x
Optical/IP

Cable VOIP Could Boost IXCs

Some specialized service providers, particularly those focused on voice wholesale and long-haul traffic, are finding new friends in the cable industry.

Cable operators accounted for about 2.5 million voice-service subscribers in 2003 and are likely to reach the 4 million mark by the end of this year, according to a new report released this week by Heavy Reading, Light Reading's paid research arm (see Heavy Reading: Cable Cos Race for VOIP).

The report, "Cable Triple Play: The VOIP Card," by analyst Peter Lambert, points out that one big ally of the cable providers are the interexchange carriers (IXCs), competitive local-exchange carriers (CLECs), and other voice-application service providers (ASPs) that are lining up to partner with multiple system operators (MSOs).

The upshot is that if VOIP services take off in the cable business, it could provide a new source of revenue and partnerships for the ailing voice-carrier world.

The cable guys are craving these partnerships, too, primarily because it gives them a new service to deliver without requiring a significant overhaul of their infrastructure. Lambert reports that ten MSOs have inked deals with telecom network operators to handle their voice services, and several more have outsourcing deals in place with affiliated CLECs.

"Just as incumbent telcos are looking at DBS [digital broadcast satellite] for video content, infrastructure, and expertise, a number of both large and small MSOs are looking to telephony partners to undertake all or parts of tasks, including not only long distance, but also interconnection, call management, signaling, customer support, and/or network management," Lambert writes. "Such outsourcing and revenue sharing is enabling smaller MSOs to enter telephony immediately, and then incrementally build their own telephony infrastructure."

Table 1: Voice-Over-Cable Strategy Snapshots
Strategy Operators
Circuit-Switched, Extending Footprint via VOIP Comcast, Charter, Cox, RCN, Eastlink, Midcontinent, GCI
Outsourced VOIP Fast Movers Time Warner Cable, Adelphia, Cebridge Connections, Bresnan, Eastlink, Northland, Liberty Cablevision, Advanced Cable, CableAmerica, Mid-Hudson Cablevision
Heavy Reading


Service providers that have struck deals with MSOs include AT&T Corp. (NYSE: T), Level 3 Communications Inc. (Nasdaq: LVLT), MCI Inc. (Nasdaq: MCIP), Net2Phone Inc. (Nasdaq: NTOP), Sprint Corp. (NYSE: FON), and Vonage Holdings Corp.

Even consumer Internet providers are making a run at the incumbent carrier's voice market share, albeit slowly. Still, those companies, including AOL, are following a familiar pattern of outsourcing the heavy lifting on the voice side (see AOL Ambles Into VOIP).

Meanwhile, RBOCs such as Verizon Communications Inc. (NYSE: VZ) are hoping to fight VOIP with VOIP. Verizon recently advertised it was offering its VoiceWing VOIP subscribers a chance to get a 1.5-Mbit/s DSL connection for $29.95 a month until December 31 (see Verizon Launches VOIP Service).

What gets left behind while all these carriers and MSOs are nailing down their VOIP strategies? Circuit switches, for one thing. Lambert writes that "no MSO plans to purchase any more circuit-switching technology."

Instead, Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. (NYSE: COX), and other MSOs with established circuit-switched networks are adding to their networks using VOIP technology.

And that has become just as apparent among wireline carriers, too. Earlier this year, Lucent Technologies Inc. (NYSE: LU) reported its U.S. revenues had dropped 13 percent primarily because of declines in spending by several large carriers on traditional circuit-switching equipment.

To Lucent's credit, it has also pursued a VOIP strategy via acquisition. In August 2004, Lucent acquired Telica, which gave it an IP-based softswitch (see Telica: Lucent's Good Buy). Telica, Lambert reports, is actively targeting cable VOIP outsourcers, including CommPartners LLC and Level 3.

Lambert's report analyzes the voice-services strategies of the 37 largest cable MSOs in North America, with emphasis on each MSO's technology and vendor choices, market success rates, and current plans for voice-service expansion. The report is available here.

— Phil Harvey, News Editor, Light Reading

Page 1 / 5   >   >>
zher 12/5/2012 | 1:14:09 AM
re: Cable VOIP Could Boost IXCs Cable service is so instable, cable companies need to improve the stability first, including the x years old HFC circuit, the IP access and backbone, the softswitch, the interfaces with Tier1 carriers, etc.

Also, the phone will be connected to the eMTA on the cable modem, which is powered by AC, are you able to make phone calls when power cutting?

Very good service, but just need some improvements.
alchemy 12/5/2012 | 1:14:08 AM
re: Cable VOIP Could Boost IXCs zher writes:
Cable service is so instable, cable companies need to improve the stability first, including the x years old HFC circuit, the IP access and backbone, the softswitch, the interfaces with Tier1 carriers, etc.

