avgiris, senior vice president and head of voice services, said in an interview.
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The plan may save Comcast a $200 to $300 service call to install phones for its cable customers, estimates RBC Capital Markets analyst Jonathan Atkin. The company, which has about 3 million phone customers, anticipates 11 million subscribers by 2010. It has hired 12,000 people in the past year and a half, mostly to deal with surging demand for telephone service.
“It not only reduces costs to Comcast, but it helps accelerate the rollout,” said Thomas Eagan, a New York-based analyst with Oppenheimer & Co. “It’s kind of a big deal.”
The kits may also give Comcast a cost advantage over phone companies including AT&T Inc. and Verizon Communications Inc., the two largest in the United States.
Verizon spent $880 on average for service calls to install television service last year, according to Atkin, who is based in San Francisco. He rates Comcast and Verizon shares “sector perform” and AT&T as “outperform.”
Comcast tentatively plans to charge customers $250 for three cordless phones that link to their cable modems. The total time from opening the box to getting a dial tone is 30 minutes or less, Avgiris said.
“It’s for the customer who says, ‘I want the service, and I want it now,”’ said Avgiris. Subscribers who want their wired phones to work still need a service call by a Comcast technician.
Comcast and other cable operators are luring customers from traditional telephone companies with packages of service that include TV, high-speed Internet access and a phone line.
Cablevision Systems Corp., based in Bethpage, N.Y., started offering a self-installation phone in 2005. A majority of the Cablevision’s customers opt for professional installation which allows them to use their existing phones, Cablevision spokesman James Maiella said in an interview.
In the second quarter, Comcast signed up 671,000 new phone customers, giving it a total of more than three million. The cable industry now claims more than 12 million, according to Brian Dietz, a spokesman for the Washington-based National Cable and Telecommunications Association.
Verizon, based in New York, lost 723,000 residential phone customers during the same period.
“I don’t think there is any question that cable is winning the battle,” said media analyst John Mansell, of John Mansell Associates in Great Falls, Virginia.
The phone companies are responding to cable’s encroachment by building fiber-optic networks that carry data, voice and video and by offering television service over the new lines. Verizon is spending $23 billion on its new network from 2004 though 2010.
Verizon added 167,000 TV customers in the second quarter, bringing its total to 515,000. San Antonio-based AT&T, the world’s largest phone company, has 51,000 TV subscribers. The company lost 193,000 phone subscribers in the second quarter.
“We are in the early innings here, we will see how this plays out,” said Verizon spokesman Eric Rabe.
Michael Coe, a spokesman for AT&T, said it’s easier for the cable companies to add voice service than it is for phone companies to offer video.
News of Comcast’s plans helped shares rise in the Nasdaq Stock Market trading on Tuesday after having declined 7.6 percent this year, compared with 12 percent increases for both AT&T and Verizon. Shares of Time Warner Cable, the second- biggest U.S. cable company, have fallen 11 percent since they started trading in January.
Consumers can order the Comcast kits from the Internet or pick them up at the cable operator’s offices. There are also plans to sell them in stores. In contrast, it takes several hours for Verizon and AT&T to install their video services.
Comcast will spend $450 million adding telephone customers in 2008, according to Craig Moffett, a New York-based analyst with Sanford C. Bernstein & Co. He estimates two-thirds of Comcast’s phone-related costs are for installations.
“Any part of that they can save is welcome news,” Moffett said. He rates Comcast “outperform” and doesn’t own it.
Comcast’s Internet-based phone service allows subscribers to listen to voicemail over the Internet, download copies of messages and forward them in e-mails. The cordless phones also provide limited e-mail access and some Web services including sports and weather, according to Avgiris.
Those may be features Comcast will want to offer if the company decides to expand into wireless.
“We want to own the customer’s experience in the home and where possible extend that experience,” said Avgiris. •
