Comcast Corporation (NASDAQ:CMCSA) 2022 Technology, Internet, Media and Telecommunications Conference Call November 15, 2022 9:25 AM ET
Company Participants
Elad Nafshi – Executive Vice President and Chief Network Officer
Conference Call Participants
Kutgun Maral – RBC Capital Markets
Kutgun Maral
[Abrupt start] I’ve been at the company at Comcast for I think just around 17 years and he’s been involved with many important projects across broadband and video at the company. And I’m particularly excited about this fireside chat because I think clearly cable sentiment is so sensitive right now’s to perceive views around competitive intensity and I don’t know that there’s a great appreciation of what’s really happening with the pats at 10G and DOCSIS 4.0 and so hopefully we’ll uncover some of the key debates here today and with that thanks for being here.
Elad Nafshi
Thank you so much for having me. It’s a pleasure.
Question-and-Answer Session
Q – Kutgun Maral
Yeah. Well, so let’s kick it off with a high level overview. Maybe talk about the broadband network evolution. Today, where you are, more importantly, where are you going over the next five years and where are the key milestones that you and the team are looking to hit?
Elad Nafshi
Yeah, definitely. So thank you so much for coming. I really appreciate the opportunity to tell in a book story. Our network is going to go through a really exciting transformation over the next four to five years. It’s really around three main themes if I have to bucket them. The first one is, we’ve been working very hard over the last several years to virtualize the Access Network and what that means is that we’re able to take advantage of web scale and web speed from a high speed data delivery infrastructure.
We’re able to take advantage of the latest advancement in digital fiber, which has benefits from a service reliability standpoint. And then because this is now a fully digital platform, it really tees up the point, which is turning a smart network into a brilliant network. A network that knows in real time everything that goes on service wise, end to end, and is able to pinpoint and self-feel when possible and do that completely transparent to the customer.
And all of that architecture is really in service of the third point, which is the upgradeability of the network and our ability to deliver multiple gigabit symmetrical services over our coaxial network or over fiber and do that on a point by point location without needing to over build themselves.
Kutgun Maral
That’s great. And I want to dive right into the key debates, and one of the big ones is, of course DOCSIS 4.0, versus fiber and fiber to the home. And so, maybe you could talk a little bit about, comparing the two, some of your fixed wireless is one topic of debate within investors, but looking at longer term, it’s really about over the next four or five years, how does cable compete with telco fiber? Some of your cable peers have decided to over build their own HFC networks and go fiber. You and Charter have been incredibly consistent in terms of the successful path that you see ahead with DOCSIS. So maybe you could kind of talk to us about the two and why you’re so confident that at least for Comcast DOCSIS is 4.0 is the right way to go?
Elad Nafshi
Yeah, definitely. So first of all, let’s take a step back, right? The Comcast network is an HSC network. Engineering speak for a hybrid fiber and coaxial network, right? It emphasis on fiber because the network has fiber leading all the way down to a few hundred feet away from the home. And it’s just that last 100 feet into the home that are reliant on the coaxial cable. Okay?
So when we talk about fiber, when will stringent fiber, we have hundreds of thousands of miles of fiber network across our network. Okay? So now we’re talking about, the last 100 feet of delivery. And we’re to do that over fiber to do that over blocks.
The reason why we don’t feel that we need to over build ourselves with fiber is because we believe that we’re able to deliver the same services meeting multiple gigabit symmetrical services with highly reliable service relied on the brilliant network that I described earlier and do that everywhere to each and every one of our 60 plus million homes without needing to dig up streets and without leading to dig up your front lawn and without more installation with your labor telco technicians in house and be able to do that everywhere and that’s why we believe that the DOCSIS evolution is the right one for us.
Kutgun Maral
Understood. Okay. And the next key question for me at least is network costs, and maybe you could kind of help us think about the contours of the cost profile over the next few years, especially as you ramp the DOCSIS 4.0. Where are the key cost buckets that we should consider? And I’ll try any chance you’d be willing to frame the expected cost profile, whether it’s on a per homes path basis, or just more broadly?
Elad Nafshi
Yeah, I’d love to. So when you really took a step back and look at the network, I talked about the virtualization, and that’s the platform that actually fits the beats down to the house, right? And takes the internet and sends it up from the house. And that’s the piece that we’re working on virtualizing. And that’s, well on its way to be mass deployed.
