IP Cable Telephony - Why?

In the US, some cable operators have been offering telephony for some time, most notably Cox and Comcast. To date, these offerings have been virtually all circuit-switched, and with over two million voice subscribers, MSOs account for roughly 2% of US wireline subscribers. As such, cable operators do have some experience with voice, and it has been profitable.

This track record with TDM voice is coming in handy as competition has intensified among all types of service providers. Among cable operators, there is a pressing need to offer IP voice services, for both defensive and offensive planning purposes. In terms of defensive strategies, VoIP can help retain subscribers who are being courted by satellite-based video providers. Not only are satellite operators a direct threat to the cable operator’s core business, but they enable telcos to offer video, which in turn can be a very attractive offering when bundled with voice and even high speed data.

MSOs are also drawn to voice in support of their offensive strategies. In the US, cable is approaching 70% penetration of households, and in the broadband arena, MSOs hold a healthy lead over telcos. For both the US and Canada, the market is far from saturated for broadband, and to a lesser extent, video. Add to this the relatively untapped small business market, and cable has room to grow, especially for voice services.

Finally, the most compelling answer to “why?” is the Triple Play, which MSOs can only achieve with voice. Churn is an ongoing concern for all service providers, and it is widely held that bundling three services is very effective for customer retention. MSOs have been successful offering two services - video and high speed data - whereas telcos have countered with their natural complement of voice and high speed data. Offering voice - especially IP voice - creates the triple play, giving MSOs a leg up on the RBOCs.

IP Cable Telephony - Why Now?

Against this backdrop, the VoIP marketplace is certainly heating up in 2004. Starting in late 2003, the RBOCs and Canadian ILECs have all been making aggressive announcements about IP buildouts and VoIP offerings.  Many US MSOs have countered, announcing VoIP trials and commercial rollouts, and in Canada, it is clear that cable is now looking at VoIP more closely. 

A key factor behind the present state of activity is the recognition that VoIP technology is ready for prime time, and can provide near carrier-class service. Underlying this is the recent focus placed on VoIP by the FCC, and the regulatory climate now appears to favor leaving VoIP unregulated.

Overriding all this is Vonage, who has demonstrated proof-of-concept for VoIP more successfully than anyone else to date. Their recent impact has been small in absolute terms, but in terms of creating a VoIP buzz, and accelerating the IP agenda for MSOs and RBOCs, Vonage’s impact has been substantial.

IP Cable Telephony - Is Cable Able?
With all this activity and focus on VoIP, this is the big question that our Insight report addresses. MSOs are in their early stages of small scale VoIP offerings, and it remains to be seen what the real adoption rate will be among residential subscribers.

To evaluate the market opportunity for IP cable telephony in North America, this report first provides the broader context by assessing current market and technology trends. Although the underlying rationale for cable voice is clear, there is an interconnected series of factors to consider - some of which work in cable’s favor, and some of which do not.

Overall, our forecast indicates there will be attractive growth in this market, particularly in the US. In support of that forecast, the report also indicates which MSOs and cable modem vendors seem best positioned to benefit from VoIP.

Readers of this report will come away with a timely understanding of the emerging VoIP opportunity for North American MSOs, with the content presented in an easy-to-digest powerpoint format.

Key highlights of the report include:

Major drivers and restraints impacting the cable telephony market
Key market and technology trends impacting this market
Market forecast for the US and Canada, for both number of VoIP subscribers and revenues - forecast period is from 2003 to 2008
Timeline projection for the market evolution from TDM voice to packet voice among MSOs
Analysis as to why VoIP is different from TDM voice for cable operators
Market trends favoring cable operators for VoIP
Market trends working against their favor for VoIP
Analysis as to why standards are important for cable telephony, and the current status of CableLabs certifications
Analysis of multimedia terminal adapters (MTAs) and why they are an important indicator of growth
Profile of the leading MTAs and who is well positioned
Market share leaders for cable modems - both US and Canada
Strategic profiles of leading cable operators (MSOs) - US and Canada
Analysis of general market conditions and factors impacting cable telephony for service providers
Competitive analysis and profiles for RBOCs and Canadian ILECs
Strategic issues and implications facing North American MSOs for cable telephony

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