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Time Warner Cable to 'Go It Alone' With VoIP

Jeff Baumgartner
3/11/2010
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Time Warner Cable Inc. (NYSE: TWC) confirmed that it will phase out its VoIP relationship with Sprint Corp. (NYSE: S) over the course of about four years under a project the MSO's calling "Go It Alone."

A winding down of the deal, which supports most of TWC's 4.1 million digital phone customers, is expected to hit Sprint's wireline base hard in the coming years.

Sanford C. Bernstein & Co. Inc. analyst Craig Moffett was first to report that Sprint was on the brink of losing that contract, estimating in a note issued Wednesday that the loss of that business could cost Sprint as much as 25 percent of its wireline EBITDA -- or $250 million annually -- over the next few years.

Based on his calculations, TWC pays Sprint roughly $10 or $11 per month per VoIP subscriber under the transport and interconnection deal. TWC and Sprint inked the initial long-term contract in late 2003.

"In the current version of our model, we assume that Time Warner Cable's payments to Sprint start diminishing in Q3 2010, until they reach zero by the beginning of 2014," wrote Moffett, who cut his target on Sprint shares from $3 to $2.50.

Time Warner Cable spokesman Justin Venech said the decision was economically driven, and would give the MSO an "opportunity to reduce our costs."

TWC, which spun off from Time Warner Inc. (NYSE: TWX) last year, isn't saying when the MSO expects to take all its VoIP functions in-house, but Venech confirmed that the process, which will be done in phases, will take about four years. (See Time Warner Finalizes Cable Spinoff Details .)

He did note that the change in the VoIP relationship will have no effect on TWC's investment and relationship with Sprint-owned Clearwire LLC (Nasdaq: CLWR). TWC has already launched mobile WiMax services that piggyback on the Clearwire network in portions of North Carolina and Hawaii and in Dallas and San Antonio. (See Time Warner Cable Hits WiMax Accelerator and Cable Plays Clearwire Card.)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Sabre
12/5/2012 | 4:41:23 PM
re: Time Warner Cable to 'Go It Alone' With VoIP
At least you're optimistic. We'll have to keep an eye on that as they start to phase out Sprint. Looks like they want to lower the costs of doing VoIP... but not sure yet how that will translate to the costs of the service itself. JB
jayja
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jayja,
User Rank: Light Sabre
12/5/2012 | 4:41:23 PM
re: Time Warner Cable to 'Go It Alone' With VoIP


Gee, that's good news....

jayja
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jayja,
User Rank: Light Sabre
12/5/2012 | 4:41:22 PM
re: Time Warner Cable to 'Go It Alone' With VoIP


If they're paying $11/sub-month for connectivity/peering, then their costs will go down definitely.&nbsp; I'm skeptical my cost, i.e., their price, will go down.

Startup Junkie
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Startup Junkie,
User Rank: Light Beer
12/5/2012 | 4:41:21 PM
re: Time Warner Cable to 'Go It Alone' With VoIP


No one ever seems to think about voice quality any more....


Will having their own network and not Sprint help in giving a better voice experience? I'm totally fed up with Vonage - tried their VoIP for several years, only used it (still do) bcos of the low cost, all-u-can-eat approach - now even international calling is free...


Can TWC make their voice lines sound like AT&amp;T's copper lines? Then customers will not care if it costs a bit more!!!

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