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Comcast to Offer Phone Service Over Internet in 20 Markets, Including Atlanta

Posted on: Tuesday, 11 January 2005, 00:00 CST

Jan. 11--Comcast, in a shot across the bow of its phone-company rivals such as BellSouth, Monday said it plans to roll out Internet-based phone service this year in 20 markets, including metro Atlanta.

"But there's no definite timetable yet," said Comcast spokesman Reg Griffin. The Philadelphia-based cable company already provides an undisclosed number of its 600,000 customers here with traditional "circuit switched" residential phone service.

That service, "Comcast Digital Phone," originally was provided in 1997 by MediaOne and then by AT&T Broadband, which Comcast acquired in November 2002. The new Internet-based phone service, using Voice over Internet Protocol technology, or VoIP, will be offered as "Comcast Digital Voice" in all of Comcast's markets next year. The cable company currently has more than 21.4 million video subscribers in 41 states.

VoIP technology sends packets of voice data over the Internet, similar to the way an e-mail message is sent. A high-speed Internet connection is needed to maintain adequate sound quality.

Cable companies and the regional Bells are increasingly butting heads as they try to take customers from each other.

They already are engaged in a battle royal in providing consumers with high-speed Internet service. That service, in turn, could help to generate even more revenue in the form of services such as video on demand.

Comcast's VoIP announcement further raises the stakes, potentially forcing the Bells to take even bolder steps, perhaps getting into the content business itself, analysts said.

As it is, BellSouth and the other regional phone companies already have slashed Internet service prices, helping them to reach parity with cable providers in that market. And the Bells are now aggressively reselling satellite TV service and boosting fiber-to-the-home investments, to provide advanced services such as video.

They also are integrating wireless phone offerings in their bundles, which cable providers currently aren't but soon could.

The degree of intensity of the rivalry will be determined by what happens in the broadband and VoIP markets, say analysts at the Booz Allen Hamilton consulting firm.

"If pricing looks to deteriorate and they face a fast erosion of their core local and high-speed (profit margins, the Bells) may be forced to accelerate their entry into media -- even if the return on investment is insufficient," said analysts Dominic Endicott, Gary Neilson and Reggie Van Lee in a report last month. "If pricing discipline is maintained, however, they can move more gradually."

Comcast so far has been loath to cut prices. For example, as BellSouth last year trimmed prices for its high-speed Internet service, Comcast kept prices on an even keel, preferring instead to increase customers' perception of value by boosting speeds further, without additional cost to the subscriber.

Comcast currently is testing VoIP service in the western suburbs of Philadelphia, in Indianapolis and in Springfield, Mass. In those markets, the service is priced at $39.95 a month for those who subscribe to both cable TV and broadband service; $44.95 for cable-only or broadband-only customers; and $54.95 for those who want phone service only.

On average, in BellSouth's nine-state territory in the Southeast, VoIP providers (ranging from giants such as AT&T to smaller providers such as Vonage) charge between $25 and $40 for unlimited voice service. Most traditional telephone providers charge $40 to $50.

BellSouth, which has been providing VoIP to business customers since 2001, doesn't plan to enter the consumer market until the first quarter of 2006.

"The regional Bells have no reason to move fast into VoIP when they are going to lose the revenue and margins on the advanced features that we get today," said Eric Shepcaro, vice president of strategy and business development at AT&T.

He was referring to features such as call waiting, caller ID and call forwarding, which cost the phone companies pennies to provide but which cost subscribers several dollars.

Cable competitors, such as Atlanta-based Cox Communications, already are deploying VoIP technology, including in Baton Rouge and in southwest Louisiana, where Cox Communications competes head-on with BellSouth.

Cox, which has offered phone service since 1997, has seen rapid growth in that business.

By the end of the third quarter, it had 1.2 million phone subscribers, 33 percent more than it had in the year-earlier period. Cox Communications, with 6.6 million customers, is owned by Cox Enterprises, which owns The Atlanta Journal-Constitution.

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To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com.

(c) 2005, The Atlanta Journal-Constitution. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

CMCSK, BLS, COX,

Source: The Atlanta Journal and Constitution

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