The rebuilds are over for Comcast ( CMCSA). But the capital expenditures aren't going away as quickly as some investors would like.

The nation's largest operator of cable systems -- a company not in the habit of springing unwelcome financial surprises on Wall Street -- caused a minor disturbance Thursday with higher-than-expected fourth-quarter capital expenditures and capex forecasts on the high side of prior indications.

The capex issue on Thursday revived longtime concerns about the cable industry's ability to generate free cash flow -- that is, cash flow from operations after interest expense and capital expenditures have been subtracted out.

Over the past few years, free cash flow growth at Comcast and at other cable operators has been hampered by capital spending on upgrading the cable plant to a two-way, interactive, fiber-optic-laden cable infrastructure.

Operators have promised not only that capital expenditures would decline as a result, but also that they won't have to rebuild their rebuilds.

But while capital expenditures devoted to rebuilding have come down, they appear to have popped up in other areas -- for example, the purchase of souped-up cable boxes featuring digital video recorders. Comcast, which had forecast $3.3 billion to $3.4 billion in capital expenditures for 2004, says it overshot the high end by $200 million mainly because of a fourth-quarter purchase of advanced set-top boxes.

Comcast shares closed Friday at $32.13, up 17 cents from where they closed on the eve of the Thursday earnings release.

Articulating the capex concerns Friday -- but taking issue with them -- was Doug Shapiro of Banc of America Securities.

In a report issued Friday, Shapiro cited capex concerns as the apparent reason that Comcast's shares didn't rise more than they did in the wake of Thursday's numbers.

"The guidance of $3 billion in 2005 was a little higher than our prior estimate of $2.85 billion," wrote Shapiro. "It was at the high end of the $2.5 billion-$3 billion range provided early in 2004, and we believe it was also near the top end of the Street range (apparently some analysts were still near $2.5 billion)."

Regarding the $200 million in fourth-quarter set-top spending, "a cynical view is that the company just front-loaded $200 million of capex into 4Q so that it could post guidance that is still within the prior guidance range," wrote Shapiro. "However, while we understand that higher capex makes for bad optics, particularly for a cable company," wrote the analyst, "for the most part we believe this capital is accretive or at worst value-neutral and therefore isn't negative fundamentally."

Shapiro has a buy rating and a target price of $37 on Comcast; his firm has done recent investment banking for the cable operator.

The analyst, who early in 2004 forecast that Comcast's 2005 capex would be $2.5 billion, suggests that the $700 million in additional spending (including the extra $200 million in the fourth quarter) isn't alarming. The roughly $100 million Shapiro attributes to a recent fiber backbone agreement with Level 3 ( LVLT), for example, essentially shifts an operating expense to a capital expense, says Shapiro. About $400 million is tied to set-top boxes with digital video recorders, says Shapiro, but those should pay for themselves in a little over two years and generate a return on the cost of capital.

"So while higher capex and the consequent 'postponing' of free cash flow spooks investors, understandably, we believe the difference between the new guidance and our estimate a year ago carries visible returns and, as a result, is not fundamentally negative," concludes Shapiro.

Somewhat more concerned than Shapiro about capex is Richard Greenfield of Fulcrum Global Partners. In a report focusing on Greenfield's disappointment with Comcast's free cash flow generation, the analyst points to capex, along with other factors such as weak basic subscriber growth, as a hindrance to Comcast's free cash flow growth.

"We had been expecting a more rapid decline in capital expenditures," writes Greenfield, who has a neutral rating on Comcast's stock. "While excitement over the revenue acceleration from new telephony services may support the shares at current levels in the near term, we are increasingly concerned by the continued upward revisions to capital expenditures (rollout of new products) and reduced EBITDA growth expectations (driven by marketing expense of new services)."