Cable Giants Tout Scale

The big cable companies are done building -- except when it comes to empire-building.

Speaking to investors last week, execs hammered home the benefits of their freshly upgraded networks. Top officers at Time Warner (TWX Quote), Comcast (CMCSA Quote) and Cablevision (CVC Quote) said their high-capacity, digitized-video, Internet-like cable systems will allow them to focus in coming years on higher-returning areas.

The comments are part of an ongoing effort to convince Wall Street that free cash flow growth has at last broken free of persistent network needs. But for all the smooth talk about product development and investing strategies, the brute power of size asserted itself, too.

"I think to compete in the future you've got to be larger," Glenn Britt, CEO of Time Warner Cable, told the Credit Suisse First Boston Media and Telecom Week gathering in New York City.

Asked by an audience member to justify the company's interest in bidding on cable systems now operated by Adelphia, Britt noted that Time Warner Cable, the nation's second-largest operator, was competing with large-scale competitors, including regional Bells, as well as satellite operator DirecTV (DTV Quote), which has more subscribers than Time Warner Cable. Marketing gets more efficient when you're bigger, Britt suggested, and it gets easier to attract the engineering talent you may be looking for.

The recent performance of cable stocks in the market also appears to indicate that Wall Street believes bigger is better.

After falling for most of the year, shares in Comcast, the nation's largest operator of cable TV systems, and New York-based Cablevision each have rebounded from August lows.

But smaller operators Mediacom (MCCC Quote) and Insight (ICCI Quote) have sunk further since August.

Meanwhile, operators spent much of the week promising no new expensive network upgrades -- a message regarded with the same mixture of enthusiasm and skepticism on Wall Street as promises of no new taxes are on Main Street.

Britt was one of several executives who forecast that one day cable TV will be all digital, freeing up cable systems for additional channels and other content.

Cablevision Chief Operating Officer Tom Rutledge, in his CSFB presentation, said the company believes that with its upgrade, the network "never needs to be upgraded again."

Capital spending from now on, he said, is what he and others term "success-based" -- outlays linked to a customer taking a particular service, such as a new set-top box containing a digital video recorder.