Cable Companies: Look Past the Cable Label
Cable providers such as Comcast haven't been sitting around while telecom and satellite firms try to encroach on their business.
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You've likely seen the commercials: Telecom companies pressing their case to enter the cable business. That competition will mean cheaper channels for all of us, and a big black eye to those monopoly-market cable companies that have been gouging us for years, the argument goes.
Cheaper cable, probably, but don't bet on the second half of that conjecture. In fact, bet against it. Cable companies haven't been lollygagging while the telecom industry makes its case and while satellite providers try to chip away at cable's dominance.
Cable is strong in several areas. In fact, the label "cable" is giving way to the acronym MSO, for "multiple service operators." In addition to hundreds of TV channels, cable MSOs provide high speed Internet connections (usually faster and more reliable than DSL service), and many are selling digital service that allows viewers to pick programs to watch at their leisure. With video on demand, you can download thousands of movies whenever you want. Plus cable MSOs are getting into phone service via the Internet, which may prove to hurt telecom companies more than telecom's forays into cable service will hurt cable companies.
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Some cable companies are pushing this triple threat in ads, promising a discount on services if you consolidate with a single provider, and flaunting the convenience of a single monthly bill.
But with telecom looking like the barbarians at cable's gate, cable company stocks have been depressed. Shares of Comcast closed Thursday at $32.57, just $1 or so below its 52-week high. But that is far below the record high of $53 set in December 1999.
Comcast, the nation's largest cable operator, has been a strong performer, adding customers for cable, video-on-demand and Internet phone services. Analyst Spencer Wang of Bear Stearns resumed coverage of Comcast (symbol CMCSA) on Thursday with an "outperform" rating. He said Comcast is better than telecom companies at bundling products and offering faster services. Wang's target price for 2006 is $37.
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