The best phone company in America?

THE NEXT BIG LEAP for both Cox Communications and Cox Business Services will be the integration of wireless into their service bundles. Through its joint venture with Sprint and other cable companies and its recent acquisition of AWS spectrum, Cox is moving steadily in the direction of fixed/mobile convergence (FMC).

“Having spectrum is important,” Esser said. “Getting it cleared is the next step, and we are doing that now, but it takes time. Then we have six or seven options as to what we do. We could build it out ourselves, or partner, we could do data or voice or both.”

The company also has an IP multimedia subsystem (IMS) strategy already in place, Bowick said, working with CableLabs and the Packet Cable 2.0 specs, which will converge with IMS. Cox will have IMS in the lab in 2007 and wants to offer IMS-based services in 2008.

In the FMC realm, as with other services, Cox is also busy asking its customers what they want — and some of the answers are surprising, Kaish said.

“I think service providers are probably more enthusiastic about wireless/wireline convergence than are the end users,” he said. “What our research said was that people still use separate phones for each. Dual-mode phones are not enough of a killer app. We just tested 15 features for IMS, and we spent hours trying to turn these concepts into something an average person can understand.”

Cox also is capitalizing on its deep fiber penetration to be able to increase the bandwidth it delivers as required by new services or for competitive reasons. For example, Pugliese said, where it competes with Verizon's FiOS technology, Cox will offer higher data service speeds “to make sure customers get all the speed they'll ever need from Cox.” And to compete with lower-cost DSL offerings, Cox introduced a 768 kb/s service at $26.95.

Still to come this year, the company will begin to roll out switched digital video, which it has already trialed.

“This is an empowered, aggressive culture,” Kaish said. “The attitude here is that we have to hurry — these guys [AT&T and Verizon] are so big right now, they are going to have that scale advantage on us and that cost advantage on us. We have to innovate faster to stay ahead of them, and take care of our customers better.”

Analyst Kashoor believes, however, that Cox has excelled most “as a fast follower — I don't think of them as being bleeding edge, but I always think of them as having a solid offering.”

One major advantage enabling Cox to invest in its technology and its customer care systems has been its unique position in the telecom industry as a privately held firm — one that isn't constantly justifying its investments. The company, which had been majority-owned by Cox Enterprises, went completely private last year.

“People thought we were nuts getting into the telephone business — they said we'd never get 10% penetration, then we got 15%, and now we are in almost a quarter of the homes today,” Esser said. “Through all of that, the one steadying point was that Cox Enterprises and the Cox family owned most of the stock and always took a long-term perspective on our business. We have delivered on the dream they had for what we could do to transform from a video business to a telecom business.”