What's Causing Comcast Slowdown?

Comcast has cut it outlook for 2007 citing “an increasingly challenging economic and competitive environment.” Cable revenue growth will be 11 percent, off from the 12 percent predicted just six weeks ago, representing 500,000 fewer revenue generating units.

Comcast now projects adding six million to 57 million, versus previous guidance of 6.5 million additions. Cable cash flow growth will also be off about a percent from prior guidance at 12 percent.

That isn't what is so interesting. In the past, cable has claimed to be recession resistant, and analysts generally have agreed. In fact, the argument has tended to be that in a tougher economic climate, cable represents even more entertainment value for the price.

To be sure, cable now has many more lines of business, and perhaps some users will consider some of them optional. Perhaps the more advanced video services will be seen as optional if choices have to be made. Perhaps customers will consider trading down from higher-speed broadband packages to slower speeds.

But the larger issue is a matter of weighing the importance of economic and competitive factors. Is it the economy driving the shortfall or is it competition? Maybe consumers are making some tough budget choices.

But what if some of the slowdown is defections to telco services? And how much to Verizon? Is FiOS now a growing factor driving defections?

To be sure, we might not be able to assess the relative competitive impact until there is simply no question that economic softness is causing the slower growth.