The network upgrade is really around digitizing the nodes. That’s the local aggregation point and point of demarcation between the fiber and the coaxial network that’s a 100 feet away from a 100 — a few 100 feet away from the home. And then obviously take advantage of the latest CPE customer premise device that we could install. And there’s a lot of exciting things out there as well if we get a chance to speak about this.
And so, from a cost for passing standpoint, to upgrade our network into what we call a mid-sleep, which enables us to launch multiple gig services today and then lay the foundation, all of the architecture in place in order to then upgrade to DOCSIS 4.0 FDX, costs us on a growth basis less than $200 a home spouse. Okay. And that’s not all incremental because in many ways we would need to make that investment for capacity augmentations anyway.
And so that’s why we believe that we have a much more cost effective way of delivering multiple gigabit symmetrical speeds in great scale and do that faster, more reliably, and without the customer destruction that a full fiber would require.
Kutgun Maral
That’s fantastic. I appreciate that number, I think it’s going to be quite helpful for us. Alright let’s talk about consumption trends. I think Comcast leaders in the past have talked about the web of today is about consumption and the web of tomorrow about creation. And so as you build your network, can you — what are you trying to solve for? Whether it be consumer demand for bandwidth or what’s the end state that you’re trying to fill today for the consumer of tomorrow?
Elad Nafshi
Right. So first and foremost, the network will never gate the customer in terms of the services that we’re able to deliver. And whether it’s to residential customers or commercial customers, we want to make sure that network will always be there to deliver the absolute best, most reliable services across our entire network, okay? That’s, by the way, what makes the Comcast network unique is our ability to do that.
From a speed standpoint, it’s hard to argue that, these multiple gigabit symmetrical services are required primarily when you look at customer usage. When you look at the ratio of downstream to upstream consumption today okay, meaning how many bits are consumed downstream versus how many bits are consumed upstream, the network is still highly asymmetric. The ratio is about 15 to one downstream to upstream okay.
And even at the height of COVID, right, we are all kind of not knowing whether the zombie apocalypse is going to transpire next. That ratio is about 12.5 to 1, meaning, there’s still a lot more entertainment consumption that there is content that is being generated out of the home. But I want to take a step back for a second, rather than play a game of gigabits.
To me what’s even more important is latency, latency out of home, right? And if you buy through the vision of the metaverse, okay, to have a truly immersive metaverse experience, low latency is a lot more important than the sheer, bit speed. And either way, the DOCSIS 4.0 upgrade that we’re doing, will execute on both. We’ll have multiple gigabit symmetrical services with unrivaled low latency that we’re already proving out.
Kutgun Maral
Yeah. Important for the metaverse or if you’re a gamer of course.
Elad Nafshi
As I shared with you, I have four boys and there’s that humbling moment when your child beats you in color duty, humbling, very humbling. And it’s as I said, that is a gamer. So yes, trust me, I feel the pain.
Kutgun Maral
That’s great. Alright, let’s talk about multi gig speeds. So in September, Comcast announced its nationwide rollout of multi gig internet speeds, including introducing download speeds of up to 2 gigs and upload speeds that are 5 times to 10 times faster than the existing speeds in about 20% of your customer base through the end of the year. From a network perspective, what has been the initial learnings from this rollout of the newly increased speed tiers in the Northeast? And how’s engagement been with across the customer base?
Elad Nafshi
Yeah, so I’m going to nerd out a little bit. So when you look at the way we’re delivering the multiple gig speeds today, we’re reliant on something called DOCSIS 3.1, which is the current latest data over coaxial cable. And we are able to deliver multiple gig services on that service. But to open up additional upstream speeds, yes, than asymmetric, but we want to be able to deliver on greater speeds.
We’re implementing something called mid split and what mid split is in plain terms increasing the amount of frequencies that we’re allocating for upstream bandwidth and that enables us to effectively triple the amount of upstream capacity that we have today and increase the upstream speeds by six times, seven times the fastest speeds that we have today. Operationalizing it is really where the network becomes brilliant.
It’s how do you now launch DOCSIS 3.1 services on the upstream overcoming network disruptions that are external, for example TV antennas, inter options that come from TV antennas. LTE interferences from cell towers. What you want to do is you want to build a network that is able to self-detect that and mitigate around those interferences as they come in because most of them are transient. And that’s the brilliant network that we are able to build already that self corrects all of that in real time without needing to have, any type of technician or any type of human interaction.
