Telcos staring into the VoIP chasm
Published: 04 Mar 2005 11:55 GMT
"Cable is definitely leading the charge," Williams said.
And they're charging en masse, which could further accelerate the trend. Most cable operators are getting into the voice business, led by Comcast and Cox Communications, which now have ambitious plans to blanket their territories using a new technology over the next few years. Even scores of tiny cable operators are taking on the Bells at their own game -- and winning. Northland, which specialises in very small markets, introduced an unlimited North American calling plan using broadband two weeks ago in a small sliver of North Carolina. About 500 people a week are signing up, many of whom are coming from incumbent BellSouth.
Cable's voice foray not only represents an incursion into the Bells' territory, it's also a defensive move against competition from satellite television. In the 1990s, the cable giants invested an estimated $75bn to $80bn to upgrade their networks into their current network of hybrid coaxial lines, a move in response to digital satellite services that could offer more channels and a clearer picture.
The investment is paying off for cable since broadband has become an incredibly profitable business. Modernising their networks also opened the door for selling digital cable, high-definition TV, digital video recording and, of course, voice.
The Bells aren't standing still. Each local provider is investing billions of dollars to upgrade its antiquated copper wire networks with much faster, more efficient fibre-optics to better compete with the cable operators and their multifaceted service packages -- including TV programming.
Cable VoIP actually represents a second major challenge to the Bells. Much of the Bells' line loss now is thought to be the result of "cord cutting," in which customers replace their home phone service with a mobile phone. But only the hardiest of souls will cut the cord, given mobile phones' notoriously unreliable service. On the other hand, VoIP services feel much like the old-style lines they’re aiming to replace.
Breaking the circuit
The rapidly changing dynamic results from cable's embrace of VoIP, which allows any Internet connection to double as a phone line. The Bells use circuit switches, which -- while time-tested -- are also antiquated, expensive to operate and wasteful of bandwidth.
The difference between the two technologies is dramatic. VoIP calling plans from standalone providers such as Vonage are about $20 a month cheaper than the Bells', owing largely to VoIP's operating efficiencies and the calls being unregulated, while the Bells face state and federal rules. Cable companies often sell their voice service for significantly more as an individual service, but the cost drops dramatically when packaged with other services.
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