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Comcast Set to Sell Phone Service in the Atlanta Area

Posted on: Wednesday, 28 December 2005, 18:00 CST

By Scott Leith, The Atlanta Journal-Constitution

Dec. 27--Atlanta's long-awaited phone fight is finally getting under way.

Slowly but surely, the region's dominant cable provider, Comcast, has started to promote and sell its phone service, called Digital Voice. Set for an even bigger push in early 2006, the service, delivered using Voice over Internet Protocol technology, or VoIP, will put the company on a collision course with telephone titan BellSouth.

Comcast claims it has been signing up 1,000 people a day in the region, spurred largely by a deal that starts at $39.95 per month for unlimited calls.

"Consumers are going to flock to this like nothing else we've ever peddled to them," said a confident Bill Connors, who runs Comcast's Atlanta operations. "We're now going to force competitors to react to us." Though VoIP is still a mysterious concept to many people, this alternative way of getting phone service is rapidly growing in popularity. There were 714,000 users in the United States a year ago compared with about 3.6 million now, according to TeleGeography, a consulting firm based in Washington.

VoIP use varies widely from market to market, however. In metro New York, VoIP is fairly widespread, thanks in large part to aggressive rollouts by cable providers Time Warner Cable and Cablevision.

For those who live in places such as Atlanta -- which is served by the nation's biggest cable company, Comcast -- VoIP has been less of an option.

That's largely because Comcast has been slow to get into the game.

In the third quarter of this year, Comcast was offering Digital Voice in 21 markets, including Atlanta. A year before, it was only three.

"There's been a lot of hard work over the last six months getting the company ready for phone," Chief Operating Officer Stephen Burke said in a conference call with analysts to discuss earnings.

"Literally thousands of people have been trained." Connors said his Atlanta operation is still adding staffers to handle phone work, including technicians.

Ron Frieson, president of BellSouth's Georgia operations, has girded for a VoIP onslaught, whether from Comcast or other cable providers, notably Cox Communications, which has territories in Middle Georgia. (The Atlanta Journal-Constitution and Cox Communications are owned by Cox Enterprises.) Cable companies are "fierce" competitors, Frieson said. But it's yet to be seen whether they can snare much business from BellSouth.

"We still believe that value and service is what's going to win in the end," Frieson said.

Early users of VoIP tend to fall into two categories -- cheapskates, if you will, who want rock-bottom prices, or techies who like the latest of everything.

A more mainstream audience might adopt VoIP, however. TeleGeography predicts usage will spike to about 19 million subscribers by 2010.

Jason Armstrong, an analyst with Goldman Sachs, also expects companies like BellSouth to continue losing landline customers, in part because of competition from VoIP.

Vonage has already helped popularize the category and remains the nation's largest VoIP provider. Atlantan Sue Musselman first used Vonage while living in New York. When she moved South, she stayed with the company, which has about 45,000 users in Georgia.

"I keep telling people they should try it," said Musselman, a vice president with Brand Velocity, a management consultancy.

Meanwhile, Comcast -- which would not disclose exactly how many local VoIP subscribers it has -- is playing catch-up. Richard Turner, of Kennesaw, signed up for Digital Voice two months ago, when a telemarketer pitched him the service.

Turner dropped his BellSouth landline in favor of Comcast. He said a technician from the company spent half an hour linking Comcast's cable line into his home phone system. Even his number was switched from BellSouth to Comcast, so he didn't have to change.

Suddenly, Turner has become an unlikely Comcast fan. "I used to hate them, too," he said. "I've really turned around." Indeed, many cable companies don't have a reputation for solid service.

Comcast already has experience in the phone business in Atlanta, with roughly 100,000 subscribers to Digital Phone, a service that works like traditional landlines.

Comcast inherited the service from two predecessor companies, MediaOne and AT&T Broadband. It was never considered much of a success. Comcast did little with it, and it hasn't grown.

With VoIP, Comcast is ready for a whole new approach. To start, Comcast will pitch the simple and generally cheaper pricing structure for VoIP.

Its Digital Voice offers unlimited calls in the United States and Canada for $39.95 per month for those who also subscribe to cable and high-speed Internet service. As a stand-alone service, the service costs $54.95.

It's difficult to compare such service to BellSouth's offerings directly, given the complexities of the way services are bundled.

Generally, a comparable BellSouth plan would cost about $59, but that could be reduced by subscribing to additional services.

Frieson, meanwhile, believes low prices on VoIP won't be enough to convert the masses. BellSouth's strength, he said, is its ability to provide reliable service. "We have done phone service for a very long time, and we understand that business very well," he said.

Yet BellSouth realizes that VoIP can't be avoided. The company recently announced it is starting its own consumer VoIP offering called Digital Phone Service. For the time being, the service, with a monthly cost of $29.99, is being handled by a third-party provider, 8x8, and has limited availability. It's also getting no marketing support and chiefly will be offered to those who seek it out or threaten to switch service providers, such as to Vonage or Comcast.

In the long term, however, BellSouth plans a full VoIP rollout.

"Clearly, we see it as a product we want to offer," Frieson said.

Connors believes Comcast's phone service will become more attractive when new features become available in 2006, such as having a caller's number pop up on a user's TV screen.

Comcast also is part of a group of four cable companies that have a deal to provide cellphone service via Sprint Nextel.

The group expects to sell phones that can work off a wireless network at home and convert to cellphone use when a person leaves.

But that is all in the future. For now, Comcast is just ready to get into the phone business.

"It's nice to be out there, charting the waters," Connors said.

-----

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

Copyright (c) 2005, The Atlanta Journal-Constitution

Distributed by Knight Ridder/Tribune Business News.

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Source: The Atlanta Journal and Constitution

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