Cable telephony speaks up

Cable operator Cablevision says its Optimum Voice phone service is attracting customers at a record rate, another sign that the cable industry is becoming a force in the U.S. phone market.

The New York-area cable powerhouse's unlimited minutes phone service now has 400,000 customers, and is adding about 7,000 more a week, the company reported Thursday. A majority of those customers are replacing local phone service from incumbent local phone operator Verizon Communications, Cablevision said.

On Wednesday, Time Warner Cable's Digital Phone service reported 372,000 customers at the end of its first financial quarter in 2005, and executives at the company say the total is rapidly closing in on 500,000. Comcast and Cox Communications, the two largest cable operators in the United States, each have 1.2 million phone customers and previously reported strong growth of their phone business.

These tallies, even with Internet phone operator Vonage's 600,000 subscribers, are meager compared with the approximately 113 million homes and businesses served by cable's chief rivals--regional Bell operators such as Verizon Communications, Qwest Communications International, BellSouth and SBC Communications. Still, Time Warner Chief Executive Richard Parsons said that the growth rate of cable's phone-service subscriber base--about 15,000 new phone customers a week at Time Warner Cable--should send a strong message to the Bells.

Indeed, some of the Bells acknowledge that cable operators have made inroads on their turf, especially by bundling voice, video and high-speed Internet services and selling the package at a discount, a tactic known as a "triple play." To defend and expand their market, the Bells are creating their own triple-play bundles and are in various stages of building new high-speed networks to more effectively compete with the cable operators' TV service.

Cable operators seem undaunted. "With this kind of start, our Digital Phone is on its way to becoming a major new business for us," Parsons told financial analysts this week.