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The Secret to VoIP's Success: Bundling
2007-08-06
Industry leader Comcast, for example, has seen its telephony business skyrocket via its Comcast Digital Voice (CDV) offering. Likewise, Time Warner Cable has also seen its VoIP subscriber base grow, as subscribers add services like VoIP to their established bundle of services.
If anything, the numbers may indicate that VoIP may have a difficult time surviving as a standalone business. VoIP's niche may end up as a value-added service to an existing broadband package.
Take Comcast, for example. The cable giant added 670,000 CDV customers during the second quarter for a total of more than three million, according to quarterly earnings released late last month. In the last year alone, the company added 2.2 million CDV users. The CDV service is available to 79 percent of Comcast's total footprint and 8 percent of that total have taken advantage of the service.
The increase, however, is not likely attributable to a sudden surge in interest for VoIP. Leading providers like Comcast and Time Warner Cable are offering bundled packages of cable-Internet-phone service, and as a result, many customers are not even aware that they are VoIP customers. A 2006 survey from the Yankee Group, for example, found that only 9.5 percent of cable telephony subscribers knew what powered their phone service.
Instead, providers like Comcast and Time Warner seem to have capitalized on their name recognition and drawn in customers who might have only been looking to sign up for cable or Internet. The numbers indicate that it may be easier for customer service agents at these companies to pitch bundled cable-Internet-digital phone service to existing or new customers with whom they are already on the phone than it is for a stand-alone VoIP providers to get some phone time with prospective customers.
Approximately 45 percent of Time Warner customers subscribe to two or more of the company's services, an increase of 184,000 during the second quarter, according to results reported Wednesday.
Time Warner now has 2.3 million digital phone subscribers, representing a 12 percent penetration rate. That is an increase of 241,000 during the second quarter. Voice revenue increased 75 percent to $ 285 million, according to the results.
Glenn Britt, president and chief executve of Time Warner Cable, said in a statement that the company's digital phone service would unveil "new offerings" in the coming months, but did not elaborate.
Many cable companies initially offered their phone service over a circuit switching network, which establishes a dedicated circuit between nodes and terminals before users can talk. VoIP allows multi-system operators (MSOs) "an inexpensive way to provision voice services across a majority of their footprints where they already had significant broadband deployments," according to a report issued Monday from the Yankee Group.
Yankee reported that providers like Cox Communications, RCN and Insight Broadband still have a number of customers who have yet to be migrated over from the circuit-switch system.
Time Warner acquired circuit-switch systems from Comcast after the joint Time Warner-Comcast purchase of Adelphia Communications in 2005. Of the 241,000 voice subscribers Time Warner added during the second quarter, approximately 63,000 of those are on circuit-switched networks, Time Warner said.
Cox went private several years ago and does not provide detailed quarterly reports.
RCN saw a slight drop in voice revenue recently, bringing in $ 29 million for the fourth quarter of 2006, but $ 28.4 million during the first quarter 2007. Second quarter results are expected next week.
Insight, on the other hand, added 24,400 customers during the first quarter, for a total of 147,800 phone customers. That accounts for 3.8 percent of the company's total revenue, an increase of 39.2 percent from last year. Insight's numbers expanded after the addition to eight new districts during the second half of 2006 and first half of 2007, according to quarterly reports.
By Chloe Albanesius
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