VoIP Toolkit

Telcos staring into the VoIP chasm

Ben Charny CNET News.com

Published: 04 Mar 2005 11:55 GMT

For 130 years, traditional telephone operators have been kings of the home phone castle. But watch out -- Ma Cable is making herself heard.

As never before, cable providers, from the giants on down to small operators like Northland Cable TV, are winning the phone wars against local phone giants BellSouth, SBC, Verizon and Qwest -- collectively known as the Bells.

Each week, cable operators are adding hundreds, thousands, even tens of thousands of new local phone subscribers, while significant numbers of the Bells' local phone customers cut their home phone lines.

The result is the "Revenge of the Cable Giants", as organisers of next week's Spring 2005 Voice on the Net Conference & Expo in San Jose, California, put it. Once given no chance in the phone business, cable operators are now at the tipping point of becoming a legitimate threat to topple the Bells.

"It's now cable's show," said InfoTech Research analyst Warren Williams. "The cable operators' voice business is starting to blossom. They have everything to gain, while the Bells have to worry about the effects of price cuts or even (offering) their own VoIP services."

Voice-over-IP services allow a phone to be plugged into a broadband data connection, sending calls mostly over the unregulated Internet -- which keeps the service cheaper than traditional telephony. A number of companies sell just VoIP services, but lately, the cable companies have been adding the service and offering it to their millions of existing broadband customers.

To be sure, the Bells still dominate the home phone industry; each still has tens of millions of phone lines in service. There are about 3.5 million US cable phone subscribers. But growth rates are heading in the opposite direction. The number of cable phone subscribers is skyrocketing, with Time Warner Cable reporting a 1,000 percent increase last year.

At the same time, homes served by traditional local phone lines are dwindling. Qwest, the smallest of the Bells, lost about 88,000 lines just in the last three months of 2004. As of 31 December, BellSouth had 21.4 million access lines in service, down 4.1 percent for the year.

Top-tier cable operators each add between 6,000 and 11,000 new phone subscribers per week; telephone revenue per operator is set to pass $1bn this year; and subscriber rolls bulge at a rate of 1,000 percent a year. The Bells, on the other hand, each lost up to 5 percent of their local-line customers last year as local-phone revenues declined hundreds of millions of dollars.