Think differentiation.That was the mantra from Comcast ( CMCSA) Wednesday, following the announcement that it was withdrawing its two-month-old hostile bid for Disney ( DIS). Now that Comcast is no longer pegging its future on the marriage of content and distribution, the nation's largest cable system operator sought to reassure investors that its cable business is doing just fine. To make clear that its business isn't being eaten away by satellite TV operators and local telcos, executives spent much of their phone call with investors Wednesday talking about their strategy of differentiation: Offering products and services that can't be matched by their competitors. Competitive differentiation "is really what we're all about right now," Comcast Cable President Steve Burke said on the call. "We see a big part of our job is making sure that we not only have what our competition has, but we have things that they don't have, or things that are better than what they have." Now that Comcast isn't going to be spending billions on Disney, competition is once again front and center as the big worry among the people who own Comcast stock. The threats to the company's lush cash flows appear everywhere -- from airborne rivals like EchoStar ( DISH) and DirecTV ( DTV) as well as broadband Internet providers like SBC ( SBC) and Verizon ( VZ). On Wednesday, as investors awaited the postclose first-quarter earnings report from cable rival Time Warner ( TWX), Comcast shares rose 37 cents to $30.34.
Calling OutThe most explicit discussion of the differentiation strategy on the call -- as well as the brightest spotlight on possible risks -- came when Burke talked about the company's development of Voice-over-Internet-Protocol telephony. That's a service that Burke says Comcast believes "will be a major source of growth for our company in the next few years."
Asked about the potential packaging and pricing of VoIP, Burke suggested that the marketing strategy for VoIP, which the company hopes to roll out across its systems next year, would lie elsewhere. As it develops its VoIP offering, Burke said Comcast was trying to come up with products and features that would make VoIP more than a commodity. "We're very interested in unified messaging and videophone and other things that we can offer on an IP platform that the regional bells can't," said Burke. "And so that's really our focus right now." Continuing on the subject, Burke said, "The idea would be to not enter a commodity business where we're the fifth or sixth entrant, and competing solely on the basis of price. Wouldn't you rather have two or three features that made your product different and better and therefore competitive for reasons other than price? ...We're spending a lot of time on that, and we've got some ideas we're pretty excited about." From a profit-margin standpoint, competing on features rather than price is indeed more sensible. But it's also harder, since Comcast will have to both design features that could be attractive to consumers and, as necessary, explain what those features are. Unified messaging -- the ability to retrieve voice messages, email and other messages from a single source -- seems to be a tougher sell than, say, 10% off one's monthly phone bill. As for videophones, while they have gained somewhat of a following over the Internet, the history of telephony is littered with ventures that have overestimated people's desire to see others, and be seen by them, in long-distance conversations. In the world of telephones, visual privacy has been valued much more than visual reinforcement. Telephony, however, was only one area in which Comcast brass spoke of the value of distinctiveness.
In the area of high-definition television programming, Burke said, "We have strong local programming that satellite doesn't have," referring to local sports networks telecast in HDTV, as well as local network affiliates broadcasting in HDTV.