Com­cast Takes the Re­mote

The re­viled ca­ble com­pany wants to own your home

Bloomberg Businessweek (North America) - - Contents - By Felix Gil­lette

The ping­pong ta­ble ar­rived on the 15th floor of Com­cast’s cor­po­rate head­quar­ters in down­town Philadel­phia in about 2008. When the com­pany in­vited lo­cal re­porters for a view­ing, none had trou­ble get­ting the sig­nif­i­cance. They also took note of the orange fur­ni­ture and relaxed dress code, and quickly con­nected the dots. In­ter­net cul­ture liked ping­pong. Com­cast got a ping­pong ta­ble. Com­cast was em­brac­ing in­ter­net cul­ture.

Eight years later, the soft­ware nerds and the mo­bileapp and data geeks have set­tled into more pro­saic jobs on ping­pong-free floors through­out the Com­cast tower. On 35, Fraser Stir­ling is stand­ing by his desk, palm­ing a se­cu­rity cam­era. Its lens is set in a rec­tan­gu­lar, an­odized-alu­minum en­clo­sure that gives it a fu­tur­is­tic, al­most Pixar- char­ac­ter pro­file. The cam­era will be avail­able later this year to cus­tomers who pay Com­cast for se­cu­rity-pro­tec­tion ser­vices. “It’s got a real nice feel,” he says, run­ning his fin­ger un­der the cam­era’s chin. “You’ll no­tice we de­signed it with a bit of per­son­al­ity, right?”

Stir­ling, 36, whose of­fi­cial ti­tle is se­nior vice pres­i­dent for hard­ware de­vel­op­ment, is broad-shoul­dered and be­spec­ta­cled. His of­fice has a turntable and a mi­cro­scope and is strewn with pro­to­types of de­vices in var­i­ous stages of de­vel­op­ment. As he gives a peek in­side the com­pany’s skunk works, he ex­plains how he ended up work­ing for Com­cast, the gi­ant provider of TV and in­ter­net ser­vices, owner of Nbcuniver­sal, and his­tor­i­cally one of the most de­spised brands in the U.S.

He says he’s ful­fill­ing a child­hood dream of de­sign­ing beau­ti­ful things. Born and raised in Scot­land, Stir­ling grew up play­ing rugby. “My fa­ther is a very tra­di­tional Scot­tish chap,” he says. “He sug­gested in no un­cer­tain terms that I should find some­thing more manly to do. In his eyes, ‘manly’ in­cluded fish­ing, mov­ing rocks with my hands, or wrestling bears.”

Stir­ling de­fied his fa­ther and stud­ied mu­sic tech­nol­ogy and elec­tron­ics in col­lege and then spent eight years work­ing for BSKYB, the Lon­don-based telecommun­ications com­pany. In 2013 he moved to Sil­i­con Val­ley to work for In­tel’s ex­per­i­men­tal in­ter­net-based TV sys­tem, On­cue. Shortly af­ter, the com­pany sold On­cue to Ver­i­zon Com­mu­ni­ca­tions. Soon, Stir­ling says, he found him­self weigh­ing com­pet­ing job of­fers from Ap­ple, the global paragon of prod­uct de­sign, and Com­cast, a prod­uct waste­land. Stir­ling chose Com­cast. The chal­lenge was more com­pelling.

Com­cast has in­stalled tens of mil­lions of ca­ble boxes, Wi-fi routers, and other hard­ware in Amer­i­can homes over the years. These de­vices have been for­get­table at best. Stir­ling hopes that’s about to change. Later this year, the com­pany will be­gin rolling out a fam­ily of slimmed­down in­ter­net, TV, and home-se­cu­rity gad­gets. The de­vices are de­signed ac­cord­ing to a rad­i­cal con­cept that’s largely gone untested in more than a half-cen­tury of ca­ble-TV his­tory—that hard­ware doesn’t have to be hideous. “We’re try­ing to em­pha­size the im­por­tance of de­sign,” Stir­ling says. “Hard­ware is a thing you can touch. It’s of­ten the per­son­i­fi­ca­tion of a ser­vice or a brand.”

The new de­vices are de­signed to work in con­cert with X1—the soft­ware at the heart of Com­cast’s strat­egy to keep its 22.4 mil­lion ca­ble sub­scribers from cut­ting the cord and de­fect­ing to Net­flix, Hulu, and Ama­zon. Think of X1 as the com­pany’s own An­droid or ios—a tech­no­log­i­cal plat­form upon which an em­pire of soft­ware, hard­ware, and ser­vices can be built. Com­cast ini­tially de­signed X1 for a spe­cific Tv-re­lated pur­pose. A few years ago the pro­lif­er­a­tion of ca­ble chan­nels, com­bined with the rapid ex­pan­sion in the num­ber of shows and movies avail­able on de­mand from net­works such as HBO, Show­time, and Starz, was over­whelm­ing many view­ers. Find­ing some­thing to watch on TV felt ex­haust­ing.

