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Cable/Video

Comcast's VOIP Feature Creature

Is Comcast Corp. (Nasdaq: CMCSA, CMCSK) starting a features war or a price war? That may be the big question following its announcement on Monday that it’s leaping into the VOIP market.

Comcast is running straight at incumbent regional phone companies, pricing its "digital voice" service at $39.95 a month when bundled with its television and broadband offerings (see Comcast Vaunts Its VOIP). The standalone price for the VOIP offering is in the $50 per month range.

Comcast also insists its product will compete as a fully featured bundled service that complements its cable and broadband data services, rather than competing on price alone. Skeptical experts still fear the VOIP boom means one thing and one thing only for the industry: price wars.

"I don’t understand the logic of throwing over the phone company and their five nines of reliability,” says Robert Rosenberg, president of Insight Research Corp. He says he doesn’t see a compelling case to switch to a VOIP offering based solely on features. “But that being said, we still believe that Comcast will take 20 to 30 percent of the market over time.”

Comcast's moves hike up the VOIP ante, and point to the shortcomings of many consumer VOIP services: They lack even basic features. Two advantages Comcast has going for it are enhanced emergency 911 service and battery backup for the cable modem, making Comcast’s VOIP service perform more like traditional phone service from an RBOC. Pure-play VOIP providers like Vonage Holdings Corp. offer optional 911 dialing which connects to a “Public Safety Answering Point,” which then must report your emergency. Most pure-play VOIP providers’ services don’t work during a power outage.

Brahm Eiley, president of The Convergence Consulting Group, says adding enhanced 911 services is a given for cable companies. ”The last thing they want is to hear a horror story about their product lacking service,” he says. “This is part of the negative hype that cable has gotten. They’re not going to risk their entire business by offering a second-rate service.”

Rosenberg says Comcast’s real advantage comes from the marketing power the company has. “They have a much stronger advertising vehicle which incumbents can’t match,” he says. “Anytime they have an open local advertising slot in their cable lineup, they can throw an ad in touting their voice service and three-way bundle offering.”

Comcast says adding Internet-based features and management -- such as a "Web portal" for controlling voicemail and call waiting -- will add value. But competitors could easily add such things, given the nature of IP VOIP as based on standard technology.

Eiley says that, initially, cable VOIP will get its share of customers, especially penny pinchers, who see an advantage from getting features like voicemail and call waiting included as part of the basic package. “A lot of customers will choose to switch,” he says. “And in some cases the total cost will end up being at least $10 cheaper than their circuit-switched product.”

But the question also cuts the other way. Many customers have had negative experiences dealing with cable companies and may be reluctant to put all their eggs in one basket.

One thing analysts appear to agree upon is that Comcast’s announcement puts the RBOCs on the defensive. “RBOCs can stave this off, but it means they will have to start offering VOIP services or lowering the price of their circuit-switched offering,” Eiley says.

— Chris Somerville, Senior Editor, Next-Generation Services

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lastmile 12/5/2012 | 3:30:00 AM
re: Comcast's VOIP Feature Creature Comcast is introducing Internet phone calling on a far bigger scale than other cable companies.
Comcast has the size and brand recognition to take on the phone companies.
Comcast plans to offer the service to as many as half of the 40 million homes within reach of its cable system by the end of this year and the remainder by the middle of next year.
The company spent $39 billion renovating its network in the 1990s

All of the above is copied from today's Washington Post.

What is really important is that while Comcast spent a large amount upgrading their network, the RBOC's spent a large amount lobbying for regulatory relief.

jonathanrichardson 12/5/2012 | 3:29:59 AM
re: Comcast's VOIP Feature Creature The RBOC's have been forced (at great expense) by the FCC to accomodate number porting. Since VoIP services are not playing by the regulatory rules, will they be able to port-in for their customers? I would think not, and missing that feature will slow them down. Also, many penny-pinchers have already tried switching to CLEC's, and have had such a bad experience with it that they couldn't wait to come back. It will be hard to motivate these people to take a chance again.
fgoldstein 12/5/2012 | 3:29:59 AM
re: Comcast's VOIP Feature Creature Comcast is introducing Internet phone calling on a far bigger scale than other cable companies.

Well, there you have it, a press mistake right up front. As I understand it, there is no Internet component in Comcast's new local service! It has a layer of VoIP encapsulation, because that's part of PacketCable, but it goes right in to Comcast's switches (I think Cedar Point?) without touching the Internet.

IP does not equal Internet. IP is just a protocol. The press does not understand this; often they call this "web phones" or some other such silliness.

This matters because PacketCable has hardware QoS, so it behaves more like TDM, lossless with bounded (rather than zero as in TDM) jitter. Nothing like the Internet.
alchemy 12/5/2012 | 3:29:58 AM
re: Comcast's VOIP Feature Creature fgoldstein writes:
Well, there you have it, a press mistake right up front. As I understand it, there is no Internet component in Comcast's new local service! It has a layer of VoIP encapsulation, because that's part of PacketCable, but it goes right in to Comcast's switches (I think Cedar Point?) without touching the Internet.

That's almost correct. The signaling and media streams still flow through all the Cisco routers on Comcast's managed IP network but the whole network is QoS-enabled so this traffic takes priority over cable modem traffic. These are publicly routable IP addresses so it's technically on the internet even though the PacketCable traffic never leaves the Comcast part of it and the core gear is firewalled away from the internet.

The scope of PacketCable QoS is the access network between the CMTS and the cable modem. CableLabs wrote an inter-domain QoS spec but it was allowed to die a natural death since the MSOs didn't want CableLabs to spec out how the MSOs were supposed to run their IP networks.

