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VOIP services

Cable Is the Voice of VOIP

Cable MSOs appear to be the main thrust behind rapid growth in U.S. VOIP, and it may be their low-tech approach to selling the service that is giving them that edge. (See VOIP Players Spur Spending.)

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

fgoldstein 12/5/2012 | 2:53:59 AM
re: Cable Is the Voice of VOIP It's the tech press that has it wrong. Yes, there is IP inside the new cable telephony systems. But so what? The service being offered by the cable companies is, uh, local phone service. POTS. You plug in a plain black telephone (or whatever) and it works. Modems, fax, Tivos too. It sounds like a normal phone line too.

Contrast this with parasitic VoIP, such as Vonage. That is dependent upon the instantaneous status of whatever IP networks are in between the end user and some gateway somewhere. It audibly drops packets now and then, because it has no control over the IP. So it's a low-tier service, not often a true substitute for POTS.

It's thus not really appropriate to lump PacketCable with parasitic VoIP. PacketCable doesn't touch the Internet. It uses bandwidth that is prioritized below the IP layer. It is peeled off by the cable company, not thrown onto the Internet itself. The IP layer is partly there to sexy up the product for the investment community, which loves the VoIP buzzword. And the use of IP technology allowed existing standards, like MGCP, to be adapted for the purpose, rather than starting from scratch. But the end user does not see VoIP. The end user sees dial tone. So easy even a technophobic granny can use it.

Nice concept, when you think about it.
alchemy 12/5/2012 | 2:53:55 AM
re: Cable Is the Voice of VOIP From 10,000 feet, the only difference between PacketCable and fgoldstein's "parasitic VoIP" is QoS. Signaling is done over IP. Media is done over IP.

You could use the same argument to say that enterprise IP PBXs aren't VoIP since most deployments don't allow VoIP to traverse the corporate firewall.

IP doesn't necessarily mean Internet. It could be the MSO managed IP network. It could be an enterprise private IP network.
fgoldstein 12/5/2012 | 2:53:50 AM
re: Cable Is the Voice of VOIP > From 10,000 feet, the only difference between PacketCable and fgoldstein's "parasitic VoIP" is QoS. Signaling is done over IP. Media is done over IP.

Looking at it from underneath, at the plumbing, as engineers, the two are more similar than different. A lot of the same components are used; the lower layers handle QoS differently.

Looking at it from above, at the service, as users, the two are more different than similar. They offer a different value proposition to the user.

We techies sometimes need to look at both sides. It's easy to get hung up on the plumbing, but that's not what makes consumers buy the product. That's why I pointed it out in the first place: The techie trade press, as in the original article, focuses on the similarities of plumbing; market share numbers, though, reflect the user perceptions.
ozip 12/5/2012 | 2:53:48 AM
re: Cable Is the Voice of VOIP The more important distinction is that the service delivered by Cable operators is not Voice over the Internet.

OZIP
alchemy 12/5/2012 | 2:53:47 AM
re: Cable Is the Voice of VOIP fgoldstein writes:
Looking at it from above, at the service, as users, the two are more different than similar. They offer a different value proposition to the user.

Hmmm. I have a Vonage phone sitting on my desk. I also have a PacketCable phone sitting on my desk. For the 99% of users who don't use more than 2 or 3 telephony features, both services have identical look and feel. Once you get beyond CallerID, Call Waiting, Voice Mail, and Message Waiting, very few people ever use the features.

Other than poor voice quality issues which are fixed by adding QoS, the service as perceived by the end user is identical. If you plug your cable modem and Vonage ATA onto a UPS, they also have similar levels of availability. PacketCable is better quality but at 2AM when nobody is on the network, the out of box experience for the service is the same.
fgoldstein 12/5/2012 | 2:53:37 AM
re: Cable Is the Voice of VOIP Other than poor voice quality issues which are fixed by adding QoS, the service as perceived by the end user is identical.

I'm sorry, but that little caveat reminds me of, "Other than that, Mrs. Lincoln, how did you like the play?"

The point is that parasitic VoIP has no QoS while PacketCable does.

If you plug your cable modem and Vonage ATA onto a UPS, they also have similar levels of availability. PacketCable is better quality but at 2AM when nobody is on the network, the out of box experience for the service is the same.

QoS is cheap at 2AM. That reminds me of the guy who walks into the butcher shop and tells the butcher that the store across the street sells the same meat for 30 cents/pound less.
"So why don't you buy it there?"
"It's sold out."
"When I'm sold out, my price is lower too."

Features are easy; they're just code on the call agent. Reliable telco-grade connectivity is what's hard, unless you control the wire. End users perceive the difference. Not everybody cares, but many do. Even if Vonage were magically or legislatively assured that it wouldn't be blocked, it would not be the kind of competition that ILECs lose much sleep over. Better for a GM to have the Subaru 360 as its competition than Toyota.
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