Comcast moves forward with voice

Reporting a banner quarter for its high-speed Internet business, Comcast announced plans to expand its new voice-over-IP service.

The cable television provider has launched its IP Phone telephony service in three test markets, Comcast chief operating officer Steve Burke said. It has hired corporate and regional teams to develop product offerings, selected vendors and is now delivering service to live customers. The live market tests are performing "very well," he said.

Comcast will increase service in those three initial markets this fall and add markets in 2005.

"We’ve been cautious about the phone business in the past, as you know," Burke told listeners to the company’s earnings call this morning. "We’re now convinced this will be a good business for us. We’ve already made our platform investments, so the returns on capital look very good. The technology is now proven. We think phone can be bundled effectively with our other products. While IP Phone won’t be that material to us financially in 2005, we think it could be a very significant growth engine in 2006 and beyond."

When asked about the potential threat from Verizon Communications’ rollout of fiber-to-the-premises (FTTP), which will include video service next year, Comcast CEO Brian Roberts said plenty of uncertainties still surround Verizon’s FTTP initiative, including how committed the carrier is to the initiative over the long term and how cost-effective it is. "Even if they do it, when they do it, you’re looking at the fourth or fifth competitor in the market," Roberts said. "At the same time, as a facilities-based competitor, if and when we’re able to successfully go into the VoIP business, we’re the second competitor in the market."

Roberts said he’s looked at hypothetical analyses of FTTP deployment that calculate possible rates of defection among cable customers, but added, "We’ve probably added more products this year already than several years’ worth of those kind of analyses would suggest [FTTP] is going to hurt us…In markets where it happens, it’s a meaningful competitor; it’s number four or number five, and you have to deal with it."

Comcast cannot "answer every possible what-if question in this company," Roberts said. "But I haven’t seen a business model that says [FTTP] is a great return on investment."

Comcast refused to comment on a Wall Street Journal article published yesterday that claimed Comcast may have already selected Sprint or Level 3 to help it deliver VoIP service. "We’re doing a number of things to get ourselves prepared for VoIP and also to make our high-speed data business more efficient and more profitable than it already is," Burke said. "Beyond that, we don’t want to comment on agreements with other public companies."

Comcast focused much of its discussion during the call elsewhere, including the 549,000 new high-speed Internet customers it added in the third quarter, the highest quarterly addition in the company’s history. The company now has more than 6.5 million broadband customers.