The Wall Street Journal suggests that cable stocks, which have sold off sharply over the last three quarters, might now be a good investment. That is probably wrong. The paper says that "while cable stocks lately have bounced from bottoms hit earlier this year, they still are trading at 10-year lows along several key metrics."

But, cable has never had so much competition and that is likely to grow. Firms such as Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) are up against new fiber-to-the-home TV and broadband offerings from telecom companies, especially Verizon (NYSE:VZ). The phone firm's FiOS product is picking up customers and it has not been rolled out in most of the 18 million homes where Verizon has customers.

The phone companies have a special advantage. They can bundle cellular, broadband, TV, and landline service to individual customers and give them "one-stop shopping."

Cable is also up against new and improved products from satellite TV companies. Firms like DirecTV (NYSE: DTV) are adding a number of HD channels. Cable does not always have the bandwidth to put as many of these channels on its systems.

Cable stocks are down because competition is way up. Much of that has come recently and it is likely to get worse.

Douglas A. McIntyre is an editor at 247wallst.com.

Cable stocks have fallen sharply and most trade near 52-week lows, but that is not keeping short sellers from continuing to believe that they could go lower. The short interest in Comcast (NASDAQ: CMCSA) and Charter (NASDAQ: CHTR) went up on December 14 compared to November 30 according to data from Nasdaq.

The slide in cable shares began around mid-year, when comments from Comcast indicated that the new TV-over-fiber products from telecom companies like Verizon (NYSE: VZ) were starting to take cable customers. Up until recently, cable was able to market voice, TV,and broadband as one package into the home. The telephone companies could not match that. But fiber installations have changed the picture, and competition is fierce.

Cable companies are starting to see slowing growth in their subscriber bases. That could push them to drop rates, and it is forcing them into capital expenditures to improve the speed of their own networks. Both moves put pressure on earnings.

For several years, Comcast (NASDAQ: CMCSA) was considered one of the most successful companies in America. It used its cable franchise to build a huge broadband, VOD, and VoIP cash machine. The so-called "triple play" of voice, TV, and broadband could not be matched by telecom competitors, so Comcast took hundreds of thousands of phone customers away from them each quarter.

From mid-2003 to early 2007, Comcast shares rose close to 100%. During the last three months, they are down 27%.

It finally occurred to Wall Street that competition from satellite TV and the new fiber-to-the-home products from telecom companies like Verizon (NYSE:VZ) were eating into Comcast's customer base. The company recently announced that its growth and cash flow would be less than expected. Customer growth was slowing and the firm had to put more money into infrastructure so that it could improve offerings for products like HDTV.

An influential cable analyst, Benjamin Swinburne of Morgan Stanley, says the slide in Comcast shares is over. According to Barron's the analyst "notes that the stock's multiples have been compressed to historic lows." He also thinks EPS and free cash flow could grow as much as 20% a year, if Comcast can keep adding voice and HDTV customers.

The logic for Comcast making a comeback may be a little thin. Verizon's FiOS is taking customers from Comcast and it is only in a small fraction of the 18 million homes that will eventually have access to the service.That means that the head-to-head competition for the cable company will actually increase. And satellite TV companies continue to ramp up their programming and HDTV offering.

The worst is probably not over for Comcast.

Douglas A. McIntyre is an editor at 247wallst.com.