In­stead of just throw­ing every chan­nel into a lin­ear grid ac­cessed by click­ing up and down with a re­mote, X1 ag­gre­gates pro­gram­ming from hun­dreds of TV net­works and on­line sources and ar­ranges ev­ery­thing by genre. Sports. Movies. Chil­dren’s pro­gram­ming. News. There’s still a re­mote, but with X1 it’s voice-ac­ti­vated. You tell the sys­tem what you want. It shows you what’s avail­able. The soft­ware is based in the cloud, mean­ing Com­cast can up­date it with­out com­ing to your home. Since its re­lease in 2012, X1 has be­come a hit.

Un­like most ca­ble com­pa­nies, Com­cast has ac­tu­ally been gain­ing TV sub­scribers. In April the com­pany an­nounced that dur­ing the first quar­ter of 2016, video rev­enue jumped 4 per­cent, to $5.5 bil­lion, and it added 53,000 video cus­tomers, its best re­sult in nine years. In 2015 it made $8.2 bil­lion in profit on $74 bil­lion in rev­enue. Ex­ec­u­tives credit the new plat­form: “When peo­ple get X1, they watch more hours of TV, and they watch a broader se­lec­tion of TV,” says Sam Schwartz, chief busi­ness de­vel­op­ment of­fi­cer for Com­cast Ca­ble. “We can see how many chan­nels on av­er­age peo­ple watch dur­ing a month, and it al­most dou­bles.” Even other ca­ble com­pa­nies seem to like X1—com­cast has li­censed the sys­tem to Cox Com­mu­ni­ca­tions and Shaw Com­mu­ni­ca­tions.

Com­cast is in­stalling 40,000 X1 boxes a day and ex­pects half of its video cus­tomers to have the tech­nol­ogy by Aug. 5, when it will face a high-pro­file test: the Olympics. Com­cast’s NBC will air every event in Rio de Janeiro live on TV or on­line. Sub­scribers will be able to use X1 to search by event, ath­lete, or coun­try, and get alerts when an Amer­i­can is close to win­ning gold. “Google or­ga­nizes the world. Face­book con­nects peo­ple,” says Chief Ex­ec­u­tive Of­fi­cer Brian Roberts. “Com­cast is con­nect­ing our cus­tomers to the mo­ments that mat­ter in their life.”

The com­pany says X1 has the po­ten­tial to solve a broader prob­lem now swal­low­ing the mod­ern home. Amer­i­can fam­i­lies keep adding more Wi-fi- en­abled de­vices to their lives, not just smart­phones and tablets, but also “smart” ther­mostats, stereo sys­tems, fire alarms, re­frig­er­a­tors, lights, locks, and toys. Try­ing to man­age this riot of gad­gets can be be­wil­der­ing. Com­cast’s so­lu­tion: Hook ev­ery­thing up to X1 and man­age the en­tire menagerie from your TV. “The home is a huge op­por­tu­nity for us,” Schwartz says.

The no­tion of Com­cast tak­ing over more res­i­den­tial ter­ri­tory may seem ter­ri­fy­ing. It has long ranked last or near last in con­sumer sat­is­fac­tion sur­veys. (Tales of Kafkaesque cus­tomer in­ter­ac­tions are an in­ter­net sta­ple. For a sam­pling go to com­cast­, or just Google “rep from hell.”) The com­pany has been try­ing to fix some of the most ob­vi­ous prob­lems: It’s re­design­ing

hun­dreds of its ser­vice cen­ters in a style that’s less high­se­cu­rity pawn­shop and more Ap­ple Store. (Step 1: Re­move bul­let­proof glass.) It’s work­ing on a mo­bile app that will al­low cus­tomers to track the lo­ca­tion and ar­rival time of home-ser­vice tech­ni­cians. Philadel­phia mag­a­zine has called the app “Uber for your ca­ble guy.”

