Waiting for the VoIP War
Competition should heat up with cable's entry
Cable not planning to tangle with Net phone service -- yet
Wednesday, April 07, 2004
NJ.com
The cable industry is not thrilled companies such as Vonage and AT&T are trying to sell Internet phone service to its high-speed data customers.
But would cable operators try to use technology to block out interlopers? It's feasible, but not likely, according to a recent research report by Merrill Lynch.
Big Cable only has to look back at the example of Excite@Home, which was supposed to be a pumped-up version of America Online.
Customers had to pay for a package that included fast online access and homegrown content from Excite@Home. But people who preferred chat rooms and channel offerings from AOL, or a stripped-down connection to the Web, hated the idea of paying extra for something they didn't want.
So far, cable moguls are saying they don't plan any heavy-handed tactics to squelch Internet phone competitors who piggyback on their networks. Pressure is expected to build, however, particularly since AT&T is attaching its powerful brand to its new CallVantage service.
"With wide-open competition among virtual providers, we can anticipate steep price declines, with margins being whittled down to a few dollars a month -- not a happy outcome for cable companies that have spent an estimated $84 billion in investor-financed cable network upgrades," Merrill Lynch wrote.
One card cable companies can play is technology that ensures its customers get priority for delivery of the data packets that make up Internet phone calls, the report said. AT&T claims it routes Net calls over its private Internet backbone, but it has less control once the packets travel over the cable networks.
Another option is plain old fashioned pricing power -- cable companies can raise their prices for high-speed data connections, and lower it for phone service. That would wreak havoc on the business models of Vonage and its peers.
The downside of playing games with pricing? Fed-up consumers might decide to switch to digital subscriber lines, the rival technology offered by the likes of Verizon and, in some locations, AT&T.
Wireless gains ground in long-distance race
If you want to know the state of the long-distance industry, look no further than a recent consumer survey by the Yankee Group.
The Boston-based consulting group found wireless customers make 43 percent of their long-distance calls on their mobile phones. That's bad news for companies such as AT&T, MCI or Sprint, even though they all sell wholesale long- distance service to wireless carriers. The reason: Profit margins for wholesale contracts are a lot smaller than selling service to Aunt Tilly in Tulsa.
The survey found 50 percent of households with wireless subscribers have significantly reduced the use of their home phones in favor of cell phones. Phone offerings by cable companies are expected to cut into traditional calling plans even more.
"These trends have precipitated the death of distance and eventually will result in the death of the minute as the measure of the market," Katie Griffin, a Yankee Group analyst, said in a statement.
Translation: Get used to flat- rate pricing schemes the wireless industry pioneered.
Verizon's college deal Verizon has won a $13 million contract to build a high-speed data and video network that will link 45 New Jersey colleges and universities.
The system will support a consortium of the schools called NJEDge.net, and is designed to promote collaboration between campuses on research and teaching.
Using an Internet-based platform, Verizon will link computer networks at the schools -- even if they use different technologies -- so equipment costs will be kept at a minimum. Faculty members will be able to participate in video-conferencing and students one campus could hear a lecture taking place on another. |
