Cable cozy with data, video insulation
The ability of cable's broadband pipes to carry voice, video, and data will help insulate the industry from falling prices as operators begin to offer IP telephony services.
Cable leaders are using this argument to shield themselves from broadband alternatives, most notably digital subscriber line (DSL) technology, which takes advantage of existing phone lines to offer high-speed Internet and data access.
"As a worst case scenario you'll have two competitors [cable and local phone companies] doing local distribution, but one of which will also be able to carry higher-speed data and video," said Tele-Communications Incorporated chief executive John Malone, in a panel discussion at the industry's annual Western Show. "The other one [regional Bell operating companies] is still pretty much limited to voice offerings."
Local telcos are experimenting with broadband services via DSL technology, but the cable industry is confident that copper wires are not equipped to carry video.
Malone said that by bundling higher profit margin services--such as Internet access and video services--the cable business may be able to ward off some of the imminent profit declines in voice traffic.
By providing an all-in-one service, cable operators will collect higher profits than by simply offering one service alone, executives said.
"If we can make the consumer experience a much simpler experience--by being one company that provides video, Internet, and telephony service, and have one bill--then that's the company that the customer wants to do business with," said James Robbins, chief executive at Cox Communications.
Cable operators, with their massive regional networks into the home, are anxious to get into the local and long-distance telephone business before the Baby Bells begin offering long distance services.
But some in the industry as well as many analysts fear intense competition in the voice market will cause costs for voice services to fall so dramatically that there will be little profit left for new entrants--among them cable operators.
The average cost of a long distance phone call has fallen from about 15 cents per minute to roughly 11 cents a minute, by many estimates, and could soon drop into the single digits.
Already, some in the industry are questioning whether there aren't too many new carriers, such as Qwest Communications, Williams Communications, or Level 3 Communications, who will drive down the costs of voice services.