The HFC plant is reliable enough. The bigger problem is operations. Today, the MSOs think nothing of cycling power on a router or CMTS. Carrier class telephony requires carrier class routers and CMTSs operated by people who have the mindset that they need to keep them up all the time. Unfortunately, the Cisco routers and CMTSs that comprise 90% of the MSO broadband environment aren't carrier class and the Cisco operations mindset is straight out of Mad Magazine "What me worry?" Cisco has unleashed an army of suits with PowerPoint presentations on the MSOs trying to claim that they're so reliable that Cisco gear is not the problem. The MSOs are starting to get a glimmer that maybe Juniper routers and Arris & Motorola CMTSs are the proper solution to the problem since they were engineered to carrier class requirements.

At least one top tier MSO is deploying separate carrier class CMTSs for their initial VoIP deployments until they sort out the issues in their CMTS and IP backbone.

Also, the phone will be connected to the eMTA on the cable modem, which is powered by AC, are you able to make phone calls when power cutting?

The eMTAs have battery backup that is good for 8 hours and the ability to monitor the state of the battery remotely. It isn't a perfect solution and the batteries have to be replaced from time to time but that's what they're going with.

To date, none of the MSOs have decided to go with line powering. Their circuit switched solution with Arris, Tellabs, and ADC HDTs uses line powering. There's already quite a bit of power on the HFC plant to drive amplifiers but it's fairly expensive to upgrade the power in the HFC plant to support a massive MTA penetration.
sol 12/5/2012 | 1:14:08 AM
re: Cable VOIP Could Boost IXCs Any information about the startups trying to get into the Cable VoIP business? Companies like CedarPoint, Nuera, etc,

thanks,
alchemy 12/5/2012 | 1:14:07 AM
re: Cable VOIP Could Boost IXCs netgenius writes:
1. Cable companies deploy VOIP
2. IXC's with wireless focus helping Cable companies deploy VOIP
3. LEC's pushing FTTP to prepare their 3play
4. LEC's deploy VOIP
5. IXC with strong cash flow acquire LECs that can't compete with Cable companies.
6. IXCs deploy Wireless/Wireline VOIP with focus on wirless...but they use the same architecture to support both wireline and wireless.
7. IXCs acquire Cable companies that are poorly run.
8. Several IXCs and several Cable companies end up on top in 5 years.
9. Winners-
IXCs- Sprint,ATT? and maybe L3 although MCI might still be there if they get some decent managment
Cable- TWC, Mediacomm and maybe Comcast - if comcast isnt one of the poorly run cable companies that gets acquired by an IXC)


I think you have it exactly backwards. The IXCs only exist because of a regulatory oddity. They have a commodity product that can only complete on price and they don't enjoy a natural monopoly. The MSOs can trivially gang up and completely bypass the IXCs by hauling their own traffic on their own networks. The MSOs have significant fiber backbones already and it wouldn't take much to bridge them together. In the natural order of things, you'd expect the IXCs to vanish over time and be replaced by the ILEC and MSO duopolies. The competition will be for local access dollars on quadruple play (video, internet, telephony, cellular). That's something north of $100/month/subscriber. The revenue dwarfs that collected by the IXCs. The IXCs don't have a way to compete other than to go down the known-bad CLEC path.

I'd also dispute your "poorly run" list. I'm a former customer of AT&T Broadband and now a customer of Comcast. In a couple of years, the improvement in my service has been dramatic. Like many long distance customers, I've jumped between all the IXCs over the years to take advantage of their frequent flyer signup bonus programs. I've been universally underwhelmed with their customer care.
netgenius 12/5/2012 | 1:14:07 AM
re: Cable VOIP Could Boost IXCs Below is a previous post of mine that some may have seen already...but it fit so well here that I had to do some cutting and pasting.
----------------------------------------------
I have to say that the only real driver I see in VOIP is competition. If a cable company can offer new triple play services using VOIP....the other providers of traditional voice services are taking a long walk down a short pier if they don't come up with ways to offer the video and data...and since they are doing that with IP...VOIP is a cost effective way to add the voice. But notice the order of the above...it is a prediction re: VOIP deployment:

1. Cable companies deploy VOIP
2. IXC's with wireless focus helping Cable companies deploy VOIP
3. LEC's pushing FTTP to prepare their 3play
4. LEC's deploy VOIP
5. IXC with strong cash flow acquire LECs that can't compete with Cable companies.
6. IXCs deploy Wireless/Wireline VOIP with focus on wirless...but they use the same architecture to support both wireline and wireless.
7. IXCs acquire Cable companies that are poorly run.
8. Several IXCs and several Cable companies end up on top in 5 years.
9. Winners-
IXCs- Sprint,ATT? and maybe L3 although MCI might still be there if they get some decent managment
Cable- TWC, Mediacomm and maybe Comcast - if comcast isnt one of the poorly run cable companies that gets acquired by an IXC)