Com­cast is af­ter some­thing much big­ger than merely not be­ing hated, though. It wants to be loved. “It sounds a bit daft com­ing from a guy with a Scot­tish ac­cent,” Stir­ling says. “But we re­ally are gen­uinely try­ing to cre­ate an emo­tional ex­pe­ri­ence, whether that’s love, or what­ever, like you have with your phone. We want peo­ple to be able to put some­thing from Com­cast in their study or their liv­ing room and peo­ple can look at it and go, ‘Oof, what is that? It’s amaz­ing.’ ”

From the edge of his desk, Stir­ling grabs a pro­to­type ca­ble box. With X1, Com­cast shifts the bulk of its cus­tomers’ TV ac­tiv­ity— what shows they record on DVR, what Wrestle­ma­nias they or­der on pay-per-view—from the phys­i­cal hard­ware into the cloud. As a re­sult, the set-top boxes no longer need lots of hard drives. Com­cast’s new box, which will ar­rive later this year, isn’t box­like at all. It’s square, about the size of a pan­cake, and could pass as a trivet. Over the years, var­i­ous com­pa­nies have trade­marked spe­cific col­ors to cod­ify their brand’s iden­tity. Coke red. Home De­pot orange. Tif­fany blue. Com­cast’s forth­com­ing gad­getry will come in cus­tom­ized hues. “This is our Com­cast gray,” Stir­ling says, show­ing off a box. “We also have it in Com­cast white.”

He puts down the trivet and con­tin­ues his guided tour. The walls in the hall­way out­side his of­fice are dec­o­rated with plaques dis­play­ing the com­pany’s tech­nol­ogy patents. They hang in long, densely packed rows, as if Com­cast’s in­te­rior de­signer was a crazed in­ven­tor with a rag­ing case of ob­ses­sive- com­pul­sive dis­or­der. Con­struc­tion cranes are vis­i­ble across the street at the site of the 59- story Com­cast In­no­va­tion and Tech­nol­ogy Cen­ter, which will open some­time in 2018. Nor­man Foster, who also worked on Ap­ple’s new dough­nut-shaped head­quar­ters, is the ar­chi­tect.

In an au­dio­vi­sual lab, Stir­ling greets Tony Werner, pres­i­dent of tech­nol­ogy and prod­uct for Com­cast Ca­ble. For a mo­ment, they stand side by side, gaz­ing down at a clus­ter of old Com­cast ca­ble boxes and routers from a few years ago, a re­minder of their in­glo­ri­ous past. “This is where we came from,” Werner says. “This is where a lot of com­pe­ti­tion still is.” He looks at one par­tic­u­larly hefty set-top box. “Where do you want your mi­crowave?” he jokes.

Werner’s swag­ger is fu­eled, in part, by the grow­ing suc­cess of Com­cast’s voice-ac­ti­vated re­mote con­trol. In May 2015, CEO Roberts stood on­stage in Chicago at the In­ter­net & Tele­vi­sion Expo, the ca­ble in­dus­try’s re­cently re­branded an­nual gath­er­ing, and gave a demon­stra­tion. Hold­ing the re­mote like a karaoke mi­cro­phone, Roberts spoke com­mands that were promptly ex­e­cuted by X1 on a gi­ant TV screen be­hind him. In­stead of click­ing back and forth through var­i­ous menus to find the movie, TV show, or sports matchup you want to watch, Roberts ex­plained, you could just say what you’re look­ing for. A few weeks be­fore Roberts’s demon­stra­tion, Com­cast ex­ec­u­tives had an­nounced they were drop­ping the com­pany’s $45 bil­lion bid for Time Warner Ca­ble. Dur­ing his Chicago pre­sen­ta­tion, Roberts ac­knowl­edged the de­feat and vowed to move on. “Our folks in the labs have been re­ally amaz­ing,” he said, hold­ing up the re­mote. “Show me the Com­cast–time Warner Ca­ble merger.” The screen be­hind him played a movie clip of a fiery ex­plo­sion en­gulf­ing a house as by­standers scream and dive for cover.

Werner says Com­cast ini­tially planned to ship 10,000 of the voice re­motes in the first year. But af­ter sharp prod­ding from Roberts, the com­pany ended up dis­tribut­ing 7 mil­lion. Com­cast ex­ec­u­tives say that un­like with other voice-ac­ti­vated prod­ucts—ahem, Siri— cus­tomers keep talk­ing to it long af­ter the nov­elty has worn off. “We’re now get­ting 180 mil­lion voice com­mands a month, and it’s grow­ing,” Werner says.

Com­cast al­ready has more than 1,000 em­ploy­ees work­ing on X1 in Den­ver, Wash­ing­ton, D.C., Sil­i­con Val­ley, and Philadel­phia. Every three months, they can take a week off to work on projects that could be­come new prod­ucts. Some of the best X1 up­dates, Werner says, orig­i­nated in these so- called lab weeks. He cites Kids Zone as an ex­am­ple. With a sin­gle voice com­mand, a par­ent can lock her TV into a child-friendly pro­gram­ming mode, hand her kid the re­mote con­trol, and go cook din­ner or take a shower with­out the risk of re­turn­ing to find her 8-year- old watch­ing Masters of Sex.

