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New Kind of Phone Service Makes New Jersey Debut

Posted on: Tuesday, 11 November 2003, 06:00 CST

Nov. 12--Phone service from the cable company has arrived for New Jersey's 1 million Cablevision customers.

The cable giant officially launched its service in New Jersey on Tuesday, becoming the first cable operator in the state to sell phone service over a cable network.

Cablevision, which announced wider third quarter losses Tuesday, hopes to boost revenues by offering a so-called triple play to consumers: television, high-speed Internet, and telephone service.

"It's definitely a great move for Cablevision to go for such a large regional deployment," said Vamsi Sistla, director of broadband research with Allied Business Intelligence, a technology market research firm based in Oyster Bay, N.Y.

Cablevision is charging customers $35 a month for its Optimum Voice service, which includes unlimited local, regional, and long-distance service and features such as caller ID and call waiting. The service offers 911 emergency service, but phones connected to Optimum Voice, unlike traditional phone networks, won't work if your power goes out.

The company isn't selling its phone service to everyone.

You have to be in Cablevision's service area, which includes a large portion of northern New Jersey, and you must sign up for Optimum Online, the company's broadband high-speed Internet service, which can cost between $45 and $50 a month depending on whether you also purchase its television services.

The company has about 1 million broadband customers across its entire region, which includes New Jersey, New York, and Connecticut.

Cablevision initially talked about the phone service this year as a second line for customers who have traditional phone service from a company such as Verizon.

But, according to a Cablevision spokesman, a trial of the technology on Long Island led Cablevision to market the service as a potential replacement for a traditional phone line.

Consumers who sign up for the service will get a new modem that connects to their computer and has a phone jack. You can plug a phone line into the modem and use a single phone or a splitter to plug in multiple phones. The company is working on a method that will enable customers to send the signal throughout a home to existing wall phone jacks, but it is not yet available, the company said.

The company's move into the business of selling phone service poses a threat to traditional phone companies such as Verizon, which are losing phone lines to competition from other phone companies and wireless providers. Some traditional phone companies have inked deals with satellite television providers to add a video offering to their product mix.

If the cable companies develop a technology that gives their phone service the ability to work during a power outage, the phone companies will feel the pressure, Sistla said.

"Once it hits that stage, the [telephone companies] will have a very tough time holding onto their subscribers," he said.

Cablevision is also positioning itself to compete with a group of upstarts that include Edison-based Vonage, a company that sells phone service over a high-speed Internet connection, essentially riding over Cablevision's network.

Cablevision's phone service is based on the same technology as Vonage's; it breaks a voice conversation into tiny packets of data and ships them over a network. In Vonage's case, the bits of data are shipped over the Internet and then onto the traditional phone network. In Comcast's case, the bits are shipped over the company's cable network and then onto the traditional phone network.

Comcast said it guarantees high-quality service because it gives priority to the voice traffic flowing over its network.

As for the rest of North Jersey, Comcast, which has about 24,000 customers in Bergen County and almost 1.5 million statewide, is testing phone service, but won't say when it might begin to offer it in New Jersey.

Time Warner, which has about 54,200 customers in Bergen County, also is testing phone service but doesn't expect to offer its New Jersey customers service until the latter part of next year, a company spokesman said.

Tiny US Cable of Paramus-Hillsdale, which competes head-to-head with Cablevision in those towns, is poised to offer cable phone service but is taking a cautious approach.

In trials, the company learned that phone service uses up bandwidth and could potentially interfere with other services such as high-speed Internet access.

"We don't want to risk our cable modem business and our video business for people that are going to have a two-way conversation at the expense of other services," said Joseph Appio, vice president of operations for US Cable.

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(c) 2003, The Record, Hackensack, N.J. Distributed by Knight Ridder/Tribune Business News.

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