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Summary:

In response to my previous post on Comcast’s desire to become a web powerhouse, David Isenberg, the man who coined The Stupid Network, succinctly points out that the cable giant is trying to enhance the value of its cable plant, and trying to build a smart […]

In response to my previous post on Comcast’s desire to become a web powerhouse, David Isenberg, the man who coined The Stupid Network, succinctly points out that the cable giant is trying to enhance the value of its cable plant, and trying to build a smart pipe, a losing proposition in his opinion.

It is hard to argue against his logic, but it is also hard to argue against the reasons why Comcast is trying to do what it is trying to do — offer web services and enhance its position as one of the top Internet destinations in the US. Of course, Comcast’s offer is just an option to what is already out there – Yahoo Mail, You Tube or Netvibes. Whether they are eventually successful, or not, remains to be seen.

“Meanwhile, Om, how about a bit more critical thinking? You can do it, I know you can. Don’t go all White-House-Press-Corps on us,” says Isenberg. Ouch!

I am taking a more pragmatic ‘wait-and-see’ approach to Comcast’s plans. Purely, because the product isn’t out as yet and it is the proverbial first pitch of the first inning from the cable companies’ when it comes to their web strategies.

I clearly don’t have the intellectual heft to argue with Isenberg, who is almost always right. That said, the recent past is why I don’t necessarily dismiss what Comcast is trying to do.

They were reluctant entrants when it came to the broadband access business, but once they realized that there was money to be made from it, they were all over it. Were they slow to get into the business? Of course they were, but they did get there.

CableCos were equally slow in offering voice, but once the business made sense (aka became critical and affordable), they are all over it. It is the same with web-services. Are they late to the party? 100% – but still, one has to wait and see what unfolds.

“If I were a Comcast shareholder, I’d sell on this news,” writes Isenberg. I think if I am a shareholder, then I’d sell on the news that Comcast isn’t trying to do what it it trying to do – offer web services, and trying to make some advertising dollars off its traffic.

  1. I think Isenberg is ignoring the importance of the billing relationship ISP’s have with their customers. $1 a month extra from each of Comcast’s subscribers generates $138 million in annual revenue, enough to deliver a potent suite of services. That’s tough to compete against for anyone without their built-in distribution and revenue model.

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  2. Yeah and that’s really stopped the millions of people from buying online subscriptions to services. It isn’t exactly hard to punch in a credit card # and setup automatic billing for any service. The ‘billing’ advantage exists only for those customers that are afraid to use credit cards online. As they ‘retire’ there will increasingly be fewer and this will matter less.

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  3. Jesse Kopelman Tuesday, May 8, 2007

    Comcast: strategically smart, tactically stupid. Sell your regional wireless operation to fund needed upgrades to the cable plant — smart. Sell to the first bidder for less than half what you would have gotten 18 months later, when you weren’t exactly hurting for cash — stupid. Buy the Sixers and Flyers to monopolize very valuable content for your networks — smart. Allow those teams to be mismanaged into the laughingstocks of their respective leagues — stupid. Form a partnership with Sprint to get the quad play — smart. Launch a wireless service without using FMC to leverage your wireline assets — stupid. I could go on . . .

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  4. Isenberg hasn’t heard of Helen Thomas?

    Nice summary jesse. What happens when comcast acquires sprint? smart or stupid?

    The baby-boomers are very large base, and will soon have (or already do) lots of free time. My parents still used everything bundled from AOLroadrunner.

    Not everyone lives in the valley.

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  5. Jesse, Cablevision and the Knicks make Comcast and the Sixers look brilliant.

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  6. I think it is too soon to judge. I think they have offered a product that seems to have some serious improvements over the Yahoo Mail for example. Is that enough? I don’t know. The debate should be when they launch, and how they do.

    Still, I think the big issue is companies make smart decisions or bad decisions. Like everybody else, COmcast has its share of stinky eggs. (Thanks Jesse for the recap.)

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  7. Om, did you ever read Phil Rosenzweig’s book “The Halo Effect”? PRetty good read in talking about how companies and their strategies and operations are perceived.

    His premise is that it is more about being in the right place at the right time than it is about being smart or good.

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  8. David Isenberg Tuesday, May 8, 2007

    My ‘twin’ David Isenberg totally misses the point. The zimbra integrated email/voicemail announcement isn’t about the network at all. Its about leveraging and managing customer relationships and developing bundles that are more than just financial bundles.

    Isenberg’s right – applications have indeed become unhinged from the access network – GrandCentral is a great example of an application provider adding value on top of a ‘stupid’ voip pipe provided by comcast or anyone else.

    What he misses, however, is that customer relationships haven’t come unhinged from their network provider. Why do you think cable now dominates voip despite the fact that they charge $8 to $15 more per month for a similar service? It is much easier and less expensive for an operator to ‘upgrade’ an existing customer than it is for a 3rd party to form an entirely new customer relationship. Further, most customers want more simplicity in their lives = fewer, not more, provider relationships.

    So, what Comcast is really trying to do here is:
    1)Create services that integrate their various product lines that may provide some level of differentiation – if I love this zimbra product, its going to make me somewhat less likely to switch my triple play to Verizon Fios.

    2)Give people a reason to go to their portal – or as Om points out, a reason NOT to use Yahoo or Google.

    There are two benefits to this:
    1)It should decrease churn. Internet customers who regularly use the Comcast portal churn noticably less. Better email & portal = more regular users = less churn. Lower churn translates into higher profits very quickly.

    2)Comcast has aspirations to grow their ad sales biz to $1 billion – they see an opportunity to generate more ad inventory and ad buyers today are looking for cross-platform media buys.

    There. Done deal and the result is a new email widget. I guarantee you no one at Comcast even remotely thought about ‘the network’ when evaluating this project.

    Fair Disclosure: I work in the cable industry, but not for Comcast.

    David A Isenberg – the other Isenberg…

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  9. OK, one of you Davids, portal users show reduced churn, but a portal user probably also has the Comcast bundle, which also reduces churn. Which comes first? The portal or the bundle?

    Anyway, from folks I have talked to, Cox Communications has the best phone portal in the industry.

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  10. Jesse Kopelman Wednesday, May 9, 2007

    RandomThoughts: sure the Knicks are a mess, but the Rangers are not. Under Comcast, both the Sixers AND the Flyers have gone to pot. It all goes back to Brian Roberts BFF Ed Snider being unwilling to fire any general manager, no matter how incompetent . Anyway, the Sixers give the Knicks a very good run for their money. Do you realize that this year they had one of the league’s highest player payrolls and were still paying the last two (maybe 3) coaches they fired? Meanwhile, the most recent fired coach, Jim Obrien, had a better record in his single season, with same players, than the current coach, Mo Cheeks, has had in either of his two yet Snider has said Cheek’s job is safe?

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