Broadband Gets Top Billing at Comcast, Cox

Is it the season or is there another reason?

That's the question about high-speed Internet connections that analysts are trying to answer as the first of the standalone cable TV operators report their quarterly financial results this week.

With Cox Communications COX and Comcast CMCSA leading off, analysts expect a slowdown in one of the most closely watched statistics in the cable industry these days: the number of new subscribers for high-speed data service -- the fastest-growing of the high-margin advanced services that cable operators offer with their upgraded systems.

Following broadband's burst of growth over the last few quarters, the anticipated slowdown, say analysts, reflects the seasonal weakness that affects other cable industry statistics in the second quarter, such as basic subscriber additions.

But investors are also trying to figure out if and when cable modem numbers could be hurt by telcos' efforts to push their competing DSL-based high-speed service -- a task that's muddled by mixed reports in recent days from Verizon Communications VZ and SBC Communications SBC.

At issue are significant revenues that operators expect in coming years as a result of the billions of dollars they've spent upgrading their systems for advanced services. Over the past few months, cablers have consistently declared that the regional Bell operating companies haven't cramped their performance, but RBOC-inspired worries persist.

Cox, the nation's fourth-largest cable operator, is set to report earnings Wednesday morning, while Comcast, the nation's largest, is due to report Thursday morning.

Flatlands

The slowdown in additions for high-speed data -- also known as broadband -- among cable operators has already begun. Earlier this month, AOL Time Warner AOL reported 170,000 second-quarter net additional broadband customers, compared to 197,000 one year earlier and 260,000 in the first quarter of the year.

"With signs the business is becoming increasingly seasonal, high-speed adds should be down sequentially and only about flat year over year," analyst Doug Shapiro of Banc of America Securities wrote in a sectorwide note Monday. Those numbers, combined with strong DSL performance and higher spending at SBC, "may play into fears about the impact of increased RBOC discounting and marketing," says Shapiro. "However, we think 3Q results, which should show a seasonal rebound, will be the first good look at the impact of heightened RBOC competition."