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Comcast to Offer Phone Service ; Cable Giant Seen Threatening Verizon

Posted on: Tuesday, 11 January 2005, 15:00 CST

Comcast said Monday that it will begin a full-scale rollout of phone service this year to its cable customers, joining the rush of companies into a crowded field of Internet-based phone providers.

The Philadelphia-based company, the nation's largest cable provider and the largest in New Jersey, said it expects to have 95 percent of its networks ready for phone service by the end of this year. Comcast has 54,200 subscribers in Bergen County.

Comcast will sell an unlimited local and long-distance phone service for a flat rate of $54.99 per month. Cable television and broadband subscribers will pay $40 per month.

Analysts called the cable giant's plan to sell phone service a major competitive threat to the big regional telephone companies such as Verizon.

Of the region's other cable providers, Cablevision has offered Internet-based phone service since late 2003 and claims 250,000 customers in the tri-state area; Time Warner plans to offer the service sometime early this year, and US Cable of Paramus and Hillside is looking at the technology.

Speaking at Smith Barney Citigroup's annual Entertainment, Media and Telecommunications conference in Arizona, Comcast CEO Brian Roberts predicted Monday that the company would make the service available to 20 million homes by the end of the year and 40 million homes within two years. Comcast hopes to have about 8 million customers within five years.

Roberts told analysts that Comcast's service "will have the same reliability from Day One as any of the [traditional phone] services." He also predicted the company would bring a video phone service to the market.

Comcast offers phone service based on traditional circuit- switched technology to more than 1 million customers in the western United States. The technology was installed out West by AT&T before that company sold its cable holdings to Comcast in 2002.

Comcast's move marks another significant entrant in the Internet- based telephone market, which, although still small, is growing rapidly. Cable companies selling television and high-speed Internet service have eagerly added phone service. The large regional phone companies such as Verizon have countered both by partnering with satellite-TV providers and planning to increase the capacity of their networks to ward off the cable industry's advance.

Telecommunications analyst Jeffrey Kagan said Comcast's phone expansion will provide "the single biggest threat to the Baby Bells," such as Verizon.

Friedman, Billings & Ramsey cable analysts wrote: "While these plans do not appear much different from what we have expected, we believe this announcement is a public shot across the bow of the Regional Bell Operating Companies."

Shares of Comcast rose 66 cents to close at $33.23 on Monday.

Voice over Internet Protocol (VoIP) provides phone service over a broadband Internet connection (cable or DSL) and typically offers a wide range of additional features such as three-way calling, call forwarding and the ability to manage phone services using a Web site.

The technology allows calls to be sent more cheaply than traditional phone service, but a recent Consumer Reports review showed that while consumers could save money, the service quality fell slightly short of traditional land-line phones.

But the quality of voice service has improved greatly over the past five years, and the lure of lower prices has fueled the VoIP market.

Along with the cable companies, both Verizon and AT&T sell VoIP phone service, as do smaller companies such as Santa Clara, Calif.- based Packet8, and Edison-based Vonage, which recently passed the 400,000-subscriber mark.

Reaction to Comcast's announcement was mixed. Ravi Sakaria, president and CEO of North Brunswick-based VoicePulse, a smaller VoIP provider that has gained a following among technology enthusiasts, said he welcomed the news because Comcast will spend time and money in educating its customers about VoIP technology.

"It does what AT&T's entry did - it validates the service and technology in the customer's mind," Sakaria said.

For its part, Verizon came out swinging.

"Comcast is entering a crowded, competitive VoIP marketplace that we've been in for some time now," the company said in a tersely worded statement.

"With their pricing going as high as $54, and other alternatives such as [Verizon's] VoiceWing widely available, there is no compelling reason we can see for any customer to choose Comcast as their voice carrier."

Cable and phone companies alike are rushing to offer customers a triple-play of services - voice, Internet and TV - with the convenience of paying a single bill.

Kagan, the analyst, remarked, "The next few years should be interesting as the local phone companies and the cable television companies rush into each others businesses."

***

E-mail: mckay@northjersey.com

(SIDEBAR, page L09)

Voice Over IP: Who and How Much

Monthly unlimited local and long-distance service (All require some type of broadband service)

AT&T CallVantage: $30

Cablevision Optimum Voice: $35 (when purchased with broadband service)

Comcast Digital Voice (service anticipated by end of 2005): $40 (when purchased with TV and broadband package)

Packet8: $20

Time Warner Roadrunner (service to begin this year): $40 (when purchased with TV and broadband package)

US Cable of Paramus/Hillsdale: not available

Verizon VoiceWing: $30 (when purchased with DSL broadband service)

VoicePulse: $25

Vonage: $25

Source: Companies

Source: Record, The; Bergen County, N.J.

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