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Cable/Video

Cable Gets a Vault from VOIP

This week there's more good and bad news for pure-play VOIP providers and CLECs. The good news is that residential VOIP services are still seen as a booming business. One industry forecaster -- JupiterResearch -- says as much as 10 percent of the U.S. population could be using VOIP phone services by the year 2009. The bad news? The cable companies look to be the ones positioned to benefit most of all, for all the usual reasons that big companies win in the communications world: the ability to bundle and bill for multiple services and the big budgets to afford aggressive marketing (see Report: VOIP Growth Won't Benefit All and Report: MSOs Scoring With VOIP). The JupiterResearch report, “Broadband Telephony: Leveraging Voice Over IP to Facilitate Competitive Voice Services,” states that about 1 million U.S. households will be using VOIP services by the end of next year, more than double the current total. That group will swell to 12.1 million by 2009.

”Next year will be important for continuing VOIP momentum as far as building customer awareness,” says Joe Laszlo, senior analyst at JupiterResearch. And he says cable companies are in the driver’s seat for dominating VOIP services:

“It’s the cable companies’ game for the next few years. That’s not to say that specialized VOIP companies like Vonage Holdings Corp. and Packet8 won’t compete, just that they don’t have the marketing muscle the cable companies do and must use a more focused approach. The cable companies are well-positioned for offering VOIP as a bundle with their existing video services.”

For wireline carriers, VOIP is a lower revenue service than a regular landline phone connection, but the services will be helpful when selling service bundles that include high-speed data connections. “Their pressing issue is not to have VOIP, but to add video services," Laszlo says. "They look at it that the customer doesn’t care if telephony services are IP-based or not but that they must have a bundle that competes with the cable guys.”

As noted at last week's UBS Investment Research media conference, VOIP services are gaining a fast following and often this comes at the expense of incumbent phone company access lines:
  • Cablevision Systems Corp. (NYSE: CVC) announced it had surpassed 250,000 VOIP customers after reporting just under 200,000 at the end of the third quarter. It is currently adding 1,000 customers a day, despite not offering local number portability. The company expects to add number portability next year, which should cause an increase in customers.
  • Vonage stated that it had 276,000 customers at the end of the third quarter, having added customers at a rate of about 27,000 per month.
  • Time Warner Cable estimates it will have more than 200,000 telephony customers by year-end and is adding roughly 10,000 customers per week. The UBS report notes that Time Warner Cable is now fully deployed in all its territories and has said that 75 percent of its new customers were porting numbers, indicating a switch of primary lines. UBS predicts that Time Warner Cable, which has 10.9 million basic cable subscribers, and a roughly 72 percent overlap with the Bells, will get more aggressive with marketing its VOIP bundle next year.


Of course, many of the wireline incumbent carriers are hedging the revenue they're losing to VOIP players with gains from increasing numbers of wireless subscribers. The JupiterResearch report found that younger consumers were least likely to turn to traditional carriers for service and the least likely to use landline telephony at all. Twelve percent of 18- to 24-year-olds say their wireless phone is their only phone. "For attracting young adults, VOIP’s biggest competitor may prove to be mobile operators, not the Bell companies," Laszlo says.

— Chris Somerville, Senior Editor, Next-Generation Services

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parttimetelecom 12/5/2012 | 3:28:12 AM
re: Cable Gets a Vault from VOIP fgoldstein,

which VoIP docket are you referring to.
I'd love to check out your comments and maybe follow up with you for more in depth discussion

ping me via [email protected]om if you can
DPD 12/5/2012 | 12:59:34 AM
re: Cable Gets a Vault from VOIP It is the pipe that is allowing the Cable MSO's to offer a true triple play. This gives them a tremendous head start over the RBOC's who are scrambling to offer a "bundled services" triple play by partnering with satellite co's for the video.

So, the cable guys win the short term. They also look good a little beyond that with IPTV on the way. This would give them a true all IP triple play, which is the holy grail of residential broadband. Capex and opex would be reduced significantly, which would lead to higher margins, which would provide an arsenal in a "residential communications" arms race, which is now in its infancy.

However, do not discount the RBOCS. They know this and that's why we've seen plans from players like Verizon stating they plan to eventually replace their circuit voice path with an IP voice path. They are also moving ahead with VideoOverDSL and IPTV, which would enable them to become true triple play providers.

The bottom line: In ten years there will be no distinction between Cable MSO's or the RBOC's -- they will all be MSO's. They will all be IP triple play providers. For if there is no distinction, then there will only be extinction.
alchemy 12/5/2012 | 12:59:33 AM
re: Cable Gets a Vault from VOIP allidia writes:
hookup? Is it a cable customer or an RBOC? Anyone?

