A report released this week from investment bank Sanford C. Bernstein & Co. highlights the trouble that cable's accelerating IP phone rollout is causing for incumbent U.S. telcos and standalone VoIP players like Vonage.

According to Bernstein, total VoIP subscriptions now top 6 million in the U.S. At the end of the first quarter 2006, cable controlled 62 percent of the VoIP market, up from only 52 percent during the same period a year ago.

Incumbent telcos are being hit the hardest. The report notes that after line losses "stabilized at 6.5-6.7M per year (4.0-4.2% of total lines) in 2003 and 2004, they accelerated to more than 8.8M in 2005 (5.9% of total lines).'

The hemorrhaging may slow this year, though. Bernstein estimates that the top five U.S. telcos will lose a total of '6.8 million access lines, including retail and wholesale," in 2006. Of these, the firm reckons that "roughly 3M will be lost to cable telephony, with most of the rest lost to wireless and broadband substitution (cancellation of second lines that were previously used for dial-up Internet access).'

Bernstein cautions that telco video rollouts are not moving quickly enough to save the day. While VoIP providers have already added roughly 6 million U.S. phone subscribers in just two years, Bernstein projects that BOCs will take five years to add just as many. Indeed, by the end of 2010, Bernstein expects total cable telephony subscribers (including both VoIP and circuit-switched) to reach 22 million, nearly quadrupling the telcos' video customer base.

Even though they grew rapidly in the first quarter, Bernstein is also less than bullish on the long-term prospects of standalone VoIP players like Vonage, due to the ability of MSOs to cross-subsidize services through their multiproduct bundles. The firm notes that Vonage's record-breaking addition of 328,000 net subscribers did not come without cost. "Vonage's already hefty cost per gross addition (CPGA) continues to increase, measurably up 5.5% y/y and its subscriber churn rate is on the rise,' the report says.

Overall, Vonage spent a whopping $209 CPGA in the first quarter -- that's double the expense of such other consumer service providers as XM Radio. Of course, this is the least of Vonage's problems. The cost of Vonage's IPO customer stock sale fiasco could make for a far uglier second quarter.