Diane Mermigas writes:
The potential pitfalls in cable's too-good-to-be-true story are mounting. ¶ From accelerating capital expenditures, service saturation and slowing subscriber growth to increased competition and the out-of-home media explosion, the cable business is facing a more fundamental change in industry dynamics than even the largest cable operators are willing to concede, though that might not be evident for several years, when emerging trends have taken hold. ¶ While their record free cash flow and double-digit growth rates are among the best in the media industry, even dominant cable operators Comcast Corp. and Time Warner are wrestling with issues they didn't anticipate even a few years ago. Unlike their $70 billion in system rebuilds, cable operators must add bandwidth capacity and speeds to stay competitive with bundled high-speed data, digital video and Voice over Internet Protocol services being attractively priced by telephone, satellite and other rival providers. Those expenditures will noticeably chip away at their robust free cash flow in coming years. ...
Link: The Hollywood Reporter.
While these comments are true (what business can say that they are comfortable 2 years out?), the author misses one point about cable's infrastructure. Namely, that 70% of bandwidth to the home is taken up supporting the old analog channels.
That will go away in a few years and the equivalent will be like a more than tripling of their capacity without any infrastructure upgrades.
Posted by: Martino Mingione | Monday, 06 November 2006 at 22:06