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Summary:

What a whopper of a year for cable telephony! Cablevision, the last MSO to report its fourth quarter earnings added 130,000 new VoIP customers, up just 7,000 from the previous quarter. The company also added, 94,000 new broadband customers, up from 81,000 adds in the previous […]

What a whopper of a year for cable telephony!

Cablevision, the last MSO to report its fourth quarter earnings added 130,000 new VoIP customers, up just 7,000 from the previous quarter. The company also added, 94,000 new broadband customers, up from 81,000 adds in the previous quarter. For 2005, Cablevision added 341,793 broadband subscribers and 458,653 VoIP subscribers. Time Warner had also experienced similar growth for its broadband and VoIP services. Some of the smaller players are experiencing triple digit growth in their voice subscribers. According to UBS research estimates, there were 5.1 million cable voice users at year end, up 63% annually and 14% sequentially.


Telegeography estimates that nearly 900,000 new subscribers were added in the final three months of 2005, and cable providers now account for nearly 52% of the total market. Their total differs from UBS by about 700,000 subscribers. Telegeography says that there are 4.5 million VoIP subscribers in the US. Phone companies come in with 11% share of the market, and independents like Vonage have 37% of the market. They are forecasting that there will be 7.9 million VoIP subscribers by end of 2006, and revenues will hit $2.1 billion. That is up from about a billion dollars in sales for 2005.

Cable telephony subscribers currently represent roughly 9% of telephony-ready homes, 10% of basic cable subscribers, 24% of cable-modem subscribers or roughly 7% of Bell households, UBS says, which means that things are going to get a tad difficult for independents like Vonage and Sun Rocket, and also for Bells which are scrambling to roll out their triple play offerings.

The cable VoIP growth is going to be good news for folks like Motorola (GI group) which has been doing a lot of work on VoIP quietly. Motorola has shipped over 2 million voice-enabled cable modems to date, according to company sources. I think it is time to focus away from RAZR and instead zero in on the broadband division.

  1. I wonder if the wireline sub numbers at the bells are deteriorating accordingly. Anybody got dirt on that?

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  2. Jesse Kopelman Monday, February 27, 2006

    Am I the only one surprised that these subscriber numbers are so LOW. I think if the cable companies had been more agressive, they’d have 10% of their customers on phone service already. Which would be what, double the current numbers? Now Cablevision is already over 10%, but they have the special case of only having a single market to worry about. That said, if Cablevision can do 20% in their chunk of NYC, why doesn’t Comcast have a million phone users in Philly yet or TW in their chunk of NYC?

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  3. om,
    this report can’t be good news for the vonage IPO. with more information coming out about how the cablecos are establishing a bigger VoIP footprint, i find it harder to believe investors are willing to participate in the IPO. then again, i guess anything can be sold at the right price but you wonder how much vonage is willing to give away to get a deal done. its VCs must be squirming!

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  4. To the independents: It is the features stupid. (http://www.mocaedu.com/mt/archives/000224.html)

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  5. More (Bad) Info For Vonage IPO

    Telegeography will issue its Q4 voice-over-broadband numbers today that will show the U.S. market grew by 25% to 4.5 million subscribers. While Vonage is still the largest provider with 1.2 million customers, Time-Warner is quickly closing the gap as i…

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  6. Om and readers,

    Thought you’d like to know we posted the full conference call transcript for Cablevision here:
    http://seekingalpha.com/article/7197

    Time Warner’s is here:
    http://seekingalpha.com/article/6470

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  7. Aswath, you nailed it. i think in the end the independents have to out innovate, and unfortunately the only innovation has been in marketing. so what can you say. Mark, you are spot on about the Vonage problems. I don’t know how that IPO happens, but if it does, it will be a sucker bet.

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  8. Look at the growth of TW’s telephony business… outstanding. Too bad their stock hasn’t risen from this growth. Is this segment of the business just too small to affect the bottom line?

    We can only dream of a TW w/o AOL.

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  9. When will COMCAST figure out the Roadrunner/Cablevision PRICING method of gaining large numbers of Customers onto VOIP VOICE?????
    HERE in Denver, Comcast is “”OFFERRING”” $39.95 VOIP IF you bundle with them and $45 if you go naked!!! WHAT in Gods Name is wrong with these comcast idiots that cannot SEE where this market is going?????????
    COMCAST alone could CORNER QWEST out of business IF they would adopt the COX method of BUNDLING for $25 per month!!!!!! What a SHAME these Comcast idiots cannot figure out Marketing 101!
    Skibare

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  10. A quick remark on why the cablecos might not be pushing telephony so hard…Here in Lafaytte, La we have Cox which has been offering but not pushing its telephone package. A lot of people locally feel pretty strongly that as telephony came online in their local area their internet service took a bad hit and people complained. Note that the cablecos are already using the sort of packet prioritization that the telecos want to “offer” in the current net neutrality debate–and, at least in our local loop, it has the effect of noticeably sapping the bandwidth available for the rest of the internet.

    I think it’s pretty clear that at least Cox is having trouble providing both good phone and good internet. The best evidence is the very low-key rollout; they are pretty clearly managing demand. It’s worth noting as well that when Cox took itself private it put huge chunks of itself up for sale–and said that it was because it needed the money to pay for upgrades to the remaining parts, specifically citing VOIP services.

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