Comcast Country Tough on Intruders

Most cities would be thrilled to see the arrival of a new cable company that promised to invest millions in the community and bring sorely needed competition to the local monopoly. In Philadelphia, city leaders ran such a would-be rival out of town.

When RCN Corp., a New Jersey-based cable and telephone venture backed partly by Microsoft Corp. co-founder Paul Allen, applied to break into Philadelphia in 1998, the then-mayor openly scoffed at the notion of helping an outsider challenge the home-grown Comcast Corp. Then the city council dragged out the approval process for months.

RCN, which also offers cable service in New York and Boston, gave up earlier this year and left town, complaining bitterly that Comcast had a lock on the city the likes of which it had never seen.

As the locals like to say, Philadelphia is Comcast country, and most seem to want it to stay that way.

Understanding how Comcast and the Roberts family, one of America’s wealthiest, came to prosper and eventually dominate this historic East Coast city goes a long way in explaining how a low-key, father-son-led company--largely unknown in the media centers of Hollywood and New York--could burst on the scene with a bold bid to become the nation’s No. 1 cable operator.

The audaciousness of the $39.7-billion stock offer for AT&T; Corp.’s cable assets impressed not only Wall Street and the cable industry, but also many in Philadelphia, where residents and some civic leaders were surprised that a company in their own backyard was rich and powerful enough to pull off such a headline-grabbing move.

It may not rival the civic excitement generated earlier this year when the city’s 76ers basketball team (which Comcast also owns) reached the NBA finals, but corporate pride in Comcast is hitting new highs in Philadelphia. Leaders hope the deal will restore some of the city’s fading luster.

“It’s the boldest business move that’s come out of Philadelphia in more than 20 years,” said City Councilman Michael Nutter. The Philadelphia Inquirer gushed in an editorial that “it’s hard to resist a parochial cheer at seeing a home-grown corporation for once be the predator, not the prey.”

As RCN learned, though Comcast and the Robertses, the company’s controlling shareholders, are known in the cable industry for their hardball business tactics, the company inspires uncommon loyalty and support in its hometown, largely because it pours millions of dollars into local campaigns and civic causes. It’s easy to find customers who will gripe about Comcast’s rising prices, but among the city’s inner circle, the company is at the top of virtually everyone’s fund-raising list.

Power of Company, Family Sparks Concern

Comcast gave $1 million to help bring the 2000 Republican National Convention to Philadelphia, and Comcast President Brian L. Roberts co-chaired the organizing committee. An additional $2 million went toward a new performing-arts center downtown. And the company is reportedly paying $10 million for the naming rights to an entertainment development along the Delaware River.

“You will have to search long and hard in this city to find anyone who will say anything bad about Comcast or the Robertses,” said Edward C. Rendell, the city’s colorful former mayor and former chairman of the Democratic National Committee. Considered a leading contender in next year’s gubernatorial race, Rendell remembers how the Roberts family took a chance on him during his first mayoral campaign a decade ago, providing funds and support that helped him win the race.

Not everyone in Philadelphia is a fan of the company or the family.

Lance Haver, a local activist and president of the board of Consumer Education and Protective Assn., said Comcast’s shrewd, behind-the-scenes lobbying campaign against RCN shows that the company has too much influence.

“This is a family so powerful and well-connected, they could stop another multimillion-dollar business from creating new jobs in the city,” Haver said.

City officials deny Comcast pressured them on the RCN deal. But Sen. Arlen Specter (R-Pa.) was so disturbed by the episode and rising cable rates that he’s considering holding hearings into whether tougher cable regulations are needed.

Philadelphia City Councilman David Cohen said Comcast’s prices are too high, and he laments that Philadelphia is still one of the only large cities without a public-access cable channel.

“Some feel Comcast got the $44 billion [the original stock value of the AT&T; bid] from overcharging customers,” said Cohen, glancing out his City Hall office window toward Comcast headquarters across the street.

In old-money, upper-crust Philadelphia, where some fortunes date back more than a century, the Robertses--whose fortune has ballooned to nearly $1 billion, according to Forbes magazine--would qualify as nouveau riche, but the family is widely accepted and admired for its lack of ostentation.

“They’re not flashy people,” said David Lipson, publisher of Philadelphia magazine. “They don’t show their wealth.” The family is not known for jet-setting or throwing lavish parties. Though Ralph J. Roberts, 81, the chairman and co-founder of Comcast, and his wife of 58 years, Suzanne, 80, live on a sprawling farm estate in affluent Chester County, they’re still listed in the local telephone directory.

Most members of the family--including their son Brian, 42, and his four siblings who are not involved in the business but own sizable stakes--have avoided the spotlight and probably wouldn’t be recognized by the average Philadelphian. Suzanne Roberts is the exception because of her frequent appearances in community theater productions. She also stars in a five-minute, Comcast-produced advice show called “Seeking Solutions with Suzanne,” which airs in Comcast markets on CNN’s Headline News three times a day.