So that has been the, the greatest learnings from a network standpoint on how do you deploy that in great scale and operationalize those speed deliveries. In terms of the response sadly, I’m not upgraded yet. My home isn’t, Well, I’m close. They going to get to me later this year. I’m part of the 34 markets that we have announced, and I can’t wait to have it. I really can’t. I make fun of my — the team that runs via deployment, so, okay. Let’s go. Come on. I can’t wait to have it. It’s enormously well received, obviously, without going through the numbers.
Kutgun Maral
Understood. Okay. Well or a phrase from earlier, and let’s continue nerding out a little bit and talk about the network upgrade path. As you begin testing with consumers next year, what are the key operational priorities around the network that you’re focused on to begin deployment of DOCSIS 4.0 in the market in the back half of 2023, which is, I think, a target that not a lot of other cable companies have really shared and so we’re excited that you have and look forward to.
Elad Nafshi
Well, trust me, I’m excited that we have as well, because I can’t wait, right. But at the same time as important as the speed is, we have to make sure that the service always works right? Customers I use this example all the time, we were shielding in place, me and my wife and the four boys during COVID, right? And now those rare occasions that the internet would be down, I would have an average of 1.5 shades within 15 seconds of it going down in my home office, letting me know that the internet is down.
It’s like, okay, I’m on team. I can see that too. Right? And that’s just the reliability expectations of consumers have today. And so the time spent between now and in that second half of next year is really around truly heartening and operationalizing the service quality and making sure that we are able to consistently deliver the multiple gigabit symmetrical speeds.
The second one is operations. We need to make sure that our technicians have the meters and all the visibility that they need in order to be able to do that. And then the third which I’m mostly excited about is with DOCSIS 4.0 FDX, we get real time visibility into every edge of the network like never before. And I can’t wait to see what my data sciences team is able to do with that. And how do we make, again, the network even smarter in terms of real time responsiveness to any type of reliability challenges across the footprint. So that’s really what we’re going to do between now and then.
Kutgun Maral
That’s perfect. And let’s talk about full duplex a little bit more. Can you help investors better understand why Comcast Network was best suited for an upgrade to full DOCSIS 4.0 and what were the network realities or requirements for Comcast? And what operationally does this path provide for the company going forward as you kind of target the 50 million plus homes and businesses path by the end of 2025?
Elad Nafshi
Yeah. So, if you take a step back and look at historically how cable upgraded its network, okay? The first cable systems were like 330, 50, and then it went to 550, and then it went to — kind of get the picture right. And, when the networks became two way, they allocated a small number of frequencies for upstream speeds because the fastest cable modem service at the time was 1 meg and that was really fast okay?
And over time, as speeds increased, what happens is that the network still is a bidirectional network, meaning the frequencies that are allocated for upstream and the speeds are allocated for downstream, most of them are allocated for downstream. And it’s really kind of separated and therefore not very efficient when you look at the actual usage, okay?
Because there’s actually very little sustained speed at two or three or four gigs, right? It doesn’t exist and so in order to launch the DOCSIS 4.0 gives a cable operators two options. They should continue to expand the frequencies all the way up to 1.8 gigahertz, but keep the upstream and downstream separate as they do now, okay, which means there’s a lot of spectrum that is going to be sitting there idle most of the day, but it’s still hard separated from a frequency standpoint or you don’t need to do that.
You could keep the network as it is today with our network virtualization and be able to share spectrum with concrete power where you’re able to overlay upstream and downstream transmission right on top of each other and be able to do that more efficiently.
Now, the essence here is really around speed of good ability. Okay? In order to expand the network all the way up to 1.8 gigahertz, you need to go out to the network and find every splitter, every cable, every device that connects the home that is not currently capable of passing 1.8 gigahertz of signal, okay?
With FDX, you need to do any of that. All you need is software download to our virtualized architecture, new generational docs for DOCSIS 4.0 FDX electronics in our nodes and amplifiers and we’re ready to go. And so the key to our strategy, the reliability that comes with, and the scale across our entire footprint, like no other into DOCSIS 4.0, which is why we chose the DOCSIS 4.0 FDX either ways would work. We believe that this is the right way for our Comcast.
Kutgun Maral
That’s great. And let’s talk about FDX just a little bit more and kind of the successful tests that you’ve had over the last year or so. You announced the successful tests with the newly designed FDX amplifiers, can you talk a little bit more on the amplifier side and when you think about the innovation with the amplifiers, what does that ultimately enable for the network and for consumers?
