Broadband Cable Association of Pennsylvania

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January 16, 2014

Six years after Comcast Corp. moved into the city's tallest building, the cable-TV and Internet giant expects to break ground this summer on an even taller, more dazzling, $1.2 billion tower. The 1,121-foot-tall high-rise will be built on Arch Street between 18th and 19th Streets in Center City, adjacent to the current tower, company officials said. One of the world's leading architects, Britain's Norman Foster, has designed the trophy building with a host of innovative features. Comcast announced the project Wednesday with Gov. Corbett, Mayor Nutter - via a video link from Seattle, where he was attending a conference - and Council President Darrell L. Clarke. The city and state have committed $40 million in grants to the project, officials said. At 59 stories, the new tower will have about 1.5 million square feet of rentable space.

The building will at least initially be called the Comcast Innovation and Technology Center. Its structural core will run the vertical length of one side of the see-through, all-glass tower, instead of through the middle like a more traditional skyscraper. There will be 13 "sky gardens," or three-story atriums, for software designers, engineers, and product developers to collaborate, and the building will be topped by a blade extending about 150 feet higher than the Comcast Center. Instead of offices, the building will be mostly broken into "lofts." Comcast and Liberty Property Trust, its partner, have reached an agreement to move the Four Seasons Hotel at Logan Square to the new tower's top floors. One entrance will be designated for the 200-room hotel and a second entrance will be for Comcast employees. Separate banks of elevators will serve both entrances.

Brian Roberts, Comcast chief executive, said at the news conference that he expected the new Four Seasons to be one of the finest hotels in the world. The existing Four Seasons on the Benjamin Franklin Parkway then will not operate as a Four Seasons but could be rebranded. NBC10 and the local Spanish-language Telemundo TV station (Channel 62), both owned by Comcast through NBCUniversal, will move their studios from Bala Cynwyd to the new building. In addition, the Suburban Station concourse will be extended a block to the west beneath 18th Street.

The massive project is expected to jolt Philadelphia's lethargic economy with about 6,300 temporary construction-related jobs and an additional 14,400 jobs in Pennsylvania. To help pay for the concourse extension and other public-space improvements, the state has committed $30 million in economic-development grants, and the city has said it will contribute $10 million, Comcast officials said. Liberty is expected to seek five ordinances from Council to proceed with construction. Those include recalibrating the commercial zoning on the block, approval for the building height, and the right to tunnel under 18th to extend Suburban Station.

Comcast has agreed to an addition of 1,500 jobs in the city connected to the tower and to lease 75 percent of the building, bringing its Philadelphia payroll to about 6,300 employees. Company officials believe this is a conservative estimate of the projected job growth at the company over the next several years, and pointed to the experience with the Comcast Center. Comcast initially agreed in the early 2000s to lease only 40 percent of the current Comcast Center. Now it occupies 90 percent and leases offices around Center City for an additional 1,000 employees. The Comcast Center, a Robert A.M. Stern-designed obelisk that dominates the skyline, was mostly Liberty's project.

The new building's adventurous architecture will be a public statement of the company's evolution from a low-tech cable-TV provider to a technology developer with video streaming, Internet products, and mobile apps. "This will not be a twin," Roberts said, referring to the Comcast Center. "We wanted to create an environment that's better than anywhere else. We are a different company than we were a few years ago. We are competing for talent all over the world, and we have to offer something special." Roberts said his vision is for a "vertical urban campus" that could compete with the traditional Google or Facebook suburban-style headquarters. Foster, who competed for the second Comcast tower along with four other prominent architects, is developing a new Apple Inc. headquarters, Roberts said. Apple manufactures the iPad and iPhone, through which Comcast now streams its Xfinity content.

Some had feared that Philadelphia could be marginalized by New York City, Los Angeles, or Silicon Valley after Comcast's acquisition of NBCUniversal. Comcast bought 51 percent of NBCUniversal in early 2011 and the remaining 49 percent in 2013. But the new tower emphasizes Philadelphia as Comcast's administrative corporate headquarters and home to its top executives, and consolidates its position as the company's technology hub. Other geographic areas with Comcast technology operations include Denver, Silicon Valley, and Northern Virginia. Comcast also hires software writers in India and China.

In Philadelphia, Comcast has scattered software engineers and technical employees in floors at the Comcast Center and offices around Center City. With the new building, employees can all work and interact together. Comcast is projected to have more Internet subscribers by next year than cable-TV subscribers. It's also developing WiFi upgrades and "TV Everywhere" streaming. As part of the building project, which has been discussed since early 2013, Comcast commissioned an independent economic impact study. "The arrival of the proposed expansion development would enable the retention of Comcast's growth within the city and the commonwealth, the relocation of economic activity into the city and commonwealth, and the provision of sorely needed 'trophy'-level office space within Center City," said the report by Econsult Solutions Inc.