Werner says much of what gets made in lab week never sees the light of day. Re­cently a team of en­gi­neers suc­ceeded in hook­ing up a breath­a­lyzer to X1. They rigged the sys­tem so that a viewer binge­ing on, say, Game of Thrones and Scotch-and-so­das could mon­i­tor his ris­ing in­tox­i­ca­tion. If his blood-al­co­hol level gets too high, it could lock him out of cer­tain po­ten­tially re­gret­table ac­tiv­i­ties, such as watch­ing too much E! “We’re never go­ing to add a breath­a­lyzer to the re­mote,” Werner says. “So why do we let them do that? It’s fun for ev­ery­one. And we’re ex­per­i­ment­ing with how to add dif­fer­ent kinds of sen­sors into the sys­tem.”

The prod­uct team is de­sign­ing ther­mostats, routers, and win­dow sen­sors to hook up to X1, and Com­cast says it’s happy to ag­gre­gate other com­pa­nies’ Wi-fien­abled hard­ware into its sys­tem, too. It’s formed part­ner­ships with sev­eral com­pa­nies, in­clud­ing Nest Labs, which makes smart ther­mostats, Au­gust Home (smart locks), and Lutron Elec­tron­ics (smart light­ing sys­tems), among oth­ers.

Com­cast knows its tech­nol­ogy, no mat­ter how good, will run into a mar­ket­ing prob­lem. Peo­ple don’t ex­pect

“A lot of peo­ple think the ca­ble guys don’t get it. Part of my role is to get Sil­i­con Val­ley to un­der­stand that we think like they do. That we’re real”

nice things from ca­ble com­pa­nies. They ex­pect crap. In 2015, Com­cast be­gan stamp­ing its re­motes with the words “De­signed by Com­cast in Philadel­phia”— an homage to the slo­gan on the iphone’s pack­ag­ing, “De­signed by Ap­ple in Cal­i­for­nia.” The move was widely mocked on so­cial me­dia. “They for­got to bracket it with a poop emoji on each side,” tweeted Ryan Fre­itas, di­rec­tor for prod­uct de­sign at Uber. Com­cast has since up­dated the slo­gan to “De­signed with ♥ in Philadel­phia.”

For years, Com­cast has been pour­ing ad­ver­tis­ing money into re­brand­ing its ca­ble, in­ter­net, and home ser­vices un­der the name Xfin­ity, us­ing the tag line “The fu­ture of awe­some.” The com­pany is also stock­pil­ing con­sumer-prod­uct gu­rus. Last year, Chris Satchell ar­rived at Com­cast from Nike to serve as chief prod­uct of­fi­cer. Satchell has a fetch­ing Bri­tish ac­cent and looks like Vin Diesel. On the tech­nol­ogy-panel cir­cuit, he can some­how make Com­cast sound less like a knuckle-drag­ging cor­po­rate cy­clops and more like a bou­tique steam­punk col­lec­tive. “We’re in a long-term re­la­tion­ship with the cus­tomer. We’ve got to de­light them,” he says. “How do we make you feel like you’re a Com­cast fam­ily?”

Satchell talks a lot about trans­form­ing am­biva­lent sub­scribers into brand am­bas­sadors. Along the way, he’s in­tro­duced a num­ber of mantras into the com­pany’s lex­i­con, such as: “CBB: Cus­tomers. Brand. Busi­ness.” An­other: “Own the couch. Own the room. Own the home.”

The com­pe­ti­tion in home au­to­ma­tion will be fear- some. In 2014, Ama­zon started sell­ing Echo, a cylin­dri­cal wire­less de­vice that in re­sponse to voice com­mands can play mu­sic, pro­vide weather re­ports, ad­just your ther­mo­stat, and or­der a ride from Uber. In May, Google an­nounced a com­pet­ing prod­uct—a chatty vir­tual as­sis­tant housed in a voice-ac­ti­vated de­vice called Google Home. And Ap­ple is re­port­edly work­ing on a Siripow­ered home-au­to­ma­tion hub.

Com­cast never re­ally needed a prod­uct- driven tri­umph to make money, says Joseph Diste­fano, the au­thor of Com­casted: How Ralph and Brian Roberts Took Over Amer­ica’s TV, One Deal at a Time. “They al­ways ob­served the tech­nol­ogy dis­pas­sion­ately,” he says. “They were not ob­sessed by it. Tech­nol­ogy was their ser­vant, not their mas­ter. They didn’t want to be the guys spend­ing all the ex­tra money that might or might not de­velop a mar­ket.”