Elad Nafshi
Yeah. So let me just demystify what that amplifier is. So on those, few hundred feet of coaxial cable, you need to make sure that the signal gets all the way to the homes on the end of the coaxial line. Okay? And to do that, you need to amplify the signal, right? Just make it stronger. And so amplifiers are installed in an network in order to do exactly that.
They basically take the signal, amplify and continue, to send down the line okay? And so when you talk about the good ability, being able to overlay those upstream and downstream frequencies for DOCSIS 4.0 FDX, you need a new generation of really smart amplifiers that are able to do that and do it seamlessly to the customers. And what we’re able to show in Philadelphia just over a month ago, and I’m so happy that you were there for that is a new generation of smart amplifiers that not only are able to do that, but are also enabling us to have real time visibility and auto correction of any type of interference on the RFA network.
We don’t need to send, once we have those in place, we won’t need to send technicians to deal with RFA impairments. They don’t need to go out there and there’s a company called pads in there, they’re like modules that you need to swap out. That amplifier is basically a computer that self corrects all of it and works in tandem with the rest of the AI on the virtualized architecture and auto corrects all of it.
And so when I talk about a brilliant network delivering multiple gigabit symmetrical speeds, that’s what’s coming. That’s why the amplifiers are so important. And that was really the missing piece to be able to deliver the multiple gigabit symmetrical services throughout the entire network without needing to do any type of special construction to do that.
Kutgun Maral
That’s great. And let’s talk a little bit more about the network virtualization because I know that’s been a big focus as well. And maybe you could help us better understand what the operational benefits of that process?
Elad Nafshi
Yeah, totally. So if you look at kind of, traditionally how cable model services were delivered, they were delivered on something called appliances, right? Those are, dedicated hardware that we’re custom made to be something called a CMTS, a Cable Modem Termination System and engineers have acronyms, right? And what it is? It’s basically a device that just aggregates traffic from the home to the internet and from the internet down to the home. Okay? And that’s great. And, we have — we’ve used those for many, many years, but the problem is around the speed of innovation, right? Because they’re custom made devices. They are custom made chip sets that feed those devices. And so the speed of innovation is in the cycle of the custom made, ASICS, right versus if we were able to rely on the same concept that the web scalars, the high risk scalars do, which is the latest and greatest Intel-based hardware, and we abstract the hardware from software, hence virtualizing it right?
Then now we could innovate at the speed of Moore’s Law, meaning a server that I buy today will be twice capable at the same cost two years from now. And that’s not just saying it, that’s the essence of Moore’s Law, right? Andy Moore was one of the founders of Intel, and he came up with that law, was 40 years ago now and as has held true throughout those years.
And so, as an example as we speak today, we’re transitioning to a third generation of this Intel-based hardware, and we’re literally doubling our capacity by virtue of doing that with that virtualized architecture. Now, the really exciting piece is by separating the hardware from the software, we’re now able to innovate at the speed of software. We don’t need, to wait for this advancement of that advancement.
I have teams of developers, building and innovating and rolling this out with a highly automated, highly reliable deployment of apps that we’re deploying across virtualization is really the essence and what enables us to deploy multiple gigabit symmetrical services over coaxial cable or over fiber. Again, we have many homes connected with fiber and be able to do that completely seamlessly without needing to have a new platform, without needing to have a new architecture, without needing to have new operations and all of that with the real time visibility that comes with the virtualized architecture.
Kutgun Maral
All right. I want to go back to something you mentioned earlier. We’re all obsessed as consumers, at least on speed, how fast, what’s download, what’s upload, we talk about the importance of latency process to us about the importance of reliability or what other factors are you in the network team are focused on to deliver the brilliant network?
Elad Nafshi
Customers pay us for speed with the expectation of reliability and we take that very, very seriously. The advantages of the virtualized architecture is that real time visibility and what the real time visibility gives us is the ability to act impairments as our customers don’t want to know that we knew what happened to them an hour ago, right? They want to know that, hey, my service is impaired right now. What are you doing about it?
And where we can — where we can do something about this small platform standpoint, we want machines, artificial intelligence and the brilliant template to take care of that and where we can’t, we want to make sure that we’re able to dispatch the technicians to the pinpoint location of where the issue is so we could quickly resolve it. And that’s the exciting piece of that network transformation that we’re after. Yes, speed is important. Yes, we’ll be able to deliver multiple gigabit symmetrical with the lowest latency. But it has to, must always work and that’s what’s built into everything that we do across our network.