It's unlikely to be an MSO. ADC dumped their CMTS business a few months ago and seems to be 100% focused on their core Telco business.
allidia 12/5/2012 | 12:59:33 AM
re: Cable Gets a Vault from VOIP hookup? Is it a cable customer or an RBOC? Anyone?
alchemy 12/5/2012 | 12:59:32 AM
re: Cable Gets a Vault from VOIP It's definitely not 100% about the pipe. Don't forget how much content is owned by the MSOs. Time-Warner is the obvious giant but all the MSOs have significant interest in programming. The RBOCs may end up paying premium prices to the MSOs for their content.

I still find it hard to believe that there's enough money in the known universe to fund union workers from the RBOCs rewiring the last 100 meters to every house in the United States. The various DSL technologies have too much crosstalk to ever have more than a 10 to 20% take rate.
keelhaul42 12/5/2012 | 12:59:31 AM
re: Cable Gets a Vault from VOIP Alchemy:
I still find it hard to believe that there's enough money in the known universe to fund union workers from the RBOCs rewiring the last 100 meters to every house in the United States. The various DSL technologies have too much crosstalk to ever have more than a 10 to 20% take rate.
>>>>>>>>>>>>>>>>>>
I used to think that. Then Comcast cut trenches in the streets in my area and laid fiber, i.e. fiber to the curb. They are getting about $100 per month from me - and plenty others - for CATV, internet, and voip telephone service.
To be sure, that's not rewiring to the house but DSL in the lab manages a synmmetric 8 Mbits/sec over many kilometers of level 3 twisted pair. How bad can the last 50 feet be?

The reality: the RBOCS have not wanted to spend the bucks to run a first class data network to residences. You can manufacture all sorts of excuses - and they have - about why it's not economically viable etc. Remember, they had the bucks to waste on long distance voice onver the last couple of years. Let's see the ROI on that.
Now someone else has just done it -- high speed service to the curb, that is, and they are finally forced to get off their collective butt.

The RBOCS are probably not going to survive, and frankly, they don't deserve too.

-kh
alchemy 12/5/2012 | 12:59:30 AM
re: Cable Gets a Vault from VOIP keelhaul42 writes:
I used to think that. Then Comcast cut trenches in the streets in my area and laid fiber, i.e. fiber to the curb. They are getting about $100 per month from me - and plenty others - for CATV, internet, and voip telephone service.
To be sure, that's not rewiring to the house but DSL in the lab manages a synmmetric 8 Mbits/sec over many kilometers of level 3 twisted pair. How bad can the last 50 feet be?


All kinds of things work in the lab. I'm dubious that most subscribers can be serviced at a rate anywhere near 8 Mbits/sec without rewiring. Most of that house wiring and last 100 meters is ancient and loaded with spurs.

I'd question your statement that you and plenty of others get CATV, internet, and VoIP phone service from Comcast at the moment. Last time I counted, Comcast only had a thousand or so VoIP customers. Their roll-out of VoIP is a 2005 activity. They do have over a million legacy telephony customers on Arris and Tellabs HDTs that sit in front of AT&T-owned 5ESS gear. I have a Tellabs box screwed to the side of my house but that's constant bit rate, not VoIP.

The truism of the network is that 80% of the cost is the last 100 meters. It's relatively inexpensive to run fiber around in trenches to reach a fiber node that serves several hundred houses. As an analogy, you can run tanks all the way from Saudi Arabia to Bagdhad in a week at little expense. When you have to go fight house-to-house in Tikrit, it's very costly. If you thought they were militant in Iraq, wait 'til you see those CWA union people if the RBOCs try to contract that work out.
bored_lurker 12/5/2012 | 12:59:29 AM
re: Cable Gets a Vault from VOIP I'm not sure why you all think that the RBOCs are going to counter with DSL. All the way up to 8MB - wow! Not. The joint FTTP proposal meeting happened less than a year ago and I expect to have fiber up and running on my house in the next few weeks from VZ.

That pipe gives me 15MB down and 2MB up plus up to 4 POTS lines today. As I hear it VZ will offer me TV service next year. And believe me, VOIP will run much better over VZs 15 and 2 service than it will over my current 3MB and 256K cable service.

Yes, if the RBOCs don't change to something like this they are done for - but I think they get that. Fiber brings the triple play well within their reach.
keelhaul42 12/5/2012 | 12:59:29 AM
re: Cable Gets a Vault from VOIP I'd bet that I can get that 8Mbits over the last 50 feet in a majority of cases. I can do it over nearly 10 Kilometers in the lab.
All you're doing is reiterating the RBOC position: it can't be done -- until someone else does it.

VOIP: I've got it, so do my neighbors. So do people in other states (from comcast). It's not for everyone (burglar alarms: trouble, no 911 service, etc) but it does pretty well for a large slice of local line service. Check it out.

-kh
keelhaul42 12/5/2012 | 12:59:28 AM
re: Cable Gets a Vault from VOIP I remember reading about that not so long ago (FTTP). I also remember thinking (sic) "talk is cheap".
I wasn't sure that the RBOC's were going to counter with anything given the mindset they've had.
Ok, I'll lighten up. If they're really going to do it, well, more power to them.
Hopefully providing a choice will keep the cable providers honest.



-kh
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