If you put session controllers on the border, you could actually run PacketCable on a private/10. network overlay. That would tighten security since the VoIP infrastructure could be invisible to the rest of the internet.
paolo.franzoi 12/5/2012 | 3:29:57 AM
re: Comcast's VOIP Feature Creature OldPOTS,

You are correct in many ways but overestimate the problem.

First of, analog specials will be around for a long time. As an example, I would love to get rid of product like Dry Pair Alarm Circuit Cards. Problem is Jewelry Stores get an insurance break for using such alarm setups. So, specials will be around a long time. There are PAY phones that are available now (electronic ones) that can utilize standard Loop Start POTS circuits and eliminate the need for Coin check voltages and the like. On the other hand, there are still Coin First PAY phones in the world. To deal with this, Comcast could offer to replace PAY circuits with POTS and give away an Electronic PAY phone. Alternately, it could price its service in such a way that it does not need to compete with such services. If you are down to just selling PAY cards and the like you will have a pretty small business.

In terms of QoS, yes it can be pretty simple. Even with all the voice lines off hook, the bandwidth used is much smaller than the channel available. So, even a simple strict priority system will work. This form of CoS (Class of Service) classification and scheduling can be done at either the Ethernet or IP layer and is basically free today. Remember this scheme is only used in the last mile. VoIP backbones are generally placed on separate backbone facilities (whether this is physically separate or logically separate using MPLS). A single Gigabit Ethernet can easily handle 10,000 simultaneous calls which would be the backhaul out of the largest COs today.

seven
OldPOTS 12/5/2012 | 3:29:57 AM
re: Comcast's VOIP Feature Creature
Alchemy Writes:
The signaling and media streams still flow through all the Cisco routers on Comcast's managed IP network but the whole network is QoS-enabled so this traffic takes priority over cable modem traffic.
>>>>>>>>>
Very profound - IP QoS enabled ... this traffic takes priority.

This takes on the argument against ATMs greater QoS grandularity vs. eey pee's/MPLS's priorities. Only two QoS classes required?
Do those routers use a fixed length cell switching fabric? Are you really sure? I think they are a form of ATM routers! So a form of ATM is used with two QoS classes, with no leaky bucket required?

More serious discussion, and back to the article.
The article implies that Comcast will make a larger impact than the other VoIP suppliers. I agree to a limited extent. To listen to some, VoIP will replace POTS, while others say that it will take some time (10, 20, 30 years), with POTS still making good profits.

Getting back to basics;
If Comcast does significantly gather market share, then can Comcast's managed IP network be expand/scaled to accomodate all the new users? If so, how many phones are served in an ILEC's area/market? Number of simultaneous calls? Asked Worldcon?

OldPOTS

Aside;
Having pushed many leading edge replacement technologies and reading the posts about pay phones, I am reminded of a sign posted on my wall by colleagues to remind me that 'somewhere in the network someone will be attaching a crank phone'.

I think this means that POTS will be around for some time, because eye pee can't serve that crank phone. Can it? Anyone know of a VoIP gateway that can handle that crank phone or even a pay phone?

alchemy 12/5/2012 | 3:29:57 AM
re: Comcast's VOIP Feature Creature OldPOTS writes:
The article implies that Comcast will make a larger impact than the other VoIP suppliers. I agree to a limited extent. To listen to some, VoIP will replace POTS, while others say that it will take some time (10, 20, 30 years), with POTS still making good profits.

Well, Comcast passes 40%+ of the homes in the United States. By sheer size, Comcast has to make more impact than any other ILEC competitor. They're telling the investment community that they want to achieve 30% market share over 5 years. They're only entering the business because it's profitable.

If Comcast does significantly gather market share, then can Comcast's managed IP network be expand/scaled to accomodate all the new users?

At 30% market share and holding cable modem traffic constant, the voice traffic will require Comcast to roughly double their network capacity over five years if they use uncompressed G.711 if you use a residential telephony traffic model. By internet standards, that's a very small growth. Unlike the internet, that bandwidth requirement is going to stay fixed forever, not double every 2 or 3 years. The bigger impact of offering primary line telephony is that the network needs to become more hardened with telco-grade failover characteristics.
alchemy 12/5/2012 | 3:29:56 AM
re: Comcast's VOIP Feature Creature rjmcmahon wrote:
I'm confused. I read that Comcast CEO Brian Roberts said they plan to achieve a 20% take rate from their customer base over five years.

You are correct. I got the number wrong. Chalk one up to message board optimism.
rjmcmahon 12/5/2012 | 3:29:56 AM
re: Comcast's VOIP Feature Creature I really don't know much about Comcast's phone offerings and any help is appreciated. A quick look at CMCSK's last annual report says about the number of subscribers:

Comcast Cable Division Subscribers
(all amounts in millions) 3Q'04 3Q'03 Change

Basic Cable 21.48 21.47 + 0.1%
Digital Cable 8.40 7.28 + 15.4%
High Speed-Internet 6.55 4.86 +34.8%
Phone 1.21 1.31 - 7.5%


It looks like their phone subscibers went down from 3Q' 03 to 3Q' 04 by 100,000 or by -7.5%? Why did that occur?

Also, what type of phone service are they offering to 1.21M subscribers? Is that using the traditional PSTN a la a CLEC model?
rjmcmahon 12/5/2012 | 3:29:56 AM
re: Comcast's VOIP Feature Creature They're telling the investment community that they want to achieve 30% market share over 5 years.

I'm confused. I read that Comcast CEO Brian Roberts said they plan to achieve a 20% take rate from their customer base over five years. Is Comcast telling the investor community that they'll have 30% VoIP market share in 5 years as well? If so, what are they projecting for a total market size in 5 years and who do they think is going to get the other 70%?
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