Time Warner Cable Inc. (NYSE: TWC), the cable industry's leading VOIP player, may be reaching a limit on how many IP phone subscribers it can sign up.

In its Q3 earnings release Wednesday, the nation's second largest cable operator reported that its "Digital Phone" product turned in its second straight quarter of decidedly slower growth following two years of breakneck expansion. After ringing up more than 200,000 subscribers for five straight quarters, the MSO signed up a disappointing 187,000 new IP customers in the summer quarter, normally one of the strongest three-month periods of the year, down from a quarterly high of 270,000 earlier this year.

Thanks to its latest gain, Time Warner Cable remains the largest cable VOIP provider in the land with more than 1.6 million subscribers, second only to Vonage Holdings Corp. (NYSE: VG) in the overall IP phone rankings. (See Vonage Customers Flee in Q3.) But it now has other cable operators gaining ground on it despite later starts in the business, especially the surging Comcast Corp. (Nasdaq: CMCSA, CMCSK), which picked up an impressive 483,000 VOIP customers in the same quarter.

Speaking on the company’s earnings call with analysts, Time Warner officials sought to downplay analysts' concerns about the company's clearly decelerating VOIP growth. Noting that about 11 percent of their service-ready homes passed are taking the product, they dismissed the idea that they've hit some kind of wall on IP phone expansion.

"As I think you all know, we are very happy with our success in phones so far over the last year or more, and we are ahead of the industry with 11 percent of eligible homes on VOIP," said Time Warner President and COO Jeff Bewkes. "But, of course, the next 10 points of penetration above the 11 percent that we are at now are harder than the first 10 or 11 points."

Bewkes allowed that Time Warner has run into "some more aggressive marketing activity from the telcos," particularly from BellSouth Corp. (NYSE: BLS) in the Carolinas. But he said such competitive moves were expected and insisted that the MSO is "now lifting our performance" in those areas.

"Have we hit a ceiling?" he said. "No, it is very clear to us that we haven't. We have got several systems already over 20 percent [VOIP penetration] -- Albany, Syracuse, Binghamton, all heading toward 25 percent. With offerings like the $99 [per month] triple-play bundle, which we introduced in every division in September, we don't see why we can't get there and keep moving up across our footprint."

Time Warner Cable officials, who completed the joint $17.4 billion acquisition of Adelphia Communications with Comcast and conducted related system swaps with Comcast over the summer, also argued the former Adelphia and Comcast systems represent a golden opportunity for their "Digital Phone" service.

That's because the old Adelphia systems, many of which had not been upgraded, never launched VOIP service. As for the former Comcast systems, some already offered phone service but didn't match Time Warner's high initial penetration rates.

"As we look out, we see plenty of 'Digital Phone' growth ahead of us, particularly as we roll out the service in the acquired systems," said Time Warner Chairman & CEO Dick Parsons. "To put our optimism in perspective, we already have four divisions where penetration is now at least 20 percent."

Analysts don't seem totally convinced. For instance, Doug Mitchelson, an analyst with Deutsche Bank AG , wondered whether Time Warner would consider cutting its triple-play package price to $89 a month or $79 a month for the first year of service.

But MSO executives dismissed the idea. They noted that the company's new triple-play bundle has already achieved nine percent penetration of all its basic cable subscribers, meaning that about 1.3 million customers now take all three services.

"Remember, we just started the $99 bundle," Bewkes said. "We have some other offerings we are putting in, in phone."

Time Warner Cable, which filed plans for a $100 million initial public offering last month, did turn in a strong performance on the broadband side in Q3. The MSO signed up 251,000 residential cable modem subscribers in the quarter, including 214,000 in its existing cable systems and 37,000 in the systems that it just picked up.

Thanks to both these strong gains and its system purchases and swaps, Time Warner boosted its overall data customer count to 6.4 million. Thus, it maintains its ranking as the fourth largest high-speed data provider in North America, just behind Verizon.

Time Warner boasted that it has now netted more than 200,000 high-speed data customers for five straight quarters. But the company's penetration of service-ready homes actually fell to 25 percent, due to the lower data penetration rates of the systems that it recently took over from Adelphia and Comcast.

Looking at video, Time Warner netted 136,000 digital cable subscribers in Q3, down from 149,000 a year ago and well off its pace for the first two quarters of the year. Its gain of 143,000 digital subscribers in its historic systems was partly offset by the loss of 7,000 subscribers in the former Adelphia and Comcast systems.

As a result, Time Warner closed out the first nine months of the year with a bit over seven million digital subscribers, earning it a digital penetration rate of 52 percent of basic cable homes. The MSO also added another 300,000 digital video recorder (DVR) subscribers in the summer, lifting its total to 2.2 million, or 31 percent of all digital video customers.

Lastly, Time Warner picked up 3,000 basic cable subscribers in Q3, registering its fifth straight quarterly gain, as a gain of 33,000 subscribers in its historic systems barely offset a loss of 30,000 customers in its newer systems. The company closed out the fist nine months of the year with nearly 13.5 million basic subscribers, courtesy of the Adelphia acquisitions and Comcast system swaps.

— Alan Breznick, Site Editor, Cable Digital News