Com­cast ex­ec­u­tives in­sist that’s no longer the case. “When I started at Com­cast, the of­fi­cial strat­egy was ‘Hey, we’ll let other peo­ple cut their teeth and in­no­vate, and then we’ll be a fast fol­low.’ And even fast was kind of er­satz fast,” says Sree Ko­tay, chief tech­nol­ogy of­fi­cer for Com­cast Ca­ble, who joined the com­pany in 2007. “That has shifted in deep and pro­found ways. Now our mantra is to cre­ate the best-look­ing prod­ucts, the best ser­vices, the best jour­ney, the best ex­pe­ri­ence in the world. Not just the best for a ca­ble com­pany in North Amer­ica.”

“A lot of peo­ple think the ca­ble guys don’t get it,” says Schwartz, the chief busi­ness de­vel­op­ment of­fi­cer. “Part of my role is to get Sil­i­con Val­ley to un­der­stand that we think like they do. That we’re real. That they can part­ner with us. And that we have the plat­form to do this.”

On the con­di­tion that we don’t re­veal cer­tain de­tails, in­clud­ing what it looks like, Stir­ling has agreed to show off a pro­to­type of a wire­less, voice-ac­ti­vated de­vice that might some­day al­low a Com­cast cus­tomer to holler com­mands at X1 with­out hav­ing to walk around with the re­mote con­trol in hand.

“Wel­come to the dun­geon,” Stir­ling says. “This is where the magic hap­pens.” The dun­geon is a win­dow­less lab­o­ra­tory high up in the Com­cast tower. He stands a few feet away from the pro­to­type and calls out one of Tom Cruise’s most fa­mous movie lines. “Show me the money!” he says. The TV screen over­head jumps to the 1996 film Jerry Maguire.

“What is the weather like?” Stir­ling asks. A re­port pops up on the screen. “The dif­fer­ence be­tween any­thing we would do in voice and what Echo does,” he says, “is that we would at­tach it to an an­chor point. Which is TV and con­tent. It’s linked to a broader ser­vice.”

In the lab­o­ra­tory next door to the dun­geon, the prod­uct team is work­ing on a Com­cast-de­signed out­door Wi-fi hub, which it’s placed in­side a cop­per box the size of a mini-re­frig­er­a­tor. The box is de­signed for test­ing how new prod­ucts per­form in iso­la­tion. Dur­ing other stages of the de­vel­op­ment cy­cle, how­ever, en­gi­neers need to know how a gad­get will in­ter­act with other de­vices in the home. To han­dle that kind of work, Com­cast be­gan rent­ing a house in the sub­urbs of Philadel­phia last year and turned it into a six-bed­room, three-bath Wi-fi lab­o­ra­tory. “It’s awe­some,” Stir­ling says. “It re­minds me of the Ad­dams Fam­ily house be­cause it’s so big.”

Home­own­ers tend to only no­tice Wi-fi when it’s not work­ing and re­mem­ber how dif­fi­cult it can be to get it run­ning again. Com­cast en­gi­neers are de­vel­op­ing a new prod­uct, known in­ter­nally as Smart In­ter­net, that would al­low cus­tomers to mon­i­tor Wi-fi per­for­mance in the home us­ing a sim­ple di­ag­nos­tic con­trol panel on the X1 menu. In the­ory, par­ents could use the Smart In­ter­net tool to shut down Wi-fi ac­cess in their kids’ bed­rooms at a cer­tain hour each night or to iden­tify which smart gad­get has lost its mind and is dis­turb­ing the rest of the net­work. The goal is to de­mys­tify in­ter­net per­for­mance and per­haps to em­power users to look slightly less clue­less in front of their chil­dren.

For years, fu­tur­ists have pre­dicted the even­tual demise of the liv­ing room TV as it’s pushed aside by smarter de­vices: mo­bile phones. Tablets. Vir­tu­al­re­al­ity gog­gles. Com­cast’s vi­sion for X1 would re­store TV’S cen­tral­ity, trans­form­ing it from a de­vice for con­sum­ing en­ter­tain­ment into a far-reach­ing com­mand cen­ter, ca­pa­ble of mon­i­tor­ing and con­trol­ling every net­worked ob­ject in your home and all the in­vis­i­ble spa­ces in be­tween. “Right now you turn off your TV when it’s no longer giv­ing you value,” says Matthew Strauss, ex­ec­u­tive vice pres­i­dent of video ser­vices for Com­cast Ca­ble. “We’re go­ing to change that. Even­tu­ally, your TV will al­ways be on.” <BW>

The X1 re­mote

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