Cable telephony player hits milestone

Cox, which first launched cable-based local phone service in Orange County, Calif., in 1997, announced today it has more than 26,000 customers in Orange County alone. The company claims penetration rates of about 18 percent in that market and 8 percent nationwide.

"[The milestone] shows that there's some legitimacy to cable operators offering telephony," said Jeannette Noyes, research manager for residential and small business communications at International Data Corp. "I think there were a lot of people that questioned whether consumers would take cable telephony seriously."

Many cable operators are upgrading their networks for two-way communications, which will support several new higher profit margin advanced services such as local phone service, high-speed Internet access and interactive television. The local phone market is valued at roughly $100 billion annually. AT&T, the nation's largest cable company, has made cable telephony the centerpiece of its renaissance by acquiring TCI and MediaOne but largely remains in the very early stages of offering local voice service.

Analysts have applauded Cox's efforts in recent years, which, aside from MediaOne, have outpaced its larger brethren. The company, with nearly 5 million cable TV customers, has aggressively upgraded its networks and developed new services.

"If anybody in the cable industry was going to do it, Cox is the one," Noyes said. "AT&T has been talking about it, but the systems that they inherited from TCI were not ready for telephony."

Cox currently offers its digital local phone service, which it claims costs 10 percent less than incumbent local phone company prices, in seven markets and plans to expand into new markets next year.

Stock in the company closed nearly 1 percent higher today at 51.13, not far from a new 52-week high. Cox shares have traded as high as 52 and as low as 31.31 in the past year.