| What's Cable
doing with VoIP? BY CARL WEINSCHENK Paraphrased from the electronic edition of America's Network The recent announcement that five big cable operators are partnering with AT&T on the carrier's CallVantage consumer Voice over Internet Protocol (VoIP) offering surely is big news: The group aligns the most recognized names in the telecom industry with a potential pool of more than 40 million customers in 23 states served by Charter, Comcast, Mediacom, Cox and Time Warner Cable. While potentially huge, the deal wasn't much of a surprise. However, it is more proof that the battle between cable and traditional local phone companies is entering a new stage. No longer can the RBOCs dismiss cable operators as mere telephony neophytes with a high capacity and ubiquitous pipe, but without the brains to lever-age both effectively. Indeed, the RBOCs - whose local access line deployments and revenues are decliningface hard sledding during the next decade simply trying to hold on to their core business as the level of competition increases. MULTIPLE FORAYS The cable industry's foray into voice and related multimedia is happening on three levels. Most obviously, the industry is rolling out VoIP and circuit switched services in numbers that now border on the significant. The industry also is creating potentially powerful alliances. In addition to the AT&T marketing pact (which is reportedly with Comcast, Time Warner, Cox, Charter and Mediacom), telephone deals are in place between cable firms and MCI, Sprint and Vonage. Finally, the industry is methodically enhancing the protocols that allow it to quickly roll out sophisticated voice-related services to eager consumers. Of course, nobody thinks cable operators are going to quickly unseat the RBOCs as the leading providers of local exchange services. The industry's goal appears to be much more subtle. It wants to cherry-pick the best customers, those willing to buy expensive service bundles and willing to puchase all or most of their telecommunications from just one service provider. Another example: Cox has aggressively rolled out traditional (though discounted) wired telephone services to its customer base, while Comcast largely stayed out of the game until it acquired more than 1 million phone customers in its acquisition of AT&T Broadband. "The strategies differ from MSO to MSO," says Leichtman. Cox added more than 66,000 telephone customers during the quarter to end with 1.1 million. Virtually all of those customers are receiving circuit-switched services. However, the company rolled out its first VoIP system in Roanoke, VA in December 2003. Mediacom Communications, the eighth largest U.S. cable operator, struck a deal in late August with Sprint to offer VoIP phone service in select markets in the first half of 2005. Smaller cable operators also are getting into the act. USA Companies, a multiple system operator with 62,000 subscribers in California, Montana and Nebraska, partners with Sprint. Michael Smith, Sprint’s director of business development, says the company wants to make clear that it sees opportunities with small operators as well as large. GRABBING ATTENTION Vonage and other nontraditional phone services such as peer-to-peer provider Skype have encouraged and pushed operators. "If you look at the impact Vonage had on the marketing, it’s really something cable operators sat up and took notice of," says an executive who wished not be identified. "It spurred a number of cable operators to sit up an say, `We need to accelerate what we are doing or a number of potential customers will go away.’ " Whatever the motivation, Time Warner Cable has taken another step in becoming a mainline telephone company. Last December, it entered into agreements with Sprint and MCI under which the companies essentially will partner on VoIP. The deal is far deeper that the marketing marriage of convenience with AT&T. Sprint will provide Time Warner with long distance, interconnection facilities linking Time Warner to the PSTN for local and long distance traffic and support for E911 management, directory assistance, operator services, voice mail and other services associated with local telephony. "Sprint and MCI are building out from their POPs to go deeper into our communities during the first and second quarter," Campbell says. "They have helped us tremendously as we have worked on an aggressive rollout across all our markets, which we still believe we will have done by the end of the year." HOME SCHOOLING Observers shouldn’t be misled by the fact that the lion’s share of cable telephone customers still are served via traditional circuit switched infrastructure. The plan, at least for some cable operators, was to proactively market traditional telephony while engineers made VoIP carrier grade. This approach was similar to the industry’s introduction of high-speed data in the late 1990s. Then, the industry rushed to market with prestandard generation of modems in an effort to control the agenda and make the phone industry react to them. The telcos still are struggling to recover from the huge marketshare lead this strategy helped create. Once the IP platform matures, these subscribers can be moved or stay on cir-cuit switched networks. "At the moment, the circuit switched market is an isolated segment," says Charter’s Barber. "Charter will continue to operate that technology until there is a compelling cost savings or revenue opportunity that justifies the conversation costs." Moving into circuit switched voice also has allowed operators to learn marketing, billing and related back-office procedures that are relevant whether the underlying technology is circuit switched or IP. While not all cable operators did so, the industry does a good job of disseminating data through CableLabs or more informally. A side benefit of the delay is that cable telephone’s reliance on home powering is not as big an issue. BRING ON BUNDLES There is little disagreement across the telecommunications landscape that bundles are the key to the future. In addition to squeezing more revenue out of every home, the greater the number of services a customer takes, the more difficult it is for him to disengage from the service provider. The cable industry can claim that it is well positioned. |
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