LR- save this post and refer to it in 5 years.. :)
----------
routingfool 12/5/2012 | 1:14:06 AM
re: Cable VOIP Could Boost IXCs alchemy,
Arris & Motorola have some redundant capabilities on the HFC side, but they are lousy when it comes to routing, I would just state that none of these boxes from any of the vendors you mentioned are "Carrier Class"
alchemy 12/5/2012 | 1:14:05 AM
re: Cable VOIP Could Boost IXCs routingfool writes:
Arris & Motorola have some redundant capabilities on the HFC side, but they are lousy when it comes to routing, I would just state that none of these boxes from any of the vendors you mentioned are "Carrier Class"

Hmmm. Both boxes meet NEBS specs, have redundant 48v power, redundant control, N+1 redundant CMTS blades that have near-glitchless failover, live software update, hot insertion... What are they missing to qualify as carrier class? A red Lucent coffee cup stain? A bunch of useless Telcordia OSMINE garbage?

I'd also be interested to hear what makes them lousy at routing? These are edge devices and the list looks fairly complete. They certainly perform well enough.

Let's hear some specific issues.
netgenius 12/5/2012 | 1:14:02 AM
re: Cable VOIP Could Boost IXCs I'm suprised you say that I have it backwards when your statments go on to reiterate my point.

I agree that plain IXCs don't have a chance, but in case you missed it- I said IXCs with a wireless focus...In your model you discuss a quadruple play...where will the cellular piece of that puzzle come from? I would submit that the IXCs that are partnering with MSOs to provide the VOIP transport and in some cases the entire VOIP architetcure will also provide this cellular service. In this quadurple play environment with revenue of $100/month the IXC/Cellular company can pull down 20-30/month for high margin voice services (supported with networks that are largely bought and paid for)...oh and they now have 15M possible new subscribers for their cellular services.

My poorly run statment is from a business perspective not a customer service perspective...the cable industry will get more competitive over the next couple of years and a misstep in business managment could find a strong player flailing if they are not nimble enough to keep up.

My 2 cents
fgoldstein 12/5/2012 | 1:14:02 AM
re: Cable VOIP Could Boost IXCs Cable telephony is going to be big. It will also be encapsulated inside IP, based on PacketCable. But that doesn't mean it's all about VoIP.

I say this because when people talk about VoIP, they're carrying a lot of baggage. There's the CB Simulator phase, starting with the old Vocaltec stuff, now Skype. There's the tie line and Centrex stuff that Cisco sells to corporations who don't value phone calls all that highly. And there's the parasitic model of VoIP (deliver dialtone without paying for the loop) that Vonage has pioneered. Most make use of the Internet itself, and thus can't offer PSTN quality.

PacketCable is different. Because DOCSIS 1.1+ includes bandwidth reservation in its physical layer arbitrage, it offers good QoS. And it's typical to attach the telephone network to the CMTS without sharing an IP pipe with data. So it will provide PSTN quality. And because it's a standard, it's mass produced, and cheap.

But it doesn't touch the Internet. Indeed, the IP headers don't do much. A shorter header and connection orientation would work even better (VoFR or VoATM, for instance). The real reason for being VoIP is that old "Wall Street Image". The MSOs get more traction in capital markets by saying VoIP. And the press (like LR!) eats it up. It's more buzzword-compatible. But the beauty is that it's almost entirely gratuitous. The product is telephony.
netgenius 12/5/2012 | 1:14:01 AM
re: Cable VOIP Could Boost IXCs I'm suprised you say that I have it backwards when your statements go on to reiterate my point.

I agree that plain IXCs don't have a chance, but in case you missed it- I said IXCs with a wireless focus...In your model you discuss a quadruple play...where will the cellular piece of that puzzle come from? I would submit that the IXCs that are partnering with MSOs to provide the VOIP transport and in some cases the entire VOIP architetcure will also provide this cellular service. In this quadurple play environment with revenue of $100/month the IXC/Cellular company can pull down 20-30/month for high margin voice services (supported with networks that are largely bought and paid for)...oh and they now have 15M possible new subscribers for their cellular services.

My poorly run statment is from a business perspective not a customer service perspective...the cable industry will get more competitive over the next couple of years and a misstep in business managment could find a strong player flailing if they are not nimble enough to keep up.

My 2 cents
Page 1 / 5   >   >>
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE