Back in the Saddle (voIP deployment)
False starts behind them, MSOs seem ready to jump into VoIP.
Jim Barthold
Telecom Flash, April 2004
telecommagazine.com
Cable operators are finally doing more than stepping into the VoIP waters and quickly retreating with a scream.
Really.
They all say so.
Every big MSO will at least trial VoIP this year, and many will roll out service with “black phone” offerings that duplicate the incumbents’ circuit-switched features while undercutting the price. There’s little chance cable subscribers will see any of the gee-whiz VoIP elements that vendors have been hyping for the past decade — at least until MSOs prove they can reliably duplicate a service that’s been around for over 100 years.
“Right now they’re selling a cheaper bundle than the RBOCs,” said Michael Harris, president of analysis firm Kinetic Strategies. “The question over time is how that becomes more interesting.”
The other question is how much time cable operators have until they must spice things up. The ILECs are preparing residential VoIP offerings that include advanced IP features. At the same time, companies like Vonage — a voice ASP (application service provider) — are taking free rides on cable’s broadband infrastructure with low-priced VoIP services that please customers and pull phone dollars out of cable coffers.
The five big MSOs — Comcast, Time Warner Cable, Cox Communications, Charter Communications and Cablevision Systems — will all do VoIP this year, and smaller players — Insight Communications, Armstrong, Adelphia Communications and Liberty Media — will explore ways to make voice a part of a video and high-speed data bundle.
“VoIP’s a killer app,” said Jimmy Schaeffler, chairman, CEO and senior research analyst at The Carmel Group. “It’s a great technology. It can do nothing but work, which begs the question: Why wait?”
Some critics have been putting that question to Comcast, the nation’s biggest MSO. A VoIP pioneer, Comcast will likely be among the last to push into packetized telephony rollouts on a large scale. That’s partially because the company needs more time to digest the huge AT&T Broadband infrastructure — including a large circuit-switched voice business — that it acquired in 2002. Those customers do not fit into its vision, and Comcast has curtailed any further marketing efforts to that base as it prepares for full VoIP service targeted for 2005. The company will offer VoIP in four markets in 2004 — Coatesville, a Philadelphia suburb where the company is already running trials, Indianapolis, Connecticut, and parts of Massachusetts.
“We are very hopeful that VoIP is going to be a way that telephony can be a profitable business line and a good bundle,” said Brian Roberts, Comcast’s president and CEO during a presentation to the Citigroup Smith Barney Entertainment Media & Telecommunications Conference in Phoenix in January. “Should that be the case, I think we’re ready to keep going and really accelerate the footprint where we offer telephony.”
That’s not a cautious message if you see it from Comcast’s perspective of what VoIP means as a piece of an overall cable offering, said Steve Craddock, Comcast’s senior vice president of new media development. Comcast wants to deliver an integrated IP-based unit that folds into its other video entertainment and data services. The unit would include SIP (Session Initiation Protocol)-based features like follow-me and data integration around which Comcast can build a suite of services leveraging existing high-speed data networks.
“Black phones can’t do any of that,” Craddock said. “People want to have instant communications. This thing is very smart; it finds you, it determines what devices you have available to you that people can get you on.”
While it might pop up here and there in trials, it won’t be common to Comcast subscribers in 2004.
Partnering Up
Time Warner Cable, AOL Time Warner’s cable group and the nation’s second-largest MSO, takes a position about 180 degrees from Comcast. The New York City-based behemoth is partnering with Sprint and MCI to “aggressively enter the voice business,” according to AOL Time Warner Chairman and CEO Richard Parsons, speaking at the Citigroup gathering. “By year-end we expect to offer voice in almost all our systems.”
That’s a big advance from the single operation the company has rolled out in Portland, Maine, and it depends heavily on help from telco partners.
“We’re providing a variety of services to them [including] interconnection [and] all types of CLEC telecom services that are part of a carrier-grade service, ranging from E-911, ordering numbers, providing operator assistance, directory assistance, really making sure that it’s the same kind of service they would get from their original home provider,” said John Overy, Sprint’s business development director.
It will be a black phone service that costs about 20-percent less than what the ILEC offers. “Down the road the thought is to provide advanced services that will be very competitive and hard to match. First of all, let’s make sure it’s reliable and carrier-grade,” Overy added.
This type of cable-telco relationship would have been heresy just a few years ago; today the two share a common opponent: the ILEC. Sprint wants to widen its wireless base; Time Warner wants to add a third piece to its video and data offerings.
