Cable's A-Team

In the never-ending attempts to convince consumers that nirvana is just one purchase away, snake-oil salesmen may have a better track record than peddlers of broadband. Despite endless hype about movies on demand, instant music downloads and Internet access in nanoseconds, broadband bliss has yet to materialize. It's been too expensive, too hard to install--and just not all that compelling for many TV viewers. That didn't stop a shrewd father-and-son team from placing a $72 billion bet on broadband in late December. Backed by Micro-soft, No. 3 cable operator Comcast Inc. of Pennsylvania won a bidding war for AT&T Broadband, the nation's largest cable company. In walking off with the prize, the glitzless Comcast defeated bidder AOL Time Warner, cable's No. 2 player.

Comcast quickly proclaimed its victory the turning point in broadband's frustrated history. "If you think broadband has a great future, this [transaction] accelerates it," Brian Roberts, president of Comcast and the CEO-designate of the proposed AT&T Comcast, told a packed New York press conference. Microsoft, which enabled Comcast to boost its bid by several billion dollars, also believes the new AT&T Comcast is critical to the software giant's Internet ambitions. Among other things, Microsoft wants distribution for its next generation of broadband software and interactive TV. It also prevailed in its goal to keep AT&T Broadband out of the clutches of archnemesis AOL Time Warner. In a gracious statement, even AOL Time Warner agreed: the transaction will "usher in an era when consumers have more options in the digital household," the company said. What remains to be seen is whether Comcast can succeed where so many communications giants have failed.

While there is no guarantee it can break consumers' broadband resistance, Comcast has a record of success dating back almost four decades. The company was founded by a partnership led by Ralph Roberts, a soft-spoken gentleman who seems patrician but isn't. He diversified into cable in 1963, starting with a system in Tupelo, Miss., when Sans-a-Belt slacks were dimming the prospects of his men's furnishings line (and belt business). Later, Brian, one of his five children and a Wharton business-school graduate, joined the company, literally starting at the bottom by climbing poles to install cable. In 1990 the young Roberts became president, and since then the company has flourished, overcoming periodic setbacks and leapfrogging to the front of a rapidly consolidating cable industry.

Over the years Comcast has gained a reputation as arguably the industry's best operator, avoiding the burdensome debt levels that have hampered some of its peers, while investing aggressively in technology. That's made Comcast one of the most profitable cable companies. Even in defeat, Comcast has shown itself to be a clever player. When AT&T wrested away Comcast's deal to acquire a major cable company two years ago, Roberts managed to negotiate a sweet consolation prize: a $1.5 billion breakup fee and the chance to purchase cable systems serving about 2 million new subscribers.

Still, Roberts was vague on the details of fulfilling the broadband dream. His confidence seems based largely on the advantages of the combined companies' size. With 22 million customers, AT&T Comcast will control about 30 percent of the industry's customers. Many of those subscribers are clustered in 17 of the nation's top 20 markets, making them an eager and receptive potential audience. Already, Comcast has sold 10 percent of its current customers on broadband connections to the Internet, and many more have purchased digital cable, the service necessary for movies on demand, interactive television and hundreds of television and music channels. Now, with AT&T's subscribers, Comcast says it will be in an even better position to offer sundry new programming services, from entertainment to commerce.

So, what will this long-promised broadband future look like? On a recent Sunday, viewers who tuned in to the QVC home-shopping network--a cable channel Comcast happens to own--were able to instantly purchase a Dell computer simply by pressing a button on their remote control. The result: 32,000 computers sold worldwide, for a single day's take of $80 million. "That's the power of a broadband network," says C. Michael Armstrong, AT&T's CEO.

For broadband to fulfill its most grandiose promises, the new AT&T Comcast must draw on its power to lead the industry. It might begin by carefully studying more attractive pricing options, even while rolling out such new products as movies on demand, which the industry has long been touting. Another important step might be the simplest of them all--quickly live up to its pledge of opening access to its vast broadband network to as many entrepreneurs and visionaries as possible. Aggressive, smart moves such as these, plus a little luck, would go a long way to bringing the broadband future that much closer.