Comcast, the nation's biggest cable-TV company, yesterday unveiled an ambitious plan to compete directly with local phone companies by offering consumers moderately priced Internet-based...
CHICAGO — Comcast, the nation’s biggest cable-TV company, yesterday unveiled an ambitious plan to compete directly with local phone companies by offering consumers moderately priced Internet-based telephone service.
The Philadelphia-based company’s strategy represents a major, but not unexpected, challenge to already embattled traditional phone companies such as SBC and Verizon.
Comcast previously had signaled its intentions to offer Web-based phone service and has been testing the service in a handful of smaller markets for some time.
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Nonetheless, noted Morningstar analyst Michael Hodel, the company’s statement yesterday underscored once again that “cable firms represent a large threat to existing local phone companies.”
Comcast said it intends to be offering its digital telephone service in 20 markets by the end of the year and to expand offerings to all its markets by the close of 2006.
Within five years, the company said, officials expect to claim a 20 percent share of the phone market in the areas Comcast serves; that would represent about 8 million phone customers.
Assuming the plan works as Comcast predicts, the rollout of the company’s “Digital Voice” service also promises to become a watershed in the technological “convergence” that is increasingly blurring the distinctions between the computer, telephone, television and recorded entertainment.
As the pace of that convergence accelerates, providers of phone and cable service are squaring off against each other, with cable companies trying to poach phone customers and phone companies belatedly offering video products.
Comcast and its rivals are exploiting the fact that it costs relatively little to add phone service to homes that already have cable and high-speed Internet service. In addition, they don’t face the same regulatory restrictions that hinder phone companies.
At the center of the cable-industry effort to claim phone customers is a Web-based format known as Voice over Internet Protocol, or VoIP.
VoIP turns speech into electronic packets that are indistinguishable from other data. That lowers costs by increasing a telecom network’s capacity. A single telephone conversation claims an entire phone line, for example, but numerous data packets can use a wire simultaneously, just as Internet messages do.
Some lower-end VoIP systems use the public Internet as a transmission vehicle; those services can be nearly free but often present quality difficulties.
Comcast Chief Executive Brian Roberts emphasized to analysts at a telecommunications conference in Phoenix yesterday that its calls will be carried over the company’s own high-speed data network. That network, which relies on leased long-distance lines, includes the extensive broadband operations that Comcast acquired from AT&T more than two years ago. Comcast, which has been testing the VoIP system in a handful of cities, didn’t identify the markets where it will first introduce the new system.
It is far from a pioneer, however. AT&T began offering Internet telephony services to consumers last summer. Indeed, many of those consumers get AT&T’s VoIP service using Comcast’s high-speed Internet connection.
And SBC, which plans to offer consumers VoIP as an alternative later this year, is also launching video products by this summer to compete with Comcast.
SBC Chief Executive Officer Edward Whitacre Jr. has said he would like to offer consumers a full range of wired and wireless phone service as well as high-speed Internet and TV for about $100 a month.
Under Comcast’s plan, the company’s existing cable-TV or high-speed Internet customers will be offered the chance to make unlimited local and long-distance calls for $39.95; that includes caller-ID, voice-mail and call-waiting features.
If Comcast charges about $40 a month for unlimited calling, its prices would be somewhat higher than those charged by AT&T, Vonage and others that offer such service. But comparing prices at this point is difficult, because the providers that own their own networks are expected to provide attractive discounts to customers who “bundle,” or buy all their services from a single source.