HOLD THE IP PHONE

Local exchange carriers eventually could face competition for residential voice service from cable operators deploying voice-over-IP technology. But if last week's Western Cable Show in Los Angeles demonstrated anything, it's that cable operators still have many obstacles to clear.

Even among the largest and most aggressive operators, IP telephony rollouts won't begin until near the end of next year - at the earliest.

AT&T Broadband and Internet Services, one of a few cable operators to demonstrate an IP voice system, projects it will have up to 500,000 local residential voice customers by the end of 2000. Of that total, most will have service delivered through circuit-switched systems, which have reached mass deployment. "This is no longer speculation," said C. Michael Armstrong, chairman and CEO of AT&T, which will acquire many cable voice customers through its MediaOne acquisition.

The economics surrounding AT&T's cable telephony plans dictate that it enter the market as soon as possible with the technology currently available, according to several vendors at the show. Perhaps even more important are the renegotiated terms under which AT&T will gain access to voice customers over Time Warner's cable plant. Previously, the two companies agreed that Time Warner would get at least $450 per household served plus a percentage of voice revenue. Although Armstrong wouldn't specify the new terms, it's expected that with the MediaOne acquisition (and the equity stake that MediaOne holds in Time Warner), AT&T will win more favorable terms.

Beyond business logistics remain nearly a dozen technical hurdles to providing IP voice over cable. Among the most important are quality of service, back-office operations and provisioning. Vendors must move into an IP-based system and provide the scalability for large deployments. But, many vendors at the show said technology is moving fast enough that they anticipate a shift to IP-voice deployments by late next year.

"By the second half of next year, we can remove the technology issue," said Dee Dee Nye, vice president of cable communications for Lucent Technologies, which announced enhancements to its CableConnect Solution that give cable operators a migration path to IP voice. Lucent, which is testing an IP voice cable system in New Jersey with Comcast, will work with General Instrument to develop IP voice products to interoperate with GI gear in the home.

Arris Interactive, which has cable telephony systems in 28 cable operators worldwide, also unveiled a migration path to IP voice. Among the company's plans are the addition of an IP-voice slot to its Cornerstone host digital terminal,.

"We think it's better to offer cable operators a full package of services and let them subtract the things they don't want," said Bob Stanzione, president and chief operating officer of Antec, which jointly owns Arris with Nortel Networks. Still, Stanzione doesn't anticipate having a fully IP voice-capable product available until the third quarter of 2000.

Tackling the hardware in the access side is no simple measure, either. Tellabs used the event to map out the migration of its Cablespan platform to the IP-voice environment. That road begins with changes in the access side hardware and continues with changes on the network side. "The challenging part is the network part," said Thomas Ruvarac, group marketing manager of Tellabs' broadband media group.

At the same time, though, the company unveiled a configuration to its host digital terminal that lets cable operators provide 3960 circuit-switched voice lines in one rack.

"Like it or not we're going have to talk to this circuit network for a long time," Ruvarac said.