Comcast sees a customer windfall in digital TV

Comcast Corp. sees a new-customer boom on the horizon, thanks to the government-ordered transition to digital TV.

The nation's largest cable provider says two million households that get free television in its cable-franchise areas may be forced to enroll with Comcast or another pay-TV company when the digital transition occurs.

These are viewers who still rely on a roof antenna or rabbit-ear antennas on their TV sets.

A new-customer surge for Comcast would be an unintended consequence of a TV transition that broadcasters hoped would make free TV more competitive with cable and satellite services.

It also would be a boost to the Philadelphia cable company, which has lost subscribers to Verizon's new FiOS pay-TV service and other competitors.

Almost 2,000 of the nation's local broadcast stations will convert to digital signals from analog on Feb. 17. Analog has been used since the dawn of the TV age.

Broadcasters say the digital-TV picture will be brighter and clearer than analog TV. Stations also will get more over-the-air channels because of the digital technology. But critics say the transition has been confusing, and they question whether digital signals will be compromised by encountering hills, tall buildings and trees.

"The real $64,000 question here is how many units is it going to generate?" Comcast executive Stephen B. Burke said in a recent conference call with analysts. "We think it's going to be a substantial number of new basic customers."

The Goldman Sachs Group Inc., the New York investment bank, said in a mid-July report that Comcast, which has 24 million cable customers, could add 600,000 subscribers because of the digital-TV transition.

Shermaze Ingram, a spokeswoman for the National Association of Broadcasters, said yesterday that the broadcasters could lose some free-TV viewers in the transition, but she cautioned those thinking of switching.

"This is the time to hold onto your free-television experience because what is happening with digital television is revolutionary," she said.

Broadcasters may regain customers after the transition because of the improvement in the TV picture and enhanced channel offerings, she said.

U.S. lawmakers embraced digital TV earlier this decade so the broadcast spectrum could be reallocated for other uses and the government could raise money through spectrum sales.

With almost six months until the big switch, Federal Communications Commission officials and broadcasters have held public meetings to inform the public of the transition. They say Americans should not wait to the last minute to prepare and offer three options to free-TV households:

People with older analog-based TVs can buy new digital TVs.

They can purchase a converter box with the help of a government coupon.

Or, they can get a pay-TV service.

The National Telecommunications and Information Administration is offering the coupons. A consumer has to apply online or by phone, and each household is eligible for two coupons worth $40 each. The coupons, which expire in 90 days, may be redeemed at Wal-Mart Stores Inc., Circuit City Stores Inc., and other participating retailers.

The agency's spokesman, Todd Sedmak, said Monday that U.S. consumers had requested 25 million converter-box coupons and redeemed nine million since the program was launched in February. In the Philadelphia TV market, consumers requested 540,000 coupons and redeemed 185,000.

Unredeemed coupons are being recycled back into the program, minus processing fees, Sedmak said. "The coupon program is working really well," he said. "You can't expect the redemption rate to be 100 percent."

The government agency has denied coupons to nursing home residents and those who get their mail through post office boxes. Sedmak said the exclusions resulted from the agency's interpretation of the law authorizing the coupon program.

"We are working to make sure we don't exclude anybody," he said. New rules could be enacted by late September enabling nursing home residents and users of post office boxes to obtain coupons, officials say.

Broadcasters will convert to digital signals in Wilmington, N.C., on Sept. 8 in a test run. Some say the flat Wilmington terrain will make the test a success and will not reflect what will happen in the transition in hilly areas such as Philadelphia. On Wednesday, the FCC said that 56 percent of the nation's 1,798 active TV stations were prepared for the digital transition.

Centris Consulting Inc., a market-research firm, said that about 17 million U.S. households received free over-the-air TV and that it believed the number would fall sharply after the transition.

Centris senior vice president Barry Goodstadt said the British experience in a digital transition showed that antennas were very important. He said he believed Americans needed more powerful antennas to receive digital signals.

Centris analyzed TV reception in major metropolitan markets and said 274,000 free-TV households in the Philadelphia region could have a problem with reception after the digital conversion.

Ingram, of the broadcasters association, said she could not comment on the Centris study because she had not seen it.

Comcast estimates that six million to eight million households in its national cable areas get free TV through rabbit ears or rooftop antennas. The company used the Centris data for the analysis.

Of the free-TV viewers in Comcast cableland, one million to two million could sign with a pay-TV service because they will not get adequate free-TV reception, Burke said. He projected the number based on digital-TV signal strength.

Comcast's basic pay-TV subscribers pay an average of $64 a month for service. A projected 600,000 new customers, based on the Goldman Sachs report, would add $460 million a year to Comcast's revenue.

Goldman listed major TV markets that it considered poorly prepared for the digital-TV transition. The least-prepared markets in Comcast cable-franchise areas are Salt Lake City; Houston; Minneapolis-St. Paul; Albuquerque-Santa Fe, N.M.; and Portland, Ore. Goldman Sachs lists Philadelphia among the most-prepared cities for the digital transition.

Other big pay-TV companies, DirecTV Group Inc. and Time Warner Cable Inc., have not projected a gain in new customers from the digital transition.

Time Warner Cable spokesman Alex Dudley said: "We'll probably get a few [new customers], but we are not banking on a big windfall."

Time Warner Cable has tested marketing campaigns to target over-the-air-TV households thinking of switching to cable. Those customers are hard-core free-TV households and "didn't respond well to the message," Dudley said.