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Cable Calling

Vonage In Print News

November 23, 2003
By David P. Willis

In the last few years, the cable television industry has grown.

Once simply a way for people to get television programming and movie channels, cable providers have spent millions to upgrade their networks and add services, such as video-on-demand and high-speed Internet access.

Now cable companies, using technology based on the Internet, are starting to pounce on the territory claimed by telephone companies such as Verizon Communications and AT&T Corp. They are finding ways to offer local and long distance telephone service over their cable lines as well.
Within the last month, Cablevision Systems, which provides cable service to about 160,000 customers in Monmouth and Ocean counties, became the first cable company in New Jersey to offer telephone service.

Comcast Cable, which has 255,000 customers in Monmouth and Ocean counties, is testing a service in Pennsylvania and hopes to offer it to customers by 2005.

Cable companies have tried to get in the telephone business before. But the products were low quality and clunky, said Jeff Kagan, a telecommunications analyst in Atlanta. "It was forcing a square peg in a round hole."

But new technology called voice over IP (short for voice over Internet protocol) has given them the ability to offer telephone services over fast Internet access lines with voice quality that rivals traditional telephone service.
This "is what is going to make cable companies a big threat to the phone companies," Kagan said. "It is just beginning."

Here's how Cablevision's new service, called Optimum Voice, works.

First, you need to have Cablevision's high-speed Internet access. Cablevision gives you a new modem equipped with a telephone jack. The technology converts your voice into packets of data and sends them over Cablevision's network.
The call is switched over to the traditional telephone network and goes on to its destination, be it around the corner or across the nation.

Cablevision tested the service on Long Island before offering it to the rest of its customers in New Jersey, New York and Connecticut. The offering is for unlimited local, regional and long distance calling to the United States and Canada for $34.95 a month. It also includes five extras: caller ID, call waiting, call return, call forwarding and three-way calling.

"We have seen a tremendous response so far," said Tanya Van Court, vice president, product management, Optimum Voice. The company would not disclose the number of customers that have signed up for the service.

Van Court said its cable customers benefit by getting all of their services -- cable TV, high-speed Internet access and telephone service -- from one company and on one bill.
Cablevision faces some competition in the Voip market. Not from other cable companies, but from upstart broadband telephone companies like Vonage, which was started by Brielle resident Jeffrey Citron, and VoicePulse, a North Brunswick company.

Vonage and VoicePulse use high-speed Internet access, such as cable modem service or digital subscriber line, to offer bundles of telephone services and extras. Like Cablevision, these companies convert calls into data, just like an e-mail or picture, and send it over the Internet. And like Cablevision, the calls are routed back onto the telephone network near the call's destination.

Lou Holder, Vonage's executive vice president of corporate development, said Vonage's ability to offer service over the Internet helps it undercut prices charged by traditional telephone companies.

For instance, Vonage offers a service consisting of unlimited local and long distance calling for $34.99, including seven call features and other extras.

The Edison-based company has no network to maintain, he said. Features can be added simply by making changes to software.

And the new features go beyond caller ID.

Vonage's software-based services give customers the ability to chose their own area code. A customer in Brick can have a 415 area code so a relative or friend in San Francisco can call without paying long distance charges. Or a 212 area code would give a Middletown-based business a New York City phone number that would ring in Middletown.

VoicePulse has a feature that gives the customer the ability to block certain telephone numbers, such as an ex-girlfriend, said Ravi Sakaria, the company's president and chief executive officer.

Still, not many people are making telephone calls using this new technology compared with the tens of millions of people still using traditional telephone lines. By the end of this year, Vonage expects to have 90,000 to 100,000 customers, a number that is estimated to grow to 250,000 by the end of 2004, Holder said.

VoicePulse's Sakaria, who would not release customer numbers for his company, said the technology will catch on.
"The number of customers today is insignificant compared to what the opportunity represents," Sakaria said. "At some point, whether it is six months or a year or two years out, people will wake up and realize that this is cost effective and feature-filled. The subscribers will come extremely quickly."

Kate Griffin, a senior analyst at the Yankee Group, agrees.
"In 2003, we learned that this is a commercially viable solution," Griffin said. "The market is gaining momentum."
Consumer advocates say that people need to be careful before they sign up.

First you need to have high speed Internet access, said Mark Cooper, research director of the Consumer Federation of America. "If they don't have high-speed today, then getting voice over IP costs not $30 but $65 or $70," Cooper said, adding in the cost of broadband service.

According to the Telecommunications Action and Research Council, consumers also need to take other factors into consideration. For example:
You might not be able to keep your telephone number. For now, Optimum Voice comes with a new number. Vonage allows you to keep your own number. "If that is important to them, they should definitely look and see if they want to keep the phone number," said John Breyault, a TRAC research associate.

If you lose power, you will lose telephone service as well unless you have some sort of battery backup. Holder said customers can use their wireless telephone as a back-up as well.

Some services don't offer 411 directory assistance.

You need to check whether the service you are looking at can handle 911 emergency calls. "It seems that we get caught up about using this service," Breyault said. "A lot of times what gets lost in the mix is how reliable will this be to me in an emergency."

Some customers are taking the leap and trying out this new type of telephone service. Freehold Township resident John Thompson, 28, was worried about voice quality when he first signed up with Vonage more than a year ago.

"But I figured I would give it a shot, try it for a month or so and see if it works," he said. "I have never noticed a difference from Verizon."

Manalapan resident Bill MacNiven, 42, chose Vonage service after he saw his telephone bill rise to $200 or $300 a month. Now his bill is about $20 a month.

"It has been costing me a flat rate every single moment," MacNiven said.

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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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