Comcast's Virile VOIP Story
Comcast Corp. (Nasdaq: CMCSA, CMCSK) announced its voice-over-IP (VOIP) plans yesterday, and – if you didn't read the fine print – the effort sounded like a world beater.
But the hard numbers tell another story. Comcast announced that, by year's end, the company plans to be able to offer VOIP service to half of the 40 million homes its cables pass. By the end of next year, it plans to be able to offer the service to 95 percent of those 40 million homes (or 38 million homes).
Several papers, including The Wall Street Journal, ran broad descriptions of the announcement, each noting that Comcast plans to offer VOIP service to all the 40 million households served by its cable systems by the end of 2006. Comcast shares climbed 12 cents to $29.69 on the news (see Comcast Directors Re-Elected).
However, the difference between "offer" and "provide" is mighty big.
Comcast does provide cable TV service to 40 million potential customers – that is, its cables pass 40 million homes. Of those 40 million homes, it actually sells basic cable TV service to 21 million customers and digital cable TV service to 7.9 million customers.
Its high-speed Internet service is still in training pants: Of the 36.2 million homes that qualify, only 5.5 million Comcast customers are buying the service.
The company won't say how many of those 38 million homes it expects to sign up for VOIP service by 2006. But, assuming Comcast doesn't offer VOIP on other carriers' access lines, customers will have to subscribe to Comcast's high-speed Internet service to get its VOIP service. So Comcast's real VOIP penetration could very likely be a single-digit percentage of its 5.5 million Internet users.
"A high percentage of people with dial-up are interested in high-speed data but haven't reached that point where they're ready to commit to a higher price," says Kate Griffin, an analyst at Yankee Group. "But if they can get VOIP bundled in with the high-speed data, that will spur the decision. It won't necessarily be, first you get the high-speed data and then you're a candidate for VOIP. We'll see people doing both at once" (see Broadband Growth Is Brisk).
Regardless, the new growth is good news to the VOIP gear vendors providing equipment to Comcast. The cable operator has not yet announced which suppliers it will use when it rolls out VOIP service, but vendors known to have participated in Comcast's trials include Cedar Point Communications Inc., Motorola Inc. (NYSE: MOT), and Nuera Communications Inc. (see Cedar Point Hits a Triple, Nortel Ups the Ante on Cable VOIP, and Comcast Picks Motorola VOIP).
"Comcast has been trialing VOIP for some time and has had probably everybody through their labs," says Kevin Mitchell, an analyst at Infonetics Research Inc. "I would guess they'll select a vendor that has PacketCable compliance, which narrows the field."
Comcast is conducting VOIP trials in Coatesville, Pa., and Indianapolis and will start a third trial next month in Springfield, Mass. The company has not yet announced a date or a market for its first commercial offering of the service.
— Justin Hibbard, Senior Editor, Light Reading