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Vonage Welcomes Comcast To Market

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Comcast Expands Web Phone

January 11, 2005

By Tom Johnson

Comcast said yesterday it will offer Internet phone service to all 40 million homes in its coverage area within 18 months, an aggressive strategy that ramps up competition with traditional phone carriers.

The nation's largest cable operator said that by the end of this year, the same lines that now provide television programming and high-speed Internet connections would also be able to carry telephone service to 20 million homes, or about half its service area. The remaining customers would be able to order Internet phone service through Comcast by 2006.

Comcast joins a growing list of cable operators, start-up ventures and traditional phone companies such as AT&T that have jumped into the rapidly growing market for Internet-based telephone service.

"There hasn't yet been a true competitor in the local phone market," Comcast Chief Executive Brian Robert told investors at a conference in Phoenix, where he detailed the rollout. "We don't have to be a cheap competitor. We can do it by adding value."

Comcast's Internet phone package -- including many features not available over traditional phone lines -- will cost customers $39.95 per month for unlimited domestic calls. To sign up, customers will need a high-speed Internet connection at an additional charge. To get the $39.95 price, customers will have to be cable TV subscribers; without television and high-speed services through Comcast, the monthly charge will be higher.

Unlike some competitors, Comcast will offer telephone customers special features such as being able to switch phone carriers while keeping their current numbers. Comcast will also offer backup batteries to power the system in the event of outages and emergency 911 dialing. The lack of 911 dialing is a key shortcoming of many Internet phone systems.

Internet-based phone service is cheaper and more flexible than traditional circuit-based switching systems. This has led major players such as Verizon Communications and AT&T, as well as start-ups such as Edison-based Vonage and Newark-based Net2Phone to join the increasingly intense competition for subscribers.

"It's going to be quite a battle as more and more companies move into each others' space," said Philip Remek, an analyst who covers Comcast for Guzman & Co.

Philadelphia-based Comcast, the largest cable system in New Jersey, has high hopes for its new phone service. It expects to reach 20 percent market penetration within five years, which would be three years quicker than the company took to reach with its high-speed Internet service.

Some analysts were skeptical. "They may have to play with their pricing a bit," predicted Remek, who does not see voice as being a big driver of growth for Comcast.

But other industry analysts see huge potential for Internet phone service. Some noted Time Warner has been signing up customers as fast as they can install them with a price package of $39.95 per month. They also noted Internet phone services do not have to pay many of the fees and charges traditional phone carriers do.

"By the time you account for taxes and fees, the average customer could wind up still saving 30 percent on his phone bill even, at $40 per month," said Craig Moffett, an analyst with Bernstein & Co.

Comcast has more than 1 million customers in New Jersey. Company officials said yesterday they did not know when the new phone service would become available in the state.
Cablevision, New Jersey's second-largest cable operator, has signed up about 250,000 Internet phone customers in a little over a year.

Other potential rivals downplayed the significance of Comcast's entry into the Internet phone field.

"Comcast is entering a crowded, competitive marketplace that we've been in for some time now," Bobbi Henson, a spokeswoman for Verizon, said. "With their pricing going as high as $54, and other alternatives such as Verizon VoiceWing widely available, there is no compelling reason we can see for any customer to choose Comcast as their voice carrier."

Gary Morgenstern, an AT&T spokesman, said the company always expected Comcast to move into this field. "They're content providers; they're not phone-centric," he said. "Their core competency isn't things like service reliability and security."

Vonage, a start-up with more than 400,000 customers, said it welcomed Comcast's entry into the field. "The more big companies that enter the fray, the more customers we can attract," said Brooke Schulz, a senior vice president of the company.

Tom Johnson can be reached at or (973) 392-5972.

Internet Phone Plans

When Comcast rolls out Internet-based telephone service over the next 18 months, it will join an increasingly competitive field. Here are some of the major plans with their basic cost (excluding high-speed Internet connection) and drawbacks of each.

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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See for details.

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