Cable heeds the call of the call

The banner over the door read "Cable 2000," but on the show floor and in the breakouts at the National Cable Television Association's annual gathering in New Orleans last week, much of the talk centered on telephony - specifically, how cable operators can add it to their menu of enhanced services.

"Cable really has the opportunity to address the last great communications monopoly - that of residential telephony," said John Egan, chairman of Antec. Rising local phone rates give cable operators a market opportunity, despite the large expenditures needed in capital and the training costs and support resources, he said.

Alex Best, executive vice president of engineering for Cox Communications, illustrated those costs for his company's cable phone effort. Cox currently pays $650 in capital equipment for every residential customer it signs, including a $125 charge for a pro rata share of the network's uninterruptible power. But the economics work.

Cox gets $60 per month per telephone customer because 50% of subscribers get a second line, and 75% use the long-distance that Cox resells. Even while discounting RBOCs' primary line charges by 10% and their second line charges by 50%, Cox's hybrid fiber/coax (HFC) phone margins are in the high 40% range and rising.

"And there's one good thing about the telephone business: no programming costs," Best said.

Much of the telephony discussion swirled around AT&T, which defended its telephony results in several panel discussions and had to live down a projection from early 1999 that it would have 2 million cable phone customers this year. The company has since amended that forecast to say that it will deliver circuit-switched telephony over HFC to 400,000 to 500,000 customers by the end of the year.

"I don't know where that 2 million number came from," said Dan Somers, president and CEO of AT&T Broadband and Internet Services. "We walked out of 1999 with install rates of about 50 telephone customers per day, and we're now at 650 per day, pushing 700. Our daily sales rate exceeds 1000 a day. We will meet our target."

The assets permitting such a ramp-up are the company's installers, said Tony Werner, executive vice president of engineering at AT&T BIS. AT&T has about 237 people provisioning 2000 HFC phone lines per day but expects to almost double that rate when flow-through provisioning becomes more widespread. Currently, the company has flow-through provisioning in five of its 10 cable phone markets.

On the question of circuit-switched vs. IP voice services, Werner said, "We'll be testing IP technology late this fall, but we have to have the reliability, the quality and the full set of class features, even if they're fairly esoteric. Right now, IP can't perform that."

Other cable executives said their companies were more interested in leveraging the digital networks that will deliver IP telephony at lower cost. Time Warner Cable has delayed implementing telephony since starting a circuit-switched service in Rochester, N.Y., four years ago, said James Chiddix, chief technology officer for the company. "Technically, it works just fine," he said of the service, which has about 4000 customers. "But we decided to focus our capital on getting our plant upgraded as rapidly as possible and on investing in the cable-modem business."

But Time Warner has been conducting a test of second-line IP cable phone tests among employees in Portland, Maine, and will offer that service to other customers in a few weeks, Chiddix said. Time Warner would be "comfortable" partnering with someone to provide lifeline service with network power, he said.

Time Warner Cable Chairman and CEO Joseph Collins said his company believes the future market will support many flavors of cable telephony -circuit-switched and IP, lifeline and second line. "We think all those things wi ll coexist," he said.

AT&T Broadband and Internet Services

Now more than 40,000 customers for circuit-switched service in 10 markets, selling to 1000 customers per day and installing 650 per day

Cox Communications

135,000 circuit-switched phone customers in eight markets; added 12,000 in March. Installing about 3000 subscribers per week

Time Warner Cable

4000 circuit-switched customers in Rochester, N.Y.; preparing an IP second-line pilot in Portland, Maine. Time Warner Cable may partner for lifeline service

Comcast

Active trials of second-line cable IP telephony with Lucent and Motorola since September 1999; expansion timed to PacketCable 1.0 release