Comcast Corporation's Grip on the Market Won't Last

Historically, many businesses have prospered by ignoring customer satisfaction and focusing only on yearly profits.Comcast is one of these businesses. But the monopoly-like grip on the telecom market Comcast has enjoyed over the last ten years is about to fade away along with its robust profits.

Jun 26, 2014 at 5:02PM

As a long-term investor, paying attention to recent financial releases is not enough to ensure long-term capital gains and dividends. Sure, a company may have posted strong earnings the previous eight quarters, but it doesn't mean it will continue this trend. You've got to pay attention to less tangible information to get a feel for what the future will look like. 

Recent consumer reports coupled with increased competition from Netflix (NASDAQ:NFLX) and Verizon (NYSE:VZ) should have Comcast (NASDAQ:CMCSA) investors questioning their position in the stock. In the future, when the average consumer has multiple choices for Internet and cable, Comcast's profits are sure to deteriorate. 

Shareholders have benefited
Comcast investors have no doubt done well in recent years. Shares have risen by 280% in the last five years, revenue has risen by a healthy 8% per year and its earnings per share have risen by over 30% per year between 2011 to 2013. Unfortunately, like every disclosure in the world says, past performance is not an indication of future results.

Consumer reports and why they matter now more than ever
Yes, Comcast shareholders have done well over the years but customers haven't. Comcast ranked 15th out of 17 television service providers with notably low ratings for value, reliability, and customer service in the recent Consumer Reports National Research Center's survey. 

Due to the lack of competition in the telecom industry over the past decade, many disgruntled Comcast customers had two choices: either suck it up, or don't have cable and Internet.

But now consumers are gaining more options. There have been extreme innovations in content delivery. Now consumers can view a plethora of content through Netflix' streaming service at a fraction of the cost of XFINITY cable. Not only that, various companies including Google (NASDAQ:GOOG)(NASDAQ:GOOGL) are vamping up their fiber optic networks to give consumers an improved Internet and cable experience in more areas of the country.

Google's innovative Google Fiber TV service offers customers over 150 HD channels and tens of thousands of shows and movies on demand. Verizon FiOS offers Internet speeds of up to 500 Mbps and has numerous plans comparable to XFINITY.The most amazing part is, the prices for the new innovative services offered by Google and Verizon are comparable, if not lower, than XFINITY'S services. 

And Verizon and Google have scored higher significantly higher in consumer reports than XFINITY. It's logical to assume that a lot of people will switch form Comcast to Verizon and Google over the next few years. The only way Comcast can avoid this is by lowering its prices or stepping its game up in terms of service quality -- both scenarios would result in lowered margins for Comcast. 

Right, but that's what the Comcast Time Warner Cable is for, right?
Theoretically, yes. If the Comcast Time Warner Cable deal gets approved, the combined company may be able to lower prices and improve its service quality. But banking on the deal going through is not safe. Especially since on June 24, Senator Amy Klobuchar of Minnesota and Senator Mike Lee of Utah voiced their concerns about the deal and the power it would give the joint company.

What this means for Comcast investors
Pay attention to what consumers think of Comcast. In the short-run, ignoring subscriber's complaints may be very lucrative. However, over the long-run, as other companies expand to new regions and create viable alternatives to Comcast's services, Comcast will either lose subscribers or experience lowered margins if it does choose to finally improve its services. 


Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Michael Nielsen owns shares of Netflix. The Motley Fool recommends Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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