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
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
, 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
, 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
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.
Cablevision's advanced network has also made it relatively inexpensive for the company to roll out Internet protocol telephony, also known as VoIP, at a relatively inexpensive cost: $67 for incremental costs to the customer's modem and the company's central telephone equipment, and $66 to send out a serviceman for installation.
Looking forward, Rutledge said Cablevision would be rolling out additional, bandwidth-intensive services that cable's competition can't duplicate, such as classified advertising, switched video to distribute programming without mass appeal, and VoIP for business. "We are ready to sell lots of VoIP," Rutledge said.
In Comcast's presentation at the CSFB conference, the company portrayed lower capital expenditures as a key element in the company's free cash flow growth. Describing Comcast's network architecture in detail, chief technical officer Dave Fellows talked both about its capacity for delivering large amounts of data, especially as analog channels are phased out, and its ability to deliver new services. "Our network has got capacity that will last for years," Fellows said.
indicated that it wouldn't sacrifice scale (by selling off, as has been speculated it might, its Los Angeles-area systems) on the altar of a cleaner balance sheet.
"We like our assets. We like our footprint," said CEO Carl Vogel.