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Cable Cadre Talks VOIP

Light Reading
News Analysis
Light Reading
4/13/2004
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U.S. cable companies are considering forming a consortium to jointly offer voice-over-IP services, a potential blow to phone companies and independent VOIP providers. NeuStar Inc. has held preliminary talks with cable representatives about providing a system to bridge VOIP calls between cable networks.

The talks, still in the planning stages, have involved Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. (NYSE: COX), and Time Warner Cable, among others. If the U.S. companies form a consortium, they are likely to invite Canadian cable operators Shaw Communications Inc. and Rogers Cable Inc. to participate, in order to enable VOIP interconnections among cable networks throughout North America. Cable Television Laboratories Inc. (CableLabs), a nonprofit research and development consortium, is helping cable companies research the proposed initiative.

Cable operators have not yet issued any requests for proposal related to the initiative. They have, however, talked informally with NeuStar, which could provide a phone-number lookup system based on ENUM, Electronic Number Mapping, a standard technique of resolving phone numbers into domain names (see Internet Gets Phone Numbers). The system would allow a call originated on, for example, Comcast’s network to find and connect to a phone number on Cox’s network. From start to finish, such a call would be transmitted via Internet Protocol (IP) and would never use the public switched telephone network (PSTN).

“There’s a huge business driver here,” says Richard Shockey, senior manager for strategic tech initiatives at NeuStar. “The MSOs have a strong economic interest in maintaining VOIP calls end-to-end on IP. ENUM is the most efficient signaling technology available to achieve that goal.”

The system would also help cable companies avoid paying reciprocal compensation to local exchange carriers. Under Federal Communications Commission (FCC) rules, service providers must pay reciprocal compensation when calls pass through a CLEC’s network and then terminate at an Internet service provider. AT&T Corp. (NYSE: T), for example, pays $8 billion a year in reciprocal compensation to local exchange carriers for terminating calls -- a cost cable operators would like to avoid (see AT&T Sets Aggressive VOIP Target).

Of course, many calls originating on cable networks are likely to terminate on PSTNs (see Packet Racket: VOIP Buzzkill?). NeuStar is well equipped to handle those interconnections, too, since the company administers the North American Numbering Plan, the telephone numbering system for PSTNs in Canada, the U.S. and its territories, and the Caribbean.

Separate from the proposed cable initiative, a public ENUM system endorsed by the U.S. government is currently under development. Cable companies are weighing whether to wait for the completion of that system or build their own. If they choose the latter, one option would call for the companies to form a limited liability company to function as a contracting agency and oversee development of the system.

A corporation created by cable companies to operate a cable ENUM system would potentially have a monopoly on the industry’s ENUM business. But some observers find that scenario unlikely. “I do not believe that there is going to be a corporation at the consortium level that’s a joint venture,” says Chris Risley, CEO of Nominum Inc., a potential supplier of DNS infrastructure for a cable ENUM system.

“This is more of a consortium to organize the way that they’re going to talk to each other. It’s not the creation of an enterprise that’s actually going to own these calls.”

— Justin Hibbard, Senior Editor, Light Reading

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