Nov 26, 2003 12:00 PM,

Cable telephony surging

By Vince Vittore

Cable telephony services are being adopted quickly on a global basis, with subscriber numbers expected to top 10 million by the end of 2003, according to a recent report from In-Stat/MDR.

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The analyst firm also is forecasting that cable operators will be serving more than 19 million subscribers by 2007 as U.S. multiple system operators begin deploying service using voice over IP. The surge in growth also is expected to coincide with cable operators making the service more profitable as the cost of entering the voice business drops.

Comcast, the largest U.S. MSO with around 1.3 million telephony subscribers, noted in its third quarter earnings that it has turned its voice operations into a profitable business since merging with AT&T Broadband. Additionally, the company recently announced plans to expand its trial of VoIP in suburban Philadelphia and move into Hartford and Indianapolis very soon.

"The opportunity as we deploy VoIP into new markets is we’ll able compete very effectively with the RBOCs," John Alchin, executive vice president, treasurer and co-CFO of Comcast said at last week’s Morgan Stanley Technology, Media & Telecoms Conference in Barcelona. "This will not be a copy cat service. This will be a service that we can probably compete on features rather than price."

Current cable telephony offerings generally mimic incumbent telco service but at a discount, according to the In-Stat report. Going forward, the most effective means of attracting customers will be through bundles of voice with video and/or high-speed data.

Overall, that should translate in higher revenues. Revenues from cable telephony service are projected to hit $3.7 billion worldwide in 2003, jumping to more than $6 billion in 2007.

Comcast anticipates its greatest financial jump to come in margins as VoIP is deployed. The company is projecting its voice business to operate at a cash flow margin of 25% next year, Alchin said.

"The opportunity for the telephone business in 2004 is very real and gets be very exciting," he said.