Kutgun Maral
Great. and, and I know there’s a lot of details over here, but I think it’s important for investors to better appreciate these. So maybe we could talk a little bit about the XMS platform and you recently introduced the platform. It monitors hundreds of thousands of local broadband optical links every minute across the network. What does this mean for you, the engineers and more broadly with the network?
Elad Nafshi
So it’s a great story of Comcast innovation. So, the challenge with a fiber network, right is when it works, that’s great, but when it doesn’t work, why doesn’t it work? And how do you detect it? It’s just light on a piece of glass, how where the impairment is, and this is a technical challenge that the cross country fiber folks solve because they have to send signal 2,000 miles away. They need to make sure that they know if there’s any type of impairments okay of the chip set that actually makes that mechanism work needs to be really tight, right? And so the yield on these chips is very low. They throw — the people who make the devices have to throw entire crops because it’s just not good enough. The quality is not tight enough, okay?
Now our access fiber is no more than 80 kilometers away from our locations, right? That’s the benefit of a cable network. And so I could effectively take the rejects of all those chips that would otherwise be thrown away to the garbage. They’re good enough for our distances. Why don’t we build a device that is able to now connect to the network, upgrade in the network virtualization that we’re executing, and is able to constantly monitor each and every one of the hundreds of thousands of access fibers that we have out there and be able to do all of that in real time and comes with built in capabilities that when there is an impairment, it other detects it and it is able to pinpoint on a map exactly where it is and that’s what we do.
And so we’re better engineers the XMS stands for extremely leader for fiber okay and that’s something that is being installed as we speak nationally. And we’re able within less than two minutes to pinpoint exactly where fiber pyramid occurs. And now this AI engine is built into our customer facing tools, we’re able to actually auto dispatch a fiber restoration crew exactly to that location to repair it, which reduces the meantime to repair by hours, because otherwise you’re going to have to do all of that manually.
And now we’re actually able to message to the customers in real time that says, hey, there’s a fiber disruption in your area. We are aware of it. Technicians are on our way, and the current ETA for restoration is four hours. And we’ll update you as a repair of the network progresses and not is a brilliant network. And that’s how a brilliant network comes together.
Kutgun Maral
That’s great. And where does — when you talk about the customer experience, where does Xfinity assistant come in?
Elad Nafshi
That’s a great question. So the Xfinity assistant is that customer side of the AI or the real time visibility that is able to message the customers exactly what is going on with their services and be able to do that in real time, right? And so rather than say, hey, reboot your mode, right? If there’s a fiber cut, what are you rebooting? There’s a fiber cut, right? And so how do we take that information, that real time visibility and turn it relevant not just to our platform, not just to our technicians, but to our customers, and do all of that in real time and do all of that in great scale, and that’s really the customer facing side of the reliability and the brilliant network to be able to message at that level to our customers when we’re getting wave from a feedback standpoint. But even more importantly, from a Nick Promoter score, that’s how we measure the satisfaction of the customers on customers that we’re able to interact with at that level.
Kutgun Maral
That’s great. I think unfortunately, we only have time for one more question, and I want go back to what you said, which I think will be probably the headline of today. When you gave out that $200 a Homes Pass number, can you just unpack that a little bit more in terms of anything more you could share on what’s in that number, how you expect that to evolve? You talked about how it’s not all incremental, how do we think about what parts of the 200 are instrument and what’s maybe an opportunity for rationalization and efficiencies elsewhere?
Elad Nafshi
Yeah. So I can’t build your model for you maybe. I would say this, the number that we share today is an all in number, right? And I kind of walk you through the molecules on you what makes that up? I would say that from a capacity standpoint, take a step back and think about this, right? What we’re able to get with the upgradeability, whether it’s with the mid split or whether it’s with a DOCSIS 4.0 FDX is tremendously more capacity that is available, right?
We augment capacity in Notebook all the time. When they say that it is not all incremental, it’s because we’re able to in order to augment our capacity where we need to right? I think that I will stay at less than $200 for now and I’m super excited, I really am to be able to have that opportunity to bring this brilliant network to bring these multiple gigabit symmetrical services, to bring a network that is truly like no other cause so many homes across the US and we’re just getting started.
Kutgun Maral
That’s great. Well, Elad thanks so much.
Elad Nafshi
Thank you so much for having me. I appreciate it. Thank you.
Be the first to comment