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Comcast's Virile VOIP Story

Light Reading
News Analysis
Light Reading
5/27/2004
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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

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lastmile
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lastmile,
User Rank: Light Beer
12/5/2012 | 1:41:58 AM
re: Comcast's Virile VOIP Story
$39.99 for high speed internet + $34.99 for all you can eat POTS or 39.99 for high speed internet + $20 for all you can eat VOIP.
Ask the consumer. Vonage is a good example of what a consumer really wants.
VOIP has a brighr future.
Scott Raynovich
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Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 1:41:46 AM
re: Comcast's Virile VOIP Story
>Vonage is a good example of what a consumer >really wants.

Actually, I beg to differ. As a consumer I recently priced out Vonage as a second line and I really didn't understand the advantage. It costs about $35. Unless you are calling China every day, it's not really much cheaper than using a cheap traditional voice plan. And the quality is not as good, plus you have all the other pratfalls of VOIP (911, failure with power outage, not as reliable).

In the end, I don't really know how Vonage is competitive except in a second line scenario where the operator is a business making lots of International calls.

May other question is: How is Vonage making money? $35 per monoth is not a lot, considering what is involved to acquire the customer and set up the box (you have the equipment, customer support, installation instructions, e.t.c.). My guess is they are playing the "Amazon.com" game of as quickly gaining market sure as possible by ramping marketing expenditures to gain customers they can later leverage as a bargaining chip for other deals. My guess is they will try to sell out before the question of profitability ever comes up.
stephenpcooke
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stephenpcooke,
User Rank: Light Beer
12/5/2012 | 1:41:45 AM
re: Comcast's Virile VOIP Story
This morning I went to check my email, those of us without jobs are always hoping for good news from somewhere, and I was unable to connect to my ISP. I checked my firewall logs to see how long the network had been down because the baddies never cease trying to log into my home computer, and found that my cable-based ISP had not been available for almost 2 hours. I called the support hotline, first I couldn't get through probably due to volume of calls, only to hear their message:

"We are experiencing network outages across Calgary and Strathmore. Emergency response has been dispatched..."

Calgary and area has over a million people. An entire city without service for almost 3 hours. Carrier-class this ain't.
lastmile
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lastmile,
User Rank: Light Beer
12/5/2012 | 1:41:43 AM
re: Comcast's Virile VOIP Story
Scott,
I respect your reply but the time has arrived to respect the consumer.
No one cares about a 2nd line unless the first line is being used for a dial-up connection.
Many cell phone customers have ditched their 1st line because they find it useless.
If you do a new research to find out who really cares about VoIP telephone service you will find that it is the consumer with a high speed connection who also, has a cell phone.
My friends who have switched to Vonage are rich people (unlike me) who adore the service. No one seems to care about the security that POTS offers because a 'back up' cell phone is always available. It is also nice to see a monthly bill that that is always the same.
Your other question as to how is Vonage making money, I am unable to answer.
Scott Raynovich
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Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 1:41:42 AM
re: Comcast's Virile VOIP Story
"Your other question as to how is Vonage making money, I am unable to answer."

Well then you have to question all of the other assumptions you make. You say that the consumers "love" Vonage and the price. But if they are not making money or acquired (this is more likely) eventually they will have to raise the price or jack up the cost of higher-value services. Pretty soon you have something that costs and looks like standard RBOC phone service, yet isn't.

On top of that, they will be pressured by folks like Skype who offer something even cheaper... i.e. its Free!

Really cheap services are nice until they disappear, get more expensive, or are replaced by something better. And then some things really are too good to be true. Remember Napster?
optoslob
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optoslob,
User Rank: Light Beer
12/5/2012 | 1:41:41 AM
re: Comcast's Virile VOIP Story
Lastmile,
I'm also a fan of VoIP but I have to agree with Scott because I dont understand how Vonage will make money. I do a lot of international travel and use VoIP software, like Skype, when calling family and friends. Most of the time Skype works just fine. If I have trouble with VoIP than I always have a cell phone to fall back on. If others have similar calling habits to me than at least 80% of my long distance and international calls are to the same 10 or 20 people. Once these 20 people change to VoIP, which BTW most are in the process of doing, than my need to bridge from VoIP to POT's disappears.
The usage model becomes VoIP to VoIP for most calls and Cell phone for all the POT's / legacy requirements.

As for second lines at home WHY, I'm even considering getting rid of my primary line but I'll do that just to spite SBC.

optoslob
technoboy
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technoboy,
User Rank: Light Beer
12/5/2012 | 1:41:27 AM
re: Comcast's Virile VOIP Story
Re Post 3
I guess you shouldnt by a VOIP service then.

Conversely I have not had a cable modem problem in over two years. However, our county E-911 system was down 20 minutes this past week. Where is Technonerd when you need him?
nigel2k2003
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nigel2k2003,
User Rank: Light Beer
12/5/2012 | 1:41:06 AM
re: Comcast's Virile VOIP Story
Your ignorance depicts why you are not employed !

VoIP Voice Ports called EMTA's are being sold to Comcast that offer 2 lines of Data and 2 lines of voice (pots lines).
In addition the MTA offers 2 lithium batteries, each battery rated for 10 hours each. That's 20 hours off of hook time to you and me.

Even your village of seal hunters will have power restored by then. GO TAMPA BAY !!
stephenpcooke
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stephenpcooke,
User Rank: Light Beer
12/5/2012 | 1:41:06 AM
re: Comcast's Virile VOIP Story
Your ignorance depicts why you are not employed !

This could very well be true.

Even your village of seal hunters will have power restored by then. GO TAMPA BAY !!

Power was restored in just enough time to harpoon the Lightening!!! GO FLAMES GO!!!
arch_1
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arch_1,
User Rank: Light Beer
12/5/2012 | 1:41:02 AM
re: Comcast's Virile VOIP Story
nigel2k2003 notes that:
"VoIP Voice Ports called EMTA's are being sold to Comcast that offer 2 lines of Data and 2 lines of voice (pots lines).
In addition the MTA offers 2 lithium batteries, each battery rated for 10 hours each. That's 20 hours off of hook time to you and me."

My neighborhood lost power last winter for 48 hours. I have UPS and a generator, so my house had power for my computer and all my network gear.

After about 2 hours, my cable connection failed. This occurred because certain equipment in the neighborhood and between the neighborhood and the head-end needs power, and its UPSs drained. My POTS and cell phones continued to work.

This in is the Virginia suburbs of Washington, DC. the provider is Cox.

So yes, the cable system is somewhat less reliable than the phone system.

So what? it's still cheaper to use VoIP except for those rare tiems when it is not available.

On the other hand, I really do not understand what value is added by a VoIP provider. I'll just make direct SIP calls to my friends, for a monthly cost of zero. For friends who don't have VoIP, I'll use cell.
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