Study: Cable giants to flex VoIP muscle

Big cable players, not VoIP specialists, will dominate cable broadband phone calling by the end of this year, a new report says.

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Cable giants will edge out VoIP specialists as leaders in selling telephone service over cable broadband this year, according to a new study.

Time Warner Cable, Cablevision and other major multiservice operators (MSOs) have begun to set up their own voice over Internet Protocol services for American consumers, The Yankee Group said in a report released Monday. These will quickly gain a lead over alternative voice service providers in 2004, the report said.

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"After many years of testing, the VoIP technology is finally available and ready for prime time. The U.S. market, which represents almost all the cable VoIP market today, also will drive global MSOs to move forward," Lindsay Schroth, senior analyst at Yankee's Broadband Access Technologies arm, said in a statement.

At present, specialist companies such Vonage, 8x8 and Galaxy Internet account for about 66 percent of subscribers to VoIP over cable broadband. But these hosted providers don't have any control over that VoIP traffic, as they don't own the networks that carry it.

Locating local internet providers

To remedy this, they have started working directly with cable companies. For example, Vonage is collaborating with six small cable providers, and Net2Phone only sets up VoIP services through partnerships with broadband providers, according to the Yankee report.

These alternative voice providers will see strong growth rates in the next few years, the study said. However, this boom will eventually decline, as people are given the choice of signing up for VoIP service from a cable company or primary-line operator.

Locating local internet providers

Some traditional telephone carriers are also working with cable broadband companies to deliver alternative voice services. Sprint recently signed a five-year deal with USA Companies, a cable and Internet service provider, to sell VoIP telephone services in in California, Montana and its native Nebraska. The deal promises to give Sprint the ability to introduce VoIP without being forced to construct its own infrastructure.

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In a separate report on the U.S. market for high-speed Internet service, Yankee said subscriptions to broadband services are poised to overtake narrowband sign-ups by 2006.

That study, released on Monday, also found that in the first quarter of 2004, Comcast led in broadband with almost 5.7 million cable modem subscribers, while SBC was ahead in the DSL (digital subscriber line) segment with about 4 million. More than 95 percent of cable modem users are residential consumers, while 15 percent to 20 percent of DSL customers are small-business customers, the report said.