Cable Companies to Rule VoIP?

A report from The Yankee Group paints a rose colored picture for cable companies selling VoIP.

While I agree they will pick up lots of customers, especially in markets where their systems are contiguous like in the New York City market where Cablevision rules the roost, knocking off the companies like AT&T, Packet8 and Vonage that have an early lead will not be as easy as one might think.

First some of the cable operators like Cox have a significant investment in Cable Telephony which is not VoIP based. While migrating the already established customer over to VoIP would be rather easy, ripping out that version of digital telephony--which is non-VoIP, will be a hard pill for the accountants to swallow. The equipment either hasn't paid back yet, or been depreciated fully. In that case the cost of switching becomes an operating expense, a hit, to the bottom line. I don't see the Wall Street centric cable companies doing that.

So far, only Cablevision has come out guns blazing about a VoIP play. For many of the cable operators who are selling broadband they are still recovering from the @HOME fiasco, where a third party company (which some of the MSO's were major investors in) basically was more of a nightmare that the panacea they expected, so with a build, rather than buy, approach from those lessons, they are going slowly at figuring out what to do.

In my view the small cable operator would be better reselling VoIP from AT&T, Level3, Packet8, VoicePuls or even Vonage (with some form of SLA/QoS guarantees) because they already have the expertise of working with the customer behind the cable modem and in various hardware (i.e. router, access point) scenarios (wired, wireless, static IP, dynamic IP address, etc.)

The cost of getting up to speed is great. The companies already in the VoIP space have done the hard work and with enough installations, already know what to expect. Cable companies want standards. Unconfirmed reports already making the rounds are that Comcast wants their VoIP customers to use the same routers across the network. That means the investment someone already has made in a wireless router/gateway or access point is lost.

Instead the MSO's would be better off selling tiered plans. Basic Access--connectivity. All VoIP support from provider. Supported--the MSO supports the connection, installation but does not provide tech support related to VoIP beyond delivery of the cable modem. Premium--The MSO is the phone provider. They deliver all support.

A second approach is to have a list of approved carriers that subscribe to standards. If the MSO's woudl agree on a VoIP standard that can be developed in consort with the carriers then consumers will have a transparent, and positive experience.

These two approaches are too easy to implement. All it requires is an open mind and some communication between the carriers and MSOs.

Comments

[Bruce Crair]

I agree with most of what you've said here. However, I don't agree the best course for most of the cable companies is to partner with an ATT or Level3, etc. The larger cable companies (TW, Cox, Cablevision) already have a lot of experience in broadband and supporting customers on the other side of the cable modem. In addition, they've already hired the engineers and operations folks necessary to build and operate a telecom network. Now all they need to do is convert to VoIP. I agree that the accountants (esp at Cox) might not like the stranded investment in circuit-switched technology, but there's a reason why they call it "sunk cost". The payback on VoIP (if you can manage the cost of customer acquisition properly) is pretty quick. Go build your own VoIP network, manage and control it yourself, and provide that "one-stop-shop" that customers like, ESPECIALLY in the customer service and billing areas. There's nothing worse than calling with a customer service problem on your phone, say, to your provider, and getting forwarded on to another company (ATT or Level3) because the provider doesn't actually provide that service, just sell it.

Now all that being said, the smaller cable companies (and/or the ones in financial trouble, like Adelphia) could quickly get into a financially rewarding business by partnering with an established provider like ATT or Level3 (or even Vonage). I think that's an excellent way to get into a business they don't know and/or don't have the $$ to afford without spending a huge amount of time and money.