Cable Is the Voice of VOIP
The number of American households using VOIP service grew from 2.7 million to 3.6 million in the third quarter, according to a new study from research firm TeleGeography Inc. TeleGeography notes that VOIP users have grown 400 percent over the mere 714,000 VOIP lines that were in service at the end of the third quarter last year. (See Infonetics Sees VOIP Explosion.)
Report author Stephan Beckert tells Light Reading that, by contrast, 93.2 million traditional (fixed) residential lines are provided by U.S. ILECs today.
TeleGeography finds that cable MSOs remain the largest providers of VOIP service in the U.S. They served one half of all U.S. VOIP subscribers at the end of the third quarter, compared with 35 percent at the end of the third quarter last year. (See Cable Gets a Vault from VOIP.) In second place are the bring-your-own-access VOIP providers like Vonage Holdings Corp., which now service about 38 percent of VOIP subscribers. Bringing up the rear are the telcos, which provide only 12 percent of all VOIP lines.
The largest single VOIP provider in the U.S. remains Vonage with around a million U.S. subscribers, TeleGeography says, but the VOIP pioneer has been building its subscriber base since 2001. (See Vonage Selects IPO Bankers.)
By contrast, Time Warner Cable launched its VOIP service only last year and already has signed up more than 800,000 subscribers, with a growth rate of 65 percent in the second quarter and 35 percent in the third quarter. Cablevision Systems Corp. (NYSE: CVC) now has just over 600,000 VOIP subscribers. (See Sprint Nextel, MSOs Unite.) Despite the growth rates, new market research from Yankee Group Research Inc. suggests that VOIP is still a long way from mainstream acceptance due to lingering consumer confusion about the service.
Nearly 35 percent of the “VOIP-aware” U.S. households Yankee Group surveyed do not believe that VOIP calls can be made with a regular telephone. Only about 38 percent of those households believe that VOIP offers a better feature set than traditional telephone service.
The Yankee analysts point out that customer confusion is caused in part by the differing positioning strategies used by VOIP service providers.
But the cable companies, the Yankee analysts point out, are the exception. Cable companies market their VOIP service as if it were traditional phone service. They don’t even call it VOIP; they call it “digital phone service” or "digital voice service." By demystifying the service, the cable companies may make their customers more likely than telco or DSL customers to pick up VOIP.
Another reason may be that the cable MSOs have been more aggressive than the others in selling VOIP as part of a bundle of services. (See Citron: Triple Play Is Tripe.)
TeleGeography reports that revenues from VOIP services appear to be rising at a slightly higher rate than subscriber numbers. VOIP revenues totaled $304 million in the third quarter, in contrast with revenues of $220 million in the second quarter and only $53 million during the third quarter last year.
TeleGeography forecasts that 4.2 million VOIP subscriber lines will be active in the U.S. at the end of 2005.
— Mark Sullivan, Reporter, Light Reading