Time Warner Plans to Sell Voice Phone Service Over Its Cable Lines

Dec. 10–A long-foretold feud between phone companies and cable providers is about to become real.

Time Warner Inc. announced Monday that it will sell voice phone service over its cable lines in nearly all of the 27 states it serves by the end of 2004. Such signs of direct competition between phone and cable companies could lead to falling prices for TV, Internet service and phone calls, analysts said Tuesday.

Though they haven’t competed on a broad scale before, cable and phone companies are natural rivals in one important way: They both have wires that reach into most U.S. homes.

Technology has made it possible for companies in both industries to supply broadband-speed Internet to consumers. And now that cable companies appear ready to pipe in voice service as well, the industries are lining up for a serious fight.

“This is the year that everybody starts to get a bloody nose,” said Jeff Kagan, an Atlanta-based industry analyst. Next year “is the beginning of what I call the homogenization of the telecommunications industry. All the companies start to look alike.”

With cable companies threatening to encroach on their territory, phone companies are seizing on video as their future. Their networks aren’t fast enough yet to pump through the crisp video that cable companies are able to provide, so they’re partnering with satellite companies to offer an alternative.

San Antonio-based SBC Communications Inc. announced an alliance earlier this year with EchoStar Communications Corp., which operates the Dish Network satellite service. Satellite company DirecTV, owned by Hughes Electronics Corp., has marketing agreements with Verizon Communications Inc., BellSouth Communications Inc. and Qwest Communications Inc.

SBC, Verizon and others also plan to offer voice service over Internet lines in areas where they haven’t traditionally offered voice service.

Besides, Time Warner, cable companies such as Comcast Corp., Cox Communications Inc. and Cablevision Systems Inc. plan to expand their Internet phone services in 2004.

The idea is to assemble a palette of services consumers buy regularly and combine them in a package.

“Everyone is looking at bundling something,” said Pat Hurley, broadband analyst at research firm TeleChoice. “It’s one of the answers to how you get customers and keep them.”

Cable and phone companies argue, in their own ways, that if you’re already buying TV and a home phone line, why not buy the two together for a discount?

“What that all means is increasing benefits for consumers and a very tough time for telephone companies and even cable companies to make money,” said Robert Atkinson, a research director at Columbia University’s Institute for Tele-Information.

It’s too early to declare a winner in a price war that hasn’t even started yet. Some analysts believe cable companies have the upper hand because their networks are typically faster and more flexible than those of the phone companies.

Others believe phone companies that own at least part of a wireless phone service provider — such as SBC’s 60 percent ownership of Cingular Wireless — will have an advantage because they can offer those services in their packages.

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