Time Warner Cable, a subsidiary of Time Warner Corp. , is rolling out a voice over IP phone service in what it calls a “triple-play” bundle that includes unlimited local, in-state and domestic long distance for $39.95.
The price is sure to get competitors’ attention, such as number six cable provider Cablevision, whose own monthly VoIP service, at $34.95 a month, is slightly lower and offers unlimited local and long distance calls.
A survey of Time Warner Cable’s first voice over Internet protocol
After about six months of service, a majority of users rated the phone service over cable lines as “good to excellent.” Although lower than traditional phone service satisfaction rates, the initial response was enough for Time Warner Cable to push ahead with its nationwide rollout.
Britt, speaking at the Credit Suisse First Boston analyst conference in New York, said the bundle rollout is an offensive and defensive weapon against Baby Bells and satellite rivals –helping it win new local phone customers and prevent its own users from defecting.
Britt’s presentation comes a day after the nation’s second-largest cable company shook up the industry by announcing the expansion of the Portland trial to 17 markets.
Time Warner has enlisted Sprint and MCI for the push. The carriers will handle long-distance traffic and connect Time Warner lines to local phone systems. Additionally, Sprint and MCI will provide directory assistance, operator service and voice mail management.
Boyd Peterson, a telecom analyst with Yankee Group, said Time Warner’s move will put regional telecoms such as Verizon, SBC, Qwest and Bellsouth into an uncomfortable position.
“If (adoption) gets to a certain point, the (Baby Bells) will roll out VoIP,” Peterson told internetnews.com. “But their motivation is not cut and dried. They have a local customer business that is making a profit, so by definition it’s cannibalistic.”
Adding to the calculus for the phone companies are the murky regulatory conditions. The Federal Communications Commission recently held hearings on regulations (read:taxes) on VoIP traffic. Commissioners signaled a preference for a hands-off approach, however it could be more than a year before any policy is adopted.
But Joe Laszlo, a senior analyst with Jupiter Research (which is owned by the same parent as this Web site), said it’s too soon to count the regional phone companies out. Some customers will be unwilling to trade quality and reliability for lower prices, he said.
The flat rate service may be attractive to consumers who make a lot of long-distance calls, but that isn’t a huge percentage, Laszlo said.
Meanwhile, other cable companies including industry leader Comcast are in trials or early deployment of their own VoIP offerings.
Yankee Group’s Peterson expects local phone companies to try and prevent losses to cable VoIP offerings by aggressively marketing their own bundles, which include wireless, something most cable companies don’t offer. If that’s not effective however, look for the companies to launch their own VoIP initiatives, like Qwest’s recently project in Minnesota.
“The end result is 2004 is going to be a bang-up year,” Peterson said.