Comcast will own 80 percent of the $1.2 billion project and Liberty will own 20 percent. In 1984, Liberty founder and chairman Willard G. Rouse III proposed breaking the Philadelphia "gentleman's agreement" height limit with One Liberty Place. The limit had been the top of William Penn's hat on the City Hall tower. William P. Hankowsky, chairman and chief executive of Liberty Property Trust, said he could think of no other U.S. development firm that had redefined a major city's skyline as Liberty has done in Philadelphia with Liberty Place, the Comcast Center, and now the proposed tower. Hankowsky is a partner in the firm that owns The Inquirer. Philadelphia Inquirer; more in the Inquirer

Charter Communications Inc. reached out to Comcast Corp this week about teaming up to buy Time Warner Cable Inc, after the larger rival rejected its $37.3 billion takeover bid, according to people familiar with the matter. Charter approached Comcast on Wednesday to discuss carving up the second-largest U.S. cable company's systems and subscribers, the people said, asking not to be named because they were not authorized to speak with the media.

Charter, the No. 4 U.S. cable provider, and Comcast, the top U.S. cable provider, are in preliminary discussions about how to structure a potential alliance, the people said. One possibility is that Charter buys all of Time Warner Cable and sells off some of its markets and subscribers to Comcast, one of the people said. It was not immediately clear which geographic markets are under discussion, but analysts have said that Comcast would be interested in Time Warner Cable's largest markets such as New York, Los Angeles and Dallas. The two companies held similar discussions late last year but those talks did not progress at that time. Comcast, Time Warner Cable and Charter declined to comment.

A successful tie-up would take out Comcast from the bidding for Time Warner Cable. Comcast, which has also evaluated a takeover bid for all of Time Warner Cable, was seen as the only likely suitor besides Charter. Analysts have said any attempt to merge the two largest cable operators, however, would face tough scrutiny from U.S. regulators. Securing backing from Comcast could also allow Charter, with a market capitalization of around $14 billion, to pay more for Time Warner Cable, which has a much larger market value of $38 billion.

Charter, backed by billionaire John Malone's Liberty Media Corp, formally announced its $132.50 per share bid for Time Warner Cable on Monday, which the larger rival promptly rejected as too low. Time Warner Cable instead made a counter proposal worth $160 per share, including $100 in cash and the rest in stock. A number of large Time Warner Cable shareholders would support a deal with Charter if the company sweetens its bid to $145 to $150 per share, Reuters reported earlier on Wednesday. Charter has said the combined company may have to do "swaps and divestitures" of cable systems to serve regions more efficiently, according to its investor presentation on Wednesday. Comcast is not interested in doing swaps, but is seeking to buy systems, one of the people said. Reuters

Shares of video streaming service Netflix Inc. fell more than 1 percent on Wednesday, a day after a U.S. court decision that could let broadband providers charge companies for faster access to content delivered over the Internet. On Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit rejected federal "net neutrality" rules that required Internet providers to treat all web traffic equally.

The decision appeared to pressure Netflix stock, Standard & Poor's equity analyst Tuna Amobi said. The stock was down 1.8 percent at $332.02 in mid-afternoon trading on Nasdaq. Earlier, the stock fell as much as 5.9 percent to a session low at $319.07. "We see potential specter that (Netflix) and other bandwidth-intensive sites may be vulnerable to the whims of broadband service providers, with potentially inherent cost disadvantages, or other quality degradation for its user experience vs. competitors," Amobi said in a research note. "Still, we doubt the court ruling spells finality for a highly controversial issue that the FCC could further shape within its domain mandate," Amobi said. A Netflix spokesman had no comment.

The FCC could appeal the ruling to the full appeals court or to the U.S. Supreme Court, something FCC Chairman Tom Wheeler said he is considering as among "all available options" to ensure Internet networks remained free and open. Video streaming is by far the heaviest bandwidth hog on the Internet. Netflix and Google Inc's YouTube alone are estimated to account for more than half of all downstream Internet traffic at peak hours.

All major broadband providers on Tuesday issued statements pledging no policy changes because of the ruling and no plans for restrictions on how people use the web on their networks. AT&T Chief Executive Officer Randall Stephenson repeated that commitment on Wednesday. "We will continue to abide by those rules, and I don't see it changing much in the short run," Stephenson said at a Christian Science Monitor breakfast with Business Roundtable in Washington. Evercore Partners analyst Alan Gould said Tuesday's court decision was a "small negative" for Netflix because the company may incur new costs to ensure its movies and TV shows are treated equally on the Internet. Any new costs would be "manageable," he said. "With 30 million (U.S.) subscribers, it would be really difficult for the distributors to disadvantage Netflix without a real customer revolt," Gould said.

Netflix was one of the year's best stock performers in 2013, surging 297.6 percent as the company added new customers in the United States and overseas. BTIG analyst Rich Greenfield said he believed fears that broadband providers would start charging for Internet fast lanes were "far, far overblown." He said it wouldn't make sense for the companies to anger customers by slowing popular content from sites such as Netflix and YouTube. "While there is certainly danger of bad behavior in the (Internet service provider) world now that net neutrality rules have been struck down, we believe economic logic will prevail, limiting abuses," Greenfield said in a blog post titled "Don't Believe Chicken Little: The Free and Open Internet is Not in Danger." Reuters; more in USA Today

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