The last time I checked, RCN and the other new telephone providers
competing with the bell phone companies did not offer free directory
assistance or access to the telephone directory as the larger companies
do, such as SBC, Verison, Quest, and Bell South.

Kelly



The New York Times

December 26, 2002

Phone Calls on the Cable Bill By WILL WADE

ALL Peter Odabashian wanted was a second phone line. But when the phone
company said it needed to run new wiring into his apartment, which would
cost nearly $300 and require waiting several weeks, he found an
alternative: the cable company.

Mr. Odabashian turned to the RCN Corporation, a cable company that offers
telephone service as well as "The West Wing" and "The Sopranos." "RCN
said it would install the line for free and throw in a month of service,"
said Mr. Odabashian, a film editor in New York who previously had cable
service from Time Warner. "I signed up for the full works. Now I have two
phone lines, TV and a cable modem from them."

Mr. Odabashian is one of a growing number of consumers who receive
telephone service from a cable company instead of a telephone carrier.
Faced with the increasing success of satellite television, cable
companies are moving to retain customers by offering services that
satellite companies cannot match. Phone traffic is part of that strategy.

Cable companies have spent millions in recent years to upgrade equipment
to carry digital television and two-way Internet traffic. Adding a third
information stream, voice, is not difficult. Not only does this reduce
defections to satellite services, it also generates a new source of
income. The cable industry's long-term goal is to deliver digital
television, high-speed Internet access through cable modems, and
telephone service; insiders call it the triple play.

"The triple play is very important, and we've been aggressive about
offering all three services," said David Pugliese, vice president for
product marketing at Cox Communications. Cox was an early mover in the
cable telephone market, starting the service in 1997.

Lower rates are among the attractions - Cox says it charges as much as 30
percent less than competing phone carriers for comparable service - and
more people are making the switch. According to In-Stat/MDR, a market
research firm, every major cable carrier is moving in that direction and
2.3 million American homes are already using cable telephones. "That's a
small fraction of U.S. households, but it's growing, and it's starting to
appear on the radar screen of the phone companies," said Mike Paxton, a
senior analyst for the firm.

Sending phone calls through coaxial cable is hardly different from using
thin phone wiring. Phone wiring inside a home terminates in a box outside
the house or apartment. With cable phones, the box is fitted with an
adapter that relays calls to a neighborhood cable node, and then to the
head end, the cable industry equivalent of the telephone central office.
At the head end, the call is routed onto the conventional phone network.

"Our goal is to make this process completely transparent to the
customer," Mr. Pugliese said. "The only real change is a different
connection to the outside of the house."

But the transition to cable phone service has not been free of problems.
Shortly after his RCN service was started in February 2001, one of Mr.
Odabashian's phone lines went down, and then the other. For almost a day
he had no phone at all. "I was the first in my building to get RCN, and
they had huge problems because my building wasn't ready," he recalled. "I
think their sales team wasn't in sync with their installers."

A more significant issue with cable telephones is electricity.
Traditional phones draw power directly from neighborhood telephone
wiring, which is how they provide so-called lifeline service, operating
even during a blackout. Most cable phones in use today cannot draw power
off the cable network, although new standards will soon address that
shortcoming. Instead, the system is powered by the home's electrical
wiring.

Since government regulations require telephone service to be invulnerable
to electrical failures, cable networks include backup power capabilities,
either batteries or generators, in the head end or in the neighborhood
node.

During a recent power failure in her building in Laguna Beach, Calif.,
one cable telephone subscriber, Shannon King, was abruptly disconnected,
but service was restored so quickly that when the caller dialed again,
she heard the phone ringing while searching for a flashlight.

Otherwise, Ms. King, a medical assistant, said, she has had no problems
since switching to Cox voice service last year. The biggest issue was
simply adapting to the idea of not using the phone company. While she
found the idea disconcerting at first, she said, "there's no real
difference in my phone service."

The quest for the triple play is being waged from both sides of the
battleground. Qwest Communications, the Denver-based telecommunications
giant, offers television service through a new type of digital subscriber
line technology, very high data rate D.S.L., and SBC Communications has
conducted trials of the format. But Mr. Paxton of In-Stat/MDR said cable
had the edge because delivering TV programs over phone lines was more
challenging than routing voice traffic through coaxial cable.

Walter McCormick Jr., president and chief executive of the United States
Telecom Association, a telephone carrier trade group, said it viewed the
cable industry as "very significant competition." And he asserted that
the cable sector had the advantage of not being subject to the same
regulatory requirements as telephone carriers. He said it had more
freedom, for example, to market separate services like voice and data
communications and television programming as a package.

Cable companies are rushing to roll out the triple play because it allows
them to use a single network for multiple services, which is far less
expensive than using separate networks for television and phone traffic.
Thus carriers can charge multiple fees, but still offer lower rates.

Cox offers basic local telephone service in various markets at about $10
to $16 per month, excluding taxes and other fees. Local service from RCN
starts at $7.50 a month, but that does not include air time. A plan
starting at $25 a month includes unlimited local calling. Both companies
say discounts start to add up when customers add Internet access and TV
service. (As with conventional phone service, customers can choose a
separate long-distance carrier.)

"The big kicker for me was that Cox phone service was about half the cost
of other companies in the area," Ms. King said. "I don't have Internet
access from them yet, but I am definitely going to get it."

And that impulse is an important part of the equation. Customers with two
services are more likely to sign up for another, according to Marc
Coblitz, senior vice president for strategic planning at the Comcast
Corporation, and customers with three services are unlikely to switch to
another carrier. Losing customers is expensive for the cable industry,
and voice and data services are an essential part of their effort to
reduce turnover.

"Cable companies have transitioned over the last five years away from
delivering a basic package of TV programs," Mr. Coblitz said. "We need to
find ways to get people to buy more services from us."

Additional services that take full advantage of digital technology are on
the horizon. While it will still be invisible to consumers, a new
generation of cable modems will be able to break voice traffic into
packets using Internet protocol (IP) technology, just as e-mail messages
are handled.

Such equipment is much cheaper than the telephone-style switches now in
place and promises integrated services that are not possible now, said
Gerry Campbell, senior vice president for voice services at Time Warner
Cable. The company is now testing voice-over-IP technology in Rochester
and in Portland, Me.

Mr. Campbell said that bringing all three digital data streams into the
home through an advanced cable modem would allow the services to be more
closely linked. For example, voice mail could be retrieved in text format
through a computer's e-mail application, or an incoming call's caller ID
information could be displayed on the TV screen.

"This starts to integrate a lot of things in the home that we have wanted
to bring together," Mr. Campbell said.

Copyright 2002 The New York Times Company | Permissions | Privacy Policy


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