Comcast Faces Long Haul on Phone Push

Comcast (CMCSA Quote - Cramer on CMCSA - Stock Picks) has taken aim at the phone business, but it's unclear when the company might make its mark.

In recent years, Comcast has become both the nation's largest operator of cable TV systems and its biggest provider of high-speed Internet service. Now it's looking to fully tap into the potential of a related but rival industry.

In a presentation to the news media last week, Philadelphia-based Comcast unveiled some of its still-fluid strategy for winning the phone business from the regional Bell operating companies. And, addressing some of the investor concerns that have driven down cable stocks in recent months, a Comcast executive insisted that the threat of telcos stealing cable operators' video business was overblown.

The attention Comcast and other cable operators are paying to the telephone business illustrates one of the great unanswered questions for investors trying to value the cable business. Like high-speed Internet service and digital video services, Internet-style telephony represents a huge potential revenue stream for Comcast. Yet with Comcast now providing the next-generation service to only a few hundred homes, the success of such a rollout -- and its impact on Comcast's cash flow -- remains unknown.

On Friday, the stock rose 4 cents to $27.87.

Rolling Out

Comcast, which has 21.5 million subscribers to its basic video service nationwide, was testing its next-generation telephone service in 650 households as of last week, said Rian Wren, Comcast Cable's general manager of telephony.

The company, which expects to roll out this telephone service in earnest next year, plans to have 50% of its plant ready to go by the end of 2004, and 95% by the end of 2005.

Comcast is already in the telephone business, delivering phone service to 1.2 million households in systems that Comcast acquired from AT&T (T Quote - Cramer on T - Stock Picks) in late 2002. The cable operator Cox Communications (COX Quote - Cramer on COX - Stock Picks), which launched its phone service in 1997, offers telephone service to more than one million home and business customers.

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