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Comcast moves into phone service
By Stephen Lawson

Cable operator Comcast Corp. plans roll out a VOIP (voice over Internet Protocol) service reaching 15 million homes by the end of this year, and offering unlimited local and domestic long-distance calls for US$39.95 per month.

The company aims to sell the phone service not as a cheap alternative to traditional carriers' offerings but as richer telephony that eventually will include features such as unified messaging and video calling, Comcast Chairman and Chief Executive Officer Brian Roberts said at a financial conference on Monday.

"It's not our desire to do this to hurt phone companies... We want to build value in the phone," Roberts said at the Citigroup Smith Barney Entertainment, Media and Telecommunications Conference in Phoenix, monitored via a webcast.

However, he does expect voice to drive revenue at Comcast, which along with other cable operators, increasingly is coming into competition with carriers. Cable and phone companies both are moving toward offering a "triple play" of phone service, Internet access and TV, possibly also adding mobile phone service.

Comcast is the last of the major cable companies to lay out details of its VOIP plans, according to The Yankee Group analyst Lindsay Schroth, but it carries a lot of weight as the country's biggest operator. Cablevision Systems Corp. offers voice across almost its entire footprint and Cox Communications Inc. and Charter Communications also have started rollouts, Schroth said. Comcast has had trials running in three markets -- Indianapolis, Springfield, Massachusetts and its home market of Philadelphia -- but has not talked much about its larger strategy, Schroth said.

However, the company hasn't been sitting on its hands. All of its back-office systems are already in place for billing, provisioning, customer care and E911 emergency calls, Roberts said. It will not be an Internet telephony service, he said: Though they will use IP, the voice calls won't touch the Internet, running instead over Comcast's private data network, with priority over regular data packets to ensure good quality. The network will have a battery backup system to keep services running in case of a power failure, so Comcast's phone offering will be as reliable as traditional circuit-switched telephony, he said. Also at launch, the system will include directory assistance, operator service, international calling capability and support for monitoring under CALEA (Communications Assistance for Law Enforcement Act).

Comcast sees future features including unified voice-mail and e-mail, customized ring tones, caller ID information that appears on the TV when a call comes in, voice-activated dialing and eventually a videophone capability.

By the end of 2006, phone service will be available across Comcast's whole network, Roberts said. He expects the voice service to achieve 20 percent penetration of Comcast's customer base about five years from now. That would equal approximately 8 million customers.

"We really do believe that this is the next engine for growth," Roberts said.

Comcast already has about 1.2 million customers using a circuit-switched phone service over cable, which the company acquired through its purchase of AT&T Broadband in 2001. The company's focus is now on VOIP, but it won't force customers of the old phone service to switch over as it rolls out the new service, said Bob Smith, senior director of corporate communications at Comcast.

Established service providers such as Comcast are likely to make significant inroads into the phone market this year with competitive flat rates and bundling with other services, said Kate Gerwig, an analyst at Current Analysis Inc., in Sterling, Virginia. That could be bad news for dedicated VOIP companies as well as traditional carriers, she said.

"I'm wondering if this will push some of the niche players like Vonage ... out of the way a little bit," Gerwig said.

However, with traditional telecommunications carriers gear up TV services to counter the cable operators' telephony strategies, the big showdown will be between those big players, she said.

"The next year is going to be sort of a wild shootout," Gerwig said.

Posted January 11, 2005 05:47 PM |