“Ralph really delights in his wife’s accomplishments,” Rendell said. “When I was mayor, Ralph was more persistent and adamant about my coming to Suzanne’s opening night than he ever was about any business deal for Comcast.”

Sylvan Cohen, 85, a former neighbor, has known the Robertses for nearly 50 years, dating back to when Ralph Roberts owned a belt and suspender company and before he decided to buy a small Mississippi cable franchise in 1963.

“Their success has not gone to their heads,” said Cohen, who lives with his wife, Alma, in Philadelphia’s fashionable Rittenhouse Square.

The Robertses, who declined to comment for this article, eventually turned that little franchise investment into the nation’s third-largest cable operator through a string of acquisitions, steady growth and tightfisted management that enables Comcast to produce the highest profit margin in the industry.

Last year, Comcast reported an operating cash flow of $2.5 billion on $8.2 billion in revenue. Nearly half its revenue comes from Comcast’s ownership in home-shopping channel QVC.

The company’s stock has increased ninefold over the last decade, dramatically boosting the fortunes of the family, whose “super-voting shares” allow it to control 86% of Comcast despite owning only 2% of the stock.

Mutual Respect Brought a Smooth Succession

To the Cohens, the Robertses are still the same good friends and frequent dinner companions. When Sylvan Cohen was hospitalized earlier this year, Ralph Roberts was the first person to pay a visit after his release.

Brian Roberts called, too, Sylvan recalled, adding that he always noticed signs of ambition and competition in the young man who as a child frequently raided his refrigerator for Popsicles.

“It was at a very early age that Brian expressed interest in heading the company,” he said.

When Brian was a teenager, the two often played tennis.

“Once, we bet five gallons of ice cream on a match,” Sylvan said. “I won, and I’m still waiting for the ice cream. The last time I read he was on the Forbes 400 list, I called and said, ‘Don’t you think it’s time you can afford that ice cream--with interest?’ ”

The transfer of day-to-day operations at Comcast from Ralph to Brian is considered one of the smoothest family successions in corporate America today.

“The father-son relationship is really the most successful part of the Comcast culture,” said Ronald Rubin, one of Philadelphia’s biggest real estate developers, who worked with the family on several deals including Comcast’s purchase of the city’s professional basketball and hockey teams.

To overcome his father’s doubts about whether he was ready to take over the business, Brian worked his way up the ranks, selling subscriptions and climbing utility poles to install lines. By age 30, he was named president and began an aggressive expansion, nearly quadrupling the number of subscribers to 8.5 million. The pair seem to enjoy a relationship of mutual respect and admiration, friends and colleagues said.

Brian has emerged from his father’s shadow over the last five years with a variety of acquisition moves, including an ambitious but unsuccessful bid in 1999 against AT&T; for Media One Group.

Microsoft’s Bill Gates was so taken with Brian that he invested $1 billion in Comcast in 1997, a deal that drew Wall Street’s attention to the opportunities of cable.

Like the family, Comcast has maintained a low profile in Philadelphia during most of its history. That goes over well in this Quaker-founded city, where residents place a high value on plain living and an unassuming style.

Firm’s Days of Being Low Profile Nearing End

Comcast’s corporate headquarters is a tan-colored high-rise, but it’s neither the tallest nor the sleekest. There’s not even a sign or logo to alert passersby of the company’s presence. Some City Hall staffers were shocked to learn last week that Comcast was based across the street.

Just outside the office is a five-story steel sculpture of a giant clothespin by pop artist Claes Oldenburg, who, appropriately enough, specializes in tributes to the simple, ordinary things in life.

The low-profile days, however, appear to be numbered. Even before the AT&T; bid, Comcast had been asserting a more visible role in the city. The Republican convention last year significantly raised the awareness of the company and Brian Roberts, who is arguably the city’s most-prominent business leader.

The company plans to build a new corporate headquarters downtown, the first high-rise construction in a decade.

And perhaps nowhere is the company more visible in this sports-loving town than at the giant indoor arena, which Comcast acquired in 1996 along with the 76ers and Flyers, the city’s professional hockey team. First Union Bank bought the naming rights to the stadium, which is officially known as First Union Center. But last year, Comcast--much to the chagrin of First Union--slapped its own name on the facility, placing it above First Union’s and in larger letters.

Inside the stadium is another giant sign reminding visitors of the company’s growing presence: “Welcome to Comcast Country.”

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Comcast’s Hot Streak

Comcast has outperformed Bloomberg’s index of 29 major cable and broadcast stocks over the last five years, as measured by total return (price increases plus dividends).

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Stock total return since Dec. 31, 1996

Comcast

June 29: +390.5%

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Cable/broadcast index

June 29: +140.1%

Source: Bloomberg News