'The cord is still intact': A Comcast exec explains why America's largest TV provider can survive the death of cable TV

AMC

• As cable-TV cord cutting continues, Comcast, the nation's largest cable-TV provider, remains optimistic.
• The company points to its growing broadband relationships as a sign that cord cutting isn't the threat that some perceive.
• "Some say the future of TV is apps, we really believe it is more and more around aggregation," Matt Strauss, EVP of Xfinity Services, said.

Cable TV viewership, and subscriber counts, continue to drop as the industry sees ever-increasing competition from digital upstarts like Netflix or YouTube.

Yet amid this waning linear-television environment, cable-TV giant Comcast had a solid third quarter. What's more, it added to its total footprint, picking up net 288,000 new customer relationships. "We surpassed 30 million customer relationships," Comcast CEO Brian Roberts touted on the third-quarter earnings call.

At a time when disruption in the pay-TV market is as high as ever, Comcast isn't worried about the signs cable TV is in decline. And it all comes back to that so-called disappearing cord.

"The cord is still intact," Matt Strauss, EVP of Xfinity Services, told Business Insider. "When people describe cord cutting I think in many ways it's a misnomer because we don't see people cutting the cord for high-speed data."

Cord shifters, not cord cutters

In the third quarter, Comcast added 363,000 new broadband subscribers. Its broadband subscriber base is growing at about 5.5%, double the rest of the industry, according to analysts at Cowen who predict Comcast could add another 1 million subscribers in 2019.

Instead of slashed revenues as a result of customers choosing to fully end their relationships with Comcast, the company is seeing a significant amount of "cord shifting," where some subscribers opt for standalone broadband through Comcast but don't subscribe to pay-TV service.

Part of the strength in broadband adds can be attributed to a stronger economy, and the growing necessity for a fast, persistent in-home internet connection. But share stealing from telcos is also what's boosting added subscribers at Comcast, according to Cowen analysts, who noted AT&T and Verizon both reported declining broadband adds.

"The utility of broadband access is high and rising," analysts at Morgan Stanley wrote. Morgan Stanley conducted a survey on the industry and found the risk of cutting the broadband cord was low among all respondents, and especially low among cable subscribers.

That probably has to do with differences between how telco companies - like AT&T and Verizon - and cable companies deliver internet. Cable companies have an intrinsic leg up on telcos when it comes to delivering faster internet due to the underlying infrastructure that each is built upon.

In the telco sector, the cheapest option for broadband access is typically DSL. DSL - digital subscriber line - is a service that's provided over a copper wire. This type of service is slow and unreliable with limited ability for streaming. The cheapest option at cable companies, on the other hand, is offered over a coaxial cable. That means faster speeds and more reliability, but often at a higher price. Fiber is the fastest and most costly option, and is offered by both cable and telecom companies.

Comcast has a larger broadband business than a pay-TV business

Of course, video subscribers are another story. Relationships in video continue to decline, and in the third quarter Comcast lost 106,000 subscribers compared to 140,000 a quarter before. At this point, the nation's biggest cable-TV provider actually has a larger broadband business than a pay-TV business.

That's the result of the companies disrupting linear TV, pitting Comcast against the likes of Netflix, YouTube, and Amazon Prime Video. Yet Comcast touts the amount of time its customers watch Netflix on the X1 set-top box.

"In a relatively short amount of time we've become, in our footprint, the number one for Netflix," Strauss said.

It's probably not something you'd expect from should-be competitors that are trying desperately to unseat each other's dominance in the industry. But Comcast is naturally incentivized to offer to customers a seamless way to access all of its content in one place.

In the Morgan Stanley survey, analysts noted that Comcast respondents hold the highest streaming video on-demand (SVOD) penetration, likely due to its integration efforts on its Xfinity platform. Comcast has already integrated YouTube service into its platform, with Amazon Prime video coming soon. There's not yet been any indication if Comcast will come to an agreement to integrate Hulu, which has 60% ownership by Disney (which Comcast just battled for Fox and Sky).

And while the subscribers to cable-TV programming declined, Strauss said the company measured 6 billion hours of on-demand video played on the X1 platform, an increase of 20% from a year before.