March 1, 2010

Editor’s Letter: More with Less

It’s an evergreen aspiration, even more timely during a downturn: More revenues, less expenses.

Comcast’s upbeat 4Q and year-end earnings call fit the bill: More revenue (up 3.9 percent from 2008), more voice, data and digital subs; more business services customers.

The other side of that coin was "less." One example: the $81 million 4Q severance charge associated with a "reduction in staffing levels."

Comcast, of course, hasn’t been alone here. The regionalization of Time Warner Cable systems that began several years ago, for instance, led to the elimination of numerous mid-level and senior engineering positions. Headcounts have fallen.

Technology is an underlying driver. Faster interconnects and more powerful tools enable regionalization. Other technologies, such as Voice over IP (mentioned specifically in the Comcast call) have their own efficiencies of scale.

The dramatic efficiencies of analog reclamation also deserve mention.

Back-of-the-envelope calculations: A decade ago, the cable industry spent $60 billion to gain 200 MHz of spectrum. If Comcast were as big then as it is now (let’s say, 37 percent of the U.S. market), it would have spent $22 billion, or $110 million per MHz.

By contrast, Comcast is now netting 300 MHz of spectrum for $2 billion, or $7 million per MHz. That is, 6 percent of what it cost ten years ago.

On the call, Sanford Bernstein Senior Analyst Craig Moffett, reviewing Comcast CapEx trends, which dropped five percentage points from 2007 to 2009, speculated that it could remain below 15 percent of revenues going forward.

"Your theory is relatively right," Comcast CFO Michael Angelakis said, in response. "We don’t foresee any major changes."

Cost containment is certainly here to stay. It’s a part of the Comcast-driven converged multiservice access platform (CMAP) outlined in these pages last month. And it figures in this month’s discussion of a common control plane (CCP).

Jonathan Tombes

Editor