February 23, 2005 12:00 PM PST

Cablevision rings in 270,000 phone customers

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Cable operator Cablevision said on Wednesday that it now sells telephone service to more than 270,000 homes, another sign that Internet-based telephony is on the move and cable companies are leading the charge.

The nation's top four cable operators provide phone services to about 3.5 million people--two-thirds of all U.S. homes that use some form of Internet telephony. About 1.1 million of the cable telephony homes use voice over Internet Protocol (VoIP) software, which lets a broadband connection double as a phone line; the balance use traditional telephone networks built by Cox Communications and Comcast.

Cable operators added phone services as part of a strategy to bundle a triple play of steeply discounted voice, video and high-speed data. By adding voice, cable operators are taking away business from Verizon Communications, Qwest Communications International, BellSouth and SBC Communications, the nation's top four local phone operators, which have all struck back with their own service triple plays by adding their own TV services. Cable operators have telephone operators on the defensive, most analysts say.

"It's cable's show right now," said InfoTech senior analyst Warren Williams.

By reporting up to 1,000-fold increases in phone subscribers over the last 12 months, cable operators are clearly drawing in the lion's share of the new Internet phone customers. They are also creeping up on Vonage, which, at 500,000 subscribers, is the most recognized of U.S. Internet phone operators. It is also the nation's largest "pure" VoIP provider--as opposed to bundling VoIP with other services.

Cable telephony subscriber numbers are growing at rates faster than Vonage is seeing. Time Warner Cable says 11,000 new phone subscribers sign up each week, at least twice what Vonage adds every week.

Healthy growth rates are spread among all top-five cable operators. Cablevision said Wednesday that its phone subscribers grew 44 percent during the last three months; Cox added about 250,000 new telephone subscribers during the first nine months of 2004, the latest figures its reporting.

"No, we're not going to get swept under," Vonage Chief Executive Jeffrey Citron said in an earlier interview. "There are 112 million residential phone lines in the United States that we can all look forward to going after."


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