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Television Companies Get Into Telephone Market

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New Calling For Cable Providers
Catskill -- Television Companies Get Into Telephone Market

December 26, 2003

By Ken Aaron

Catskill -- Television companies get into telephone In recent weeks, some of the biggest companies in the cable television universe have rolled out plans to compete with entrenched telephone companies.

But the smaller players are getting in the game, too.
Early next year, Mid-Hudson Cablevision Inc. will sell phone service. "It is incumbent upon us to keep up with the technology, and we have," said James M. Reynolds, Mid-Hudson's president.

That even a small company like Mid-Hudson is stepping up to do battle with the phone giants is an indication of how pervasive the technology is likely to become. "It will spread," said Reynolds, whose Catskill-based company has about 20,000 television subscribers and about 2,500 high-speed Internet users. "It's inevitable."

Voice over Internet protocol, or VoIP, has come a long way since the 1990s, when it was touted as a way for people to use the Internet to place phone calls anywhere in the world. But it was technology only a geek could love: dirt-cheap or even free, but calls could be choppy and garbled.
Since then, advances have rendered calls routed over the Internet nearly indistinguishable, if not entirely so, from conventional phone calls.

And that has pushed many companies -- including Time Warner Cable of Stamford, Conn., Cox Communications Inc. of Atlanta and Comcast Holdings Corp. of Philadelphia -- into an arena once reserved for Ma Bell and her offspring.

Time Warner Cable, which has 320,000 customers in the Capital Region, will introduce Voip service sometime next year. Prices are expected to be about $39.95 for all-you-can-call local and long-distance service; people who don't subscribe to Time Warner's cable channels will pay $10 more.

Since Time Warner started the service in Portland, Maine, in May, 8,000 people have signed up.

Mid-Hudson is charging $34.99 for unlimited calling through its service, which it is offering through a partnership with Vonage, an early leader in the Voip race.

Edison, N.J.-based Vonage, which has partnered with five cable companies and has 90,000 customers, expects to ink many more deals.

"It does give these guys an opportunity to get into the voice market without spending a lot of money," said Louis Holder, Vonage's executive vice president of operations.

Both Vonage and Time Warner let customers use ordinary phones for the service. Equipment is installed between cable lines and phones to adapt them for Internet use.
Forays like these are a threat to phone companies, already losing customers to wireless providers and high-speed Internet services that don't require extra land lines.

"It is a negative for Verizon, obviously, and it's a benefit for consumers," said Patrick Comack, a telecommunications analyst with Guzman & Co., an investment firm based in Coral Gables, Fla. "It just increases the competition in an industry that doesn't need any more competition."

In response, telephone companies such as Verizon Communications Inc. and AT&T Corp. have unveiled their own lower-priced Voip plans. And some phone companies are preparing their own satellite-video options to compete for video customers with the cable companies.

"The competition has been here for awhile, and I think you're going to see more of it before you see less of it," said Cliff Lee, a spokesman for New York City-based Verizon, the Capital Region's dominant telephone company.

He added that the competition is further proof that regulators need to ease off Verizon.

The cable companies' moves came after they spent billions of dollars upgrading their cable networks to handle advanced data services.

Telephone service is a good way to recover some of those costs, observers say.

"If you look at the competitive landscape broadly, revenues from voice communications represent a pretty strong upside from their average overall revenue per user," said Boyd Peterson, a consumer technology analyst for the Yankee Group, a Boston consulting firm.

Calls placed over the Internet are broken up into packets of digital information and sent over the network. Those packets are reassembled at the other end of the call.

Companies are hoping, though, that simply making and receiving phone calls isn't the end of the line. "Down the road -- and this is where it gets interesting -- we are going to be able to provide additional services to our voice product that other companies can't," said Keith Cocozza, a Time Warner Cable spokesman in Connecticut.

These include putting caller-ID information on cable subscribers' TV screens when calls come in, and allowing users to change their dial tones from the time-honored drone to something more tuneful.

But there still are rough edges that mean Internet calling isn't for everyone yet.

"It's come a long way," said Jeff Kagan, an independent telecommunications analyst in Atlanta. "Sometimes it will sound great. Other times it will probably sound a little fuzzy."

Kevin O'Connor, chief executive of Tech Valley Communications, an Albany-based voice-and-data provider, said there are limitations that make Voip less attractive to businesses.

Power or cable outages can disrupt service. And while companies have devised ways to enable emergency service such as 911, it's not always as easy to use as traditional phones.

"It's something that's the technology of the future; it's something that's coming, it's something that's inevitable," he said. "But for the business customer, anyway, I think it's a little premature."

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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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