January 10, 2005 9:54 AM PST

Comcast pushes VoIP to prime time

Comcast, the nation's largest cable company, on Monday began selling its version of Internet phone service in three markets, kicking off one of the most significant challenges traditional local phone companies have ever faced.

Initially launching its Digital Voice service in three cities--Indianapolis, Philadelphia and Springfield, Mass.--Comcast plans to reach 20 markets by year's end. The Philadelphia-based company says it intends to make the service available to all its 21 million customers six months after that.


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Aside from an aggressive rollout schedule, Comcast has a lofty goal for the number of subscribers the service will attract: 8 million customers in five years, or eight times the number of Internet phone subscribers currently in the United States, according to Rian Wren, Comcast's senior vice president of voice services.

Comcast is the latest, and perhaps most important, addition to the roster of companies selling unlimited domestic dialing to any phone number using voice over Internet Protocol (VoIP), which sends calls over the Internet or private network. The technology is cheaper for consumers because it avoids the heavily taxed and regulated traditional local phone networks built and controlled by the Baby Bells--the four regional operating companies formed after the breakup of AT&T. While other cable companies and a host of upstarts such as Vonage Holdings have been selling VoIP since 2002, Comcast is considered the most daunting for the Bells because of its size, financial backing and political muscle.

Wren acknowledged that Comcast is introducing its product months, if not years, behind the rest of its cable competitors, as well as VoIP start-ups such as Vonage and copycats such as AT&T, with its CallVantage service. But the wait was worth it, he says.

"What we've been trying to do is come out with equivalent or better service than traditional phone competition," he said Monday. "You only get one shot at this, when it comes to quality of service."

Comcast's long-anticipated push into VoIP illustrates the cutthroat competitiveness between cable and the local phone providers. Both sides are trying to become the primary pipelines for delivering an array of entertainment and communications services into households, including broadband Internet access, multichannel television, high-definition programming and voice calling.

After investing an estimated $75 billion upgrading their networks during the 1990s, cable companies are reaping the rewards for selling their "triple play" of voice, data and video into homes. The local phone companies, realizing their disadvantage, have realigned their attention to target cable's success and plan to invest billions of dollars to upgrade their decaying copper network with speedier fiber-optic lines.

Later this year, regional phone providers such as SBC Communications and Verizon Communications plan to introduce their own video service in hopes of stealing customers from cable. But with Monday's announcement, Comcast hopes its VoIP service, cheaper than unlimited calling plans offered by the local providers, will keep customers from defecting.

At $40 a month when purchased with Comcast's cable and broadband service, $54 a month on its own, Digital Voice is more expensive than what competitors such as Vonage or AT&T offer. Unlimited domestic dialing plans from other VoIP providers often costs as little as $25 a month.

While it remains to be seen whether the price will be lowered, Wren said "we're not trying to focus on niche or cheap priced phone service."

It's that lower cost--as little as 50 percent of traditional landline rates--that has made VoIP a threat to the traditional phone companies. Already the Bells have seen their customer bases erode as some customers drop their home lines to use only cell phones. Until Comcast's entry, the VoIP market has been dominated mainly by Vonage, which at 400,000 subscribers has helped change the face of the telephone market. But Wren pointed out that Vonage's calls travel over the public Internet, with service quality at the whim of factors Vonage can't control. All of Comcast's VoIP calls will travel over its own network.

Representatives from several of the nation's major local phone companies did not immediately return calls seeking comment.

In an interview in December, Vonage Chief Executive Jeffrey Citron scoffed at claims that his company will ultimately be crushed by larger competition like Comcast. He noted that his company has been more than holding its own against another major cable provider's VoIP offering.

"Cablevision has been doing this as long as Vonage has, and they are, I admit, doing well," but not as well as Vonage, he said. "In the third quarter, they added what I estimate to be 74,000 subscribers. Vonage added 80,000. They'll probably have around 275,000 for the year. Vonage will be a lot higher."

The size of the market and the variety of opportunities, Citron said, will leave plenty of room for Vonage and other dedicated VoIP sellers. "No, we're not going to get swept under," he said. "There are 112 million residential phone lines in the United States that we can all look forward to going after."

Until it began offering VoIP, Comcast had been selling telephone service using traditional circuit-switched means, a much more cumbersome and expensive method that uses the same traditional, circuit-switched technology as is used by the local providers. Comcast will continue serving its 1.4 million phone customers, but the new VoIP service will be its primary focus going forward.

CNET News.com's Jim Hu contributed to this report.

