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It's not as sexy as, say, video on demand or interactive gaming. But cable telephony continues expanding even as cable system operators continue putting the bulk of their attention on high-speed data and video-oriented services.
Most operators agree that telephony is a key component of the bundled triumvirate of digital services that they hope to offer-voice, video and high-speed data. Yet major operators are moving at different paces-in some cases widely different-and pursuing a variety of business models to eventually achieve what one telecom industry exec calls the "one throat to choke" service offering.
Undoubtedly the most aggressive multiple system operator (MSO) has been AT&T Broadband, which this summer offered five months of free service to consumers eligible for service in several markets widely seen as a move to meet company targets of reaching 500,000 telephony subs by year-end. The company announced in September it surpassed 300,000 telephone subs, although the number included approximately 66,000 customers it acquired in its buyout of MSO MediaOne.
Although industry analysts have placed increased importance on AT&T meeting its cable telephony goals to appease shareholders upset at the company's sagging stock price, Sara Duisik, AT&T spokeswoman, says, the company is placing equal emphasis on voice, video and data businesses.
Next to AT&T, Cox Communications for some time has been pushing telephony in nine of its markets. "Revenue generating unit" is the mantra at Cox, where the company is focused on winning more revenue from its subscriber base by offering digital phone service in addition to digital TV and broadband cable modem Internet access. As of June 30 Cox had 166,582 telephony subs, up from 101,811 at the end of last year and on a pace to pass 230,000 by year-end.
Chris Bowick, Cox's senior vice president of technology development, says the company is achieving penetration rates in telephone-ready homes passed of 9.5%, with an average of 1.44 lines per customer and total residential lines of 239,561.
Cox has employed traditional circuit-switched telephony over its cable plant since 1997, and although it's working with its vendors to develop a possible migration to Internet Protocol telephony-with resulting benefits in both operating costs and network capacity-"we don't think it's ready for prime time yet," Bowick says. "And we don't know exactly when it will be ready for prime time. Our philosophy is 'why wait?' This is a pretty good business, and why not take advantage of it while we can?"
Conversely making a beeline straight to IP telephony is Adelphia Communications Corp., which according to Bob Williams, director of engineering, is engaged in a primary line IP telephony trial in Buffalo. "We see IP as the real solution," Williams says. "We hope to learn if IP, primary line telephony is really feasible." While trial numbers were unavailable, Williams says the company is moving toward offering IP, primary line service in the Buffalo area sometime next year, with possible deployments to follow.
Cautiously moving into telephony is the nation's second-largest MSO, Time Warner Cable. The company actually launched performed a circuit-switched telephony trial in Rochester, N.Y. in 1995, which helped shape its current long-term strategy of looking for a partner-it's talked extensively with AT&T-to share the costs of network deployment such as the expensive Class 5 switches necessary for circuit-switched telephony.
At the same time, Time Warner has initiated an IP telephony market trial to its Road Runner Internet customers in its Portland, Maine, system. Spokesman Mike Luftman cites the lower capital costs of deploying IP telephony as a reason for the trial, although Kim Cannon, vice president of marketing and public affairs for the Portland system, says the IP service still is best suited as a secondary line offering rather than lifeline telephony.
The trial is beginning with fewer than 50 friendly subjects but will ramp up over the next few months. Once pricing and regulatory issues are worked out, Cannon says, the company plans to go full-scale with the service and market it to Road Runner customers. While Luftman left the door open for the company to develop a partnership with AT&T, which nearly was completed in 1999, he pointed to the IP route as another tack the company may take as it more seriously considers adding telephony to its suite of services.
Comcast Corp. also is laying the foundation for telephony, but that service ranks lower on its agenda than driving penetrations of digital TV and high speed data, according to Steve Craddock, vice president of new media development. "Once you get the penetrations for high-speed data up, a lot of these new services are basically very easy to deploy."
Deeply involved with Cable Television Laboratories Inc.'s PacketCable efforts to standardize IP services over cable networks, Craddock says he and Comcast "have been patiently waiting to get the pure IP solution correct." Comcast may launch a second line service before rolling out primary line, as Craddock points out that primary line service requires the managed Quality of Service aspects of Data Over Cable Service Interface Specification 1.1. DOCSIS 1.1-certified gear is not yet out in the field.
But with two IP trials up and running, one in Union, N.J., the other outside of Philadelphia, Craddock says "the rocket science part of this stuff has basically been solved. The technology works. The issue is trying to fill in the pieces." Those pieces include powering the service with telco reliability as well as back office support for telephony.
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