Optical/IP Networks

RCN's 'Forward-Thinking DNA'

Cable overbuilder RCN Corp. says it is ready to conduct a major test of VOIP, two years after first deploying IP phone service in Chicago. In a press release issued yesterday, an RCN executive says the move is in "keeping with our innovative and forward-thinking DNA."

Or, maybe it's in keeping with the company's chronic delusions of grandeur. Thankfully, our crack fact-checking team at Cable Digital News was able to confirm that the RCN release was approved for distribution by the Ministry of Silly Announcements.

RCN is crowing about its plans to conduct a four-month test of Cedar Point Communications Inc. 's SAFARI C3 switch. What it neglects to mention is that this platform has long powered commercial VOIP deployments by such MSOs as Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. .

RCN first started offering VOIP service in Chicago two years ago, although that rollout used a hybrid technology, delivering IP phone service through its existing Class 5 phone switches. (See RCN Brings VOIP to Chicago.) Two years later, it seems that RCN may finally be ready to take the plunge and use a softswitch for delivering VOIP. Call it just another example of innovative DNA in action.

RCN is clearly keen about the VOIP opportunity. As another RCN executive boldly predicts in the release: "This ability could create an additional revenue stream for RCN."

This conclusion may not be such a stretch, since the top three MSOs that RCN is trying to compete against -- Comcast, Time Warner Cable Inc. (NYSE: TWC), and Cablevision Systems Corp. (NYSE: CVC) -- now count a total of more than 4 million VOIP customers. This installed base will generate at least $2 billion in new annual revenue for the three cable operators.

The once-bankrupt RCN finished the third quarter with 424,000 basic customers, adding an eye-popping 6,000 customers in Q3. As a point of comparison, the three aforementioned MSOs added 783,000 VOIP subscribers alone in Q3.

RCN did report that two thirds of its customers bought bundled services in Q3, a good thing for a company billing itself as a triple-play provider. The company's total revenue-generating units (RGUs) clocked in at 268,000 voice, 372,000 video, and 269,000 data subscribers.

— Michael Harris, Chief Analyst, Cable Digital News

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