7 comments

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Why would I? Cable has been out for 18 hours?
My Comcast cable broadband connection has been down due to weather for 18 hours, my land line and cellphone are okay though. So where is the benefit? Not to mention the addition hardware to make VoIP work. It's not worth it.

BTW: I got a call in to switch to DSL. Goodbye Comcast.

-akak
Posted by Yakak (2 comments )
Reply Link Flag
no equipment invovled
in my area the phone and cable companies had to open up their networks.

i am not sure if the cable/phone works with no power and a traiditonal corded phone.
Posted by Lite Rocker (42 comments )
Link Flag
Comcast at $54? what rip off!!! Vonage and others offer at $25 or less
Vonage unlimited plans are $25 or less.
Broadvox has theirs at $19.99 for unlimited service. check out www.broadvoxdirect.com
And then there are others such as Lingo, Broadvoice, etc.

And their packages are sweet with caller ID, call forwarding, voicemail.

I personaly have Broadvoxdirect and it is working like a charm. 19.99 for unlimited calls to all states and canada. Plus a virtual number free. So now I have a canadian number and US number.


The bad things about this service as some have mentioned is that if electricity or your internet connection is down, it wont work. But in the past 400 days that I have had Broadband connection, it has only been down maybe 1-2 hours maximum. And that is definitely something I can live with.
The other problem is that 911 calling is not available in MOST areas but they are working on fixing that issue.
BUT you could use any cell phone to make 911 calls. EVEN if your cell phone is not activated because all Cell Phones are wired to free 911 calls regardless of service. I have 3 old cell phones and 911 works on all of them even though i dont have service anymore on those phones.

Switch today and screew SBC for charging around $70 for unlimited calling.
Posted by lavacentral (61 comments )
Reply Link Flag
You can find VOIP 19.99 a month unlimited
You can find voip service for only 19.99/month for unlimited US/Cananda calling at <a class="jive-link-external" href="http://www.gateshare.com" target="_newWindow">http://www.gateshare.com</a>. I have used mine for almost 2 years
Posted by (1 comment )
Link Flag
Lingo, Broadvoice
<a class="jive-link-external" href="http://www.analogstereo.com/acura_owners_manual.htm" target="_newWindow">http://www.analogstereo.com/acura_owners_manual.htm</a>
Posted by Al Johnsons (157 comments )
Link Flag
VONAGE RIPPOFF
I would like people to know about my very negative experience with VONAGE. There are extra charges for everything even when you decide to cancel and return the equipment they charge you $115 and tell you that this money will be credited to your account when the equipment is returned...but they did not credit my account until I had to to call them and remind them...

I would not mind paying this much ONLY IF the everthing worked as promised as I travel a lot and I need my clients to reach me with a local number...BUT the system never worked as good as a regular telephone line even with my cable modem...

I am seriously disappointed with the technology and the way VONAGE creeps their charges on your credit card...I dont think I will touch VoIP for couple of years...

Ian
Posted by atatekin (1 comment )
Reply Link Flag
People do stupid things
So, I decided to join Vonage to avoid paying too much for long distance. Don't we all want to pay less. I got the $14.99 a month deal (and I will use the word 'deal' loosely).

I wanted to get something cheap and I did, but what I got is cheap in terms of quality. I bought the DLink adapter from their website, which was free after instant rebate. In total, I was charged $66.54 for activation, shipping, taxes, service, etc.

After the first month of crappy quality and lost connections, I realize that my bill went up to $21.94, recovery fees, 911, state tax, federal tax, etc. (yeah, $2.40 for calls to Mexico, but still!). So the $14.99 all of the sudden is now $19 something.

Calls to mexico were terrible, it was a headache, even though calls in the USA were fine, so I figure my device and installation was OK. And I have a pretty good speed in internet connection.

Then I decided to cancel, but it happens that is now past the 30 days of money back. So I said, whatever I'll pay the $39.99 of disconnection fee and get it over with... it's my fault for procrastinating.

I called. Then the lady said that the charge was for $97 dlls!!!, dang!!!, I was charged for the device, which I read I was supposed to return. But the device had to be returned during the first 30 days, otherwise you are screwed.

So I said, whatever... charge what you have to charge and get it over with! she then told me that my account could be lowered to $4.99 and for the next 11 months that I have left in my contract the total charge was like $55 dlls instead of $97. And I agreed...

But the next day I couldn't live with the idea that Vonage had my credit card info, and cancel my contract... I paid the $97 dlls...
Posted by tzicali (1 comment )
Reply Link Flag
 

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