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Cable multiple system operators (MSOs) will eventually offer phone service and equipment through retailers along much the same lines as they do cable-modem and video services, analysts and manufacturers say.
Cable operators have long viewed voice as the final, elusive jewel in the triple crown of offering residential data, video and voice services. And, as they have done with data services, cable companies are eyeing retail as the final destination for selling voice services and equipment once residential trials have been completed and the technology is validated.
Alternately called the "triple play" bundle, cable operators are out in force to attract and retain customers and maximize the revenue in their infrastructure network, said Vamsi Sistla, senior technology analyst at ABI Research of the Oyster Bay, N.Y. The "triple play" would not only allow MSOs to offer multiple services on a single bill but be able to entice customers by leveraging the price of one service off another.
"Having acquired 69.4 million homes receiving cable television services, and 11.3 million subscribers to high-speed Internet access via a cable modem, the cable MSOs are staking out telephony users as their next untapped market," ABI Research said in a recent report.
Providers such as Cox, which has a sizeable segment of the voice market in Phoenix, are already marketing cable voice services but are using older analog??? technology. New Voice over Internet Protocol (VoIP) technology, however, is poised to bless cable companies with a viable, lower cost voice offering that can compete or undercut Baby Bell rates in most markets and offer easy self-installation, said Mark Bakies, Cisco's director of voice systems marketing.
VoIP uses the cable providers' back-end data-service infrastructure plus infrastructure specifically created for carrying voice. The infrastructure taps into the public switch telephone network (PSTN) to give consumers the ability to place a phone call through their cable modem. The major VoIP cable-telephony standard is PacketCable, which was developed by the CableLabs standards body and is built on the industry's DOCSIS 1.1 (Data Over Cable Service Interface Specifications) cable-modem standard.
PacketCable works roughly like this: The cable provider installs a new cable modem equipped to do both voice and data (Toshiba, Motorola and others make PacketCable-certified modems). The modem typically features one or two RJ11 jacks that connect to a home phone jack. Once the modem is plugged into a home phone jack, all the phones in the household will send signals through the modem, which converts them to a digital signal and routes them over the cable company's network. That signal is then converted back to analog and sent over the PSTN and onto the final destination.
From an end-user perspective, the experience will be identical, at least initially, from the phone service they've known for years, said Glen Russell, CableLabs's director of PacketCable architecture.
One reason why cable companies are so attracted to VoIP is the ability to offer value-added features, said Cisco's Bakies. Consumers will eventually be able receive caller ID info or listen to voice mail on their television set or through their computer, he explained.
"We have beta units doing that right now," Bakies said.
Another is cost. Because the network architecture is largely based on the already established data network, the cost of establishing and maintaining a VoIP network is less intensive than traditional phone service, allowing the MSOs to undercut the Baby Bell rates, Russell said.
Currently, VoIP trials are underway at TimeWarner, Armstrong Cable Services, Comcast Cable, Cablevision and others. Time Warner calls its primary line service "Digital Phone."
Cox's cable voice service, which Cisco's Bakies said has proven that cable operators can muscle in on the competitive voice market, is not VoIP and as such is not as easy to self-install. Rather than swapping modems, Cox installs a Network Interface Unit (NIU) on the side of the house to take signals from the inside phone wiring and route them over their network.
The model embraced by providers currently testing VoIP service is to market and sell to consumers directly, but that will change, said ABI's Sistla.
"Retail is where the entire services industry is going; it reduces the operator's overhead to maintain additional inventory, up front cost and investment in maintaining the hardware and sales force," Sistla said. "This will also increase competition among vendors to build their products at attractive prices and compete in the open market."
Toshiba marketing manager Christopher Boring said MSOs will want to package the service and equipment in one box to save on the cost of a truck roll and installation. His company's PCX3000 modem is VoIP-ready and being used "in all the major MSO trials."
"Voice will follow the data model," Boring said. "At first the MSOs offered it [data] directly, but soon they partnered with retail for equipment sales and self installations." As such, retailers can look forward to stocking VoIP-ready cable modems, as well as retailing voice plans alongside data and video services.
CableLabs' Glenn Russell agreed that retail is the eventual destination for cable voice equipment and services. "It makes sense for this to move to retail once it's been validated."
Eventually, but not right now. As ABI's Sistla said, "It seems as though each MSO is waiting for another to be the first mover. They want someone else to be the guinea pig so they can learn from the other's mistakes."
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