COMCAST SEEDS DIGITAL SHIFT WITH FREE BOXES

NOVEMBER 04, 2008

Comcast Corp. (Nasdaq: CMCSA, CMCSK) hopes free is the key as it embarks on an aggressive strategy to migrate millions of analog video customers to the digital domain.

To fuel the move, the MSO plans to offer free digital terminal adapters (DTAs) and more advanced set-tops capable of supporting video on demand (VOD) to customers as the MSO attempts to remove its expanded basic programming tier from analog and deliver it only in digital.

In those "digital upgrade" markets, Comcast will give customers that are taking the so-called "B2" expanded basic programming tier two DTAs and one basic, interactive set-top for no additional cost as long as they remain a Comcast customer, according to MSO spokeswoman Alana Davis.

Comcast arrived at that setup in part based on recent National Cable & Telecommunications Association (NCTA) figures showing that the average home has 2.8 TVs. The operator is also ramping up the initiative (dubbed internally as "Project Cavalry") as Comcast closes in on 70 percent digital video penetration.

Comcast is also giving existing digital customers up to two DTAs at no additional cost. The MSO is charging $1.99 for each DTA a customer wants above those set limits.

DTAs are simple one-way digital-to-analog converters that will provide access to the expanded basic tier (as many as 100 channels, depending on the market), while the more advanced, two-way box will also give customers access to Comcast's trove of VOD content, digital music channels, the interactive program guide, and, if they want them, premium services from HBO, Showtime Networks Inc. , and Starz Entertainment LLC . (See DTAs on Parade , Comcast Confirms Digital Dongle Project, and Pace Pix .)

The operator hopes the promise of enhanced video and audio services entices analog subs to make the digital leap and accept the new boxes. Although Comcast is offering a set of set-tops for no additional fee to existing expanded basic subs, it's possible that some customers will still complain about it. In Chicago, site of an earlier digital migration by Comcast, only a small percentage of customers filed complaints related to the change, at least in the early going.

Comcast expects to dangle these free carrots in front of customers as the MSO goes "all digital" and reclaims about 40 analog channels for more VOD and high-definition televisions services, as well as extra spectrum for faster Docsis 3.0-based cable modem services. (See Comcast Takes 'Wideband' Wider .) Although the MSO tends to apply the all-digital tag to this process, it will continue to deliver its basic "B1" tier of roughly 20 channels in analog format. (See FCC OKs Dual TV Carriage Rules.)

Last week, Comcast revealed that it will use the DTA strategy first in the Portland, Ore. region. The migration will start in the state capital, Salem, and proceed on a neighborhood-by-neighborhood basis, according to Davis. (See Comcast IDs First DTA Market.) Comcast has also made similar analog reclamation moves in the Chicago and the Detroit areas, but it hasn't introduced DTAs in those markets. (See Going 'Mostly' Digital and Comcast Doctoring Digital in Detroit .)

Comcast hasn't said where it will apply the DTA-centric approach next, but the company plans to go all digital in 20 percent of its markets this year. The MSO expects it will need up to 25 million DTAs to complete the migration over the next 12 months to 18 months.

Comcast is starting to notify Salem customers of the move this week using a mix of direct mail, TV spots, billing messages, and eventually, channel-crawl information. The operator has also set up a Website that walks customers through how to order self-install kits or set up a professional install, which carries a one-time fee of about $15.

In Salem, self-install kits will arrive or professional installs will take place a week or so after the order is initially received by Comcast. Once customers receive notification from Comcast, there's a 60 day window before the expanded basic tier is shifted to digital for good, giving the MSO the time required to notify local franchise authorities of the change.

Although the number of channels in Comcast's expanded basic tier varies by market, the digital switch in Salem reportedly will affect channels 32 through 71, with Oxygen, MSNBC, PBS Kids on Sprout, Discovery Kids, and Discovery Science Channel among the networks included in that group.

— Jeff Baumgartner, Site Editor, Cable Digital News

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