VON: VoIP just means to cable's end

SAN JOSE--Major cable players are using voice over IP primarily to compete with incumbent telcos for basic residential voice service and not to push the envelope with innovative new features.

Speaking at the Voice on the Net conference in San Jose this week, representatives of Comcast, Cox and Time-Warner sounded one clear theme--VoIP is the means to their end, and that end is to be the primary residential voice service provider.

None of the three companies is using VoIP in its product name or its marketing--in fact, all three are using "Digital Telephone" or "Digital Phone" as a product moniker.

Michael Jablon, senior director of product marketing for Digital Phone at Time-Warner, said his company deliberately avoided layering on new features to its offering, after research showed customers weren't all that interested.

"Adding more actually creates the perception that customers are paying for more than they need," he said. Time Warner looked at actual usage of advanced features and determined that by offering seven basics--caller ID, call waiting, wire maintenance, speed dial, anonymous call control, voice mail and CD voice quality--it covered the bases.

Cable companies are rapidly building their base of telephone customers, said Michael Harris of Kinetic Strategies, who moderated the panel discussion of the three cable players. Cable adds 18,000 new VoIP telephony subscribers each week, he said. Cable IP phone service is now available to 18 million homes in North America.

Cox, which is adding VoIP to its TDM voice service, doesn't distinguish between the two to its customers, said Mike Pacifico, director of marketing for Digital Telephone at Cox.

"Adapting to technology is important, but customers don't care," he said. "Our marketing message, our packaging and our pricing is consistent" for both TDM and VoIP offerings.

Cox, which has 1.3 million residential telephone subscribers already, is realizing 40% EBITDA margins on voice, Pacifico said, while reducing customer church to 1.4% among customers who buy a voice, data and video bundle. Where Cox offers the bundle, it achieves an average 47% service penetration--and has increased that to 63% in Orange County, Calif., and 61% in Omaha, Neb.

Pacifico also cited the "halo effect" that voice service has, increasing customer satisfaction in key areas such as quality customer care, innovation and ease of doing business.

Comcast is rolling out VoIP this year, building on the 1.2 million voice subscribers it inherited when acquiring AT&T Broadband. The largest cable operator in the U.S. is adding on-line customer control of features and call detail as well as Web-based unified messaging to its VoIP service, said Tom White, vice president of marketing, voice services, for Comcast.

"But our challenge is to design these interfaces and applications to be as easy to use as possible," said White.

Comcast hopes to make voice fun by creating the ability to customize service by downloading celebrity greetings for voice mail and by giving customers the ability to control their voice services using their TV remote control.