“We’re drawing on our expertise plus long-distance assets and, in the future, wireless capabilities to enable cable companies to compete in a meaningful way against the RBOCs,” says Overy. “We see it as a win-win for both companies.”
Competing against the ILECs was once relatively easy: A service provider would come in with a cheaper, albeit less dependable, second-line deal with similar or better features than the incumbent, and cherry pick high-end customers and features, leaving the incumbents with skeletal primary line service. That formula still works for companies like Vonage, which runs on both telco and cable broadband infrastructure.
While this is only making a small dent in a huge telco business, it’s been enough to drive the incumbents to slash prices and develop their own bundled packages, including DSL and wireless.
Full Steam Ahead
Meanwhile, the cable industry inexorably moves into the telephony space, led by Cox Communications. The Atlanta-based MSO was among the first to dip into voice with a carrier-grade circuit-switched service that critics claimed would become an albatross when VoIP developed. VoIP’s here — Cox is rolling it out in Roanoke, Va., with plans to expand into other unnamed territories — and the company still uses those switches.
“We can serve telephone customers with our circuit switch in the core and actually do a distribution via IP,” says Bill Dame, Cox’s director of network switching. “We’re just taking our circuit-switched gear, running it through a media gateway and converting TDM circuitry over to IP and distributing it through our local Internet backbone.”
The investment that the doomsayers called a burden is, in fact, a blessing. Cox uses switches to deliver primary line service — mostly in Arizona, although an Atlanta-based switch is handling the Roanoke VoIP business — and will continue to do so until it fills them up and moves completely to IP.
“This hybrid scenario allows us to fully utilize all the capacity that we have, and nothing goes to waste,” Dame said.
Another large MSO is also gearing up to aggressively pursue VoIP after a year-long quiet period to work out some internal organizational issues. St. Louis-based Charter Communications, Microsoft co-founder Paul Allen’s broadband piece, “deviates significantly from our cable brethren [in that] we actually anticipate offering two services: a pure primary line replacement that we’ll file as a CLEC and a voice-enabled high-speed data service,” said Mark Barber, the MSO’s telephony vice president.
Charter’s second offering vaguely resembles the VoIP service that Cablevision Systems is rolling out to about a million high-speed data customers in metropolitan New York markets. Cablevision’s OptimumVoice, though, is intended as a full-service phone line that uses the high-speed data network while Charter’s is a “PC-to-PSTN voice-and-video calling option [that] won’t support inbound calling,” said Barber, who called the service “very similar to what Vonage does — a best-effort service that we feel if you’re trying to present it as a primary line replacement is problematic for the customer.”
Charter “sees the need to aggressively deploy telephony services” and is willing to talk partner with anyone — “AT&T, MCI, Sprint, KMC, Vonage, Net2Phone, you name it,” said Barber. The MSO has been serving about 2500 VoIP customers since 2002; by the end of this year it expects that number to be 50,000.
Still Making Plans
Other, smaller cable players have less solid VoIP plans for 2004. Insight Communications is hampered by a partnership it made to use AT&T Broadband’s CBR (constant bit rate) infrastructure. That deal ran afoul of Comcast’s reluctance to invest any more in the switches or to pursue any more customers. Adelphia is clearing away an industry-rattling scandal involving the company’s founder, and adjusting to a headquarters move from Coudersport, Penn., to Denver, including a whole new management team.
Liberty Media, which has no U.S.-based cable operators, has rolled out commercial VoIP service in its Puerto Rican cable operation using a turnkey solution from Net2Phone, a company in which Liberty has a financial stake.
Yet another small cable operator, Western Pennsylvania-based Armstrong, is in VoIP with a service called ZoomPhone. Armstrong and Advanced Cable Communications have embraced Vonage, much to the displeasure of some more parochial cable industry members who see Vonage as a threat.
“A lot of companies are going to determine what they think is their best strategy,” said Dave Wittman, Armstrong’s cable marketing director. “We’ve had a pretty good experience so far.”
A pretty good experience is about the most any cable subscriber should expect this year if the local MSO approaches with a voice service offering. In 2005, however, things might get more interesting as advanced VoIP features begin to creep into the mix.
(fyi, during the Liberty Media Cablevision/Net2Phone – Puerto Rico conference call last nite, NTOP talked about being in the process of adding advanced voIP features … into its product mix --] |
