Laying the groundwork for cable phone

Year-end reports from some of the largest cable operators indicate a growing interest in new lines of revenue-particularly from local telephone service-and perhaps as a result, new pressures on cash flow.

Of the group-MediaOne Group, Cox Communications, Jones Intercable and Cablevision Systems-only Cox broke out telephony revenues in its year-end statement. The company said it took in $31.8 million from all telephone service. That represents a 142% increase over Cox's 1997 telephone revenues of $13.1 million. Much of that boost came from the addition of more than 26,000 residential customers for Cox's digital telephone product in 1998; the company now supplies local telephone service to nearly 28,000 subscribers in six markets over more than 42,000 access lines.

Cox also continued to beat the industry average for lines per telephone subscriber, showing 1.5 lines per customer in both 1997 and 1998. MediaOne posted 1.3 lines per subscriber.

MediaOne listed 10,000 digital phone subscribers over 13,000 lines; 6000 of those were turned up in the fourth quarter of 1998.

Cablevision reportedly added 2000 residential telephone customers in 1998 in its launch of local phone service on Long Island, N.Y. Jones did not break out results for the service it offers in Alexandria, Va.

"These numbers show commitment to telephony over cable," said Ravi Jain, a consultant with Tel-Analysis Corp. "The operators want to make [hybrid fiber/coax] telephony and Net access happen. That's reflected in their margins, too, which are growing thinner as they rebuild their networks for two-way traffic."

MediaOne, Cox, Jones and Cablevision all posted lower cash-flow margins in 1998 than in 1997. Only Jones showed a rise in its cash-flow margin, from 43.8% in 1997 to 49.5% in 1998.

RCN Corp. reached a preliminary agreement with officials in Montgomery County, Md., to offer competitive phone, cable and Internet services over its fiber optic network to the county's 200,000 residents.

Canadian competitive local exchange carrier MetroNet Communications Corp. signed a memorandum of understanding with Nortel Networks to purchase OC-192 Sonet and dense wavelength division multiplexing equipment to use at the core of its fiber backbone.

Network Access Solutions launched a 7 Mb/s DSL service on the East Coast from southern Virginia to Boston. CuNet is designed specifically for businesses, telecommuters and government offices.