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Summary:

Earlier this decade, when cable companies started their foray into the phone business, not many gave them much of a chance to succeed. Sure, they could sell a lot of broadband connections, but no one thought they would be players in telecom services such as voice. […]

news20091106-1.gifEarlier this decade, when cable companies started their foray into the phone business, not many gave them much of a chance to succeed. Sure, they could sell a lot of broadband connections, but no one thought they would be players in telecom services such as voice. Fast-forward to today, and the situation is entirely different. During the first half of 2009, cable companies across the globe generated about $30 billion in telecom service revenues, according to Telegeography, a market research company. Voice, in fact, has become the secret weapon for cable companies around the world.

Those revenues come from 49 million voice subscribers and 82 million broadband customers worldwide. Cable companies’ revenues have grown 28 percent every year since 2003 vs. overall wireline business growth of 4 percent. CableCos now account for 29 percent of broadband subscribers and 9 percent of voice subscribers in countries where they are allowed to compete with the phone companies. That works out to about 15 percent of residential telecom revenues in countries where cable and telecoms are allowed to compete.

The reason we are seeing this growth is primarily because of North America. The presence of highly competitive players such as Time Warner Cable and Comcast is a major reason why telecoms are on weak footing in the U.S. And there is no sign that U.S. CableCos are easing up the pressure on phone companies.

For instance, during the third quarter (ending Sept. 30), Time Warner added 117,000 new residential high-speed Internet customers (up 32 percent from second-quarter net additions of 88,000 subscribers) and 62,000 voice subscribers (down 39 percent from 103,000 new voice customers added during the second quarter). Comcast, on the other hand, added another 361,000 broadband subscribers (up 455 percent from 65,000 new additions during the second quarter)  and 375,000 voice customers, up 61 percent from 233,000 subscribers added during the second quarter.

Even in the highly competitive and mature markets of North America and Western Europe, the leading cablecos have grown their telecoms revenue by almost 10 percent relative to the third quarter of 2008. Despite the added pressure of a deep recession, these leading cablecos have seen their broadband Internet subscriber bases grow by 7 percent and their telephony subscriber bases by 13 percent over the last 12 months. “Comcast, Time Warner Cable and Liberty Global all now feature in the top 15 ranking of broadband Internet service providers, and telecoms remains an engine for growth for many cablecos around the world,” added TeleGeography’s John Dinsdalee.(Telegeography)

CableCos are likely to have a major impact in Eastern Europe and Latin America. In Asia, the role of cable is being viewed as limited. In places like China and India, cable is not allowed to compete with phone companies.

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  1. Good points Om. What’s interesting is we thought cable voice growth was beginning to slow in 2009, maybe heading towards a plateau. But Comcast’s monster 3Q09 may make us rethink that. We’ll have to watch over the next couple quarters to see if they can continue this reversal of slowing growth for voice.

    You do wonder though, when will wireless substitution begin to impact cable? They are certainly not immune to the larger trend of consumers giving up wireline voice.

    1. The Cable guys have one thing going for them: they are continuously offering higher broadband speeds which keeps the customers locked in. Wherever they don’t (Verizon FiOS territories) they lose traction. I think Voice, Video and Broadband are going hand in hand. One of the main reasons why AT&T is sucking wind. Cablecos eventually would have to make their voice service super super cheap.

      Generically speaking, I believe what is happening is that most people are thinking: wireless and cable as two bills instead of three.

      And while I think with Sprint/Clearwire these guys can do some serious damage but I don’t think world is ready/comfortable for a single bill. Or at least that is how i see it.

  2. For voice, the cableco’s are part way through step one – acquiring a customer who was in many cases dying to leave their telco. Step 2 – the more challenging one – is taking the rare opportunity to innovate and bring more services into the home. And in doing so think less about killing the land and instead adding/expanding valuable home based communications service that takes advantage of broadband, video, the new app development community and more.

    What could this look like? Well short of owning my mobile service, I imagine Comcast (or other) could be the delivery mechanism of Ribbit Mobile-like service, enabling us to unify my home and mobile services. Once there, my mailboxes, contact books call routing preferences and other applications would sit under one roof. I imagine they could also get at our mobile outbound ILD through some VoIP gateway or app but not sure there would high return.

    Instead I’d like to see more innovation and value brought to what we used to call the land line and should now think about as a cloud based communications service that can delivery voice, video and more to screen-based devices we have in the home.

  3. This has all been a bit self-evident for several years. Look at the cable MSO quarterly, annual reports for the past few years and many quarters in North America. They made the upgrades, in some cases acquisitions. In a counterintuitive scenario (like in Canada), the voice-over-cable infrasrtructure was designed and licensed by the telcos themselves and “given” to some MSOs. Of course, this has been the “take” on landline share that all telcos should have expected and been far more proacctive about. Cable MSOs have gone for voice, telcos have chased video in any way they could, both have tried and so far failed to provide better overall service for value in the end customers’ eyes. The telcos still have wireless, but only for a while, voice or data it doesn’t matter. The MSOs will be picking over the pureplay wireless players’ carcasses as they bring the bundle together in time via a superior valuation endgame. In Canada, well, there’s a bunch of new players who will be good fodder for the smart SPs, unless they happen to be already owned by a cable player. In the US, it will play out a little differently but not really too much…. In the end calculus for CSPs, it comes down to a relentless focus on improving customer service, deploying new services and devices (Larry Lisser is right about that one) rapidly, and being a low cost provider across the whole bundle by delveraging their value chains. One bill? Well, I’d let the customer decide how many bills they want to pay. Being friends with innovators, no question for the channel owners.

  4. i fully expect that something free like google voice will start to work with SIP hadware devices. it would than be a rapid decline as paid home telephone become a thing of the past. it would not surprise me if within a couple years every internet connection comes with a free phone number and you just hook up an ATA to use it. in some european countries this is already the case. so yes the cable companies will be major telephone p[roviders but i do not believe it will survive as a separate billable service and revenue generator.

  5. Cable has captured voice customers via 1-year triple-play discounts, in most cases better service levels than telco, perceived faster internet speeds, and simplified billing over telco.

    I’ve personally cut over a dozen in the family tree in the past year from telco facilities to cable voice, something I thought would never happen. But telco billing is so obtuse (15+ fees and taxes) and their various extortions (‘insurance”) and plan minimums make even this telecom vet give up.

    We’ll see what happens when the 1-year anniversary comes around and cable tries to double the bill.
    Hopefully by then telco will have revised its offerings to reflect the competition. Unfortunately, if telco’s product is “Uverse”, there isn’t much point.

    1. Comcast in the MD area offers better service than Verizon and considering the headaches associated the constant issues that are common to often very old twisted copper pairs which DSL run over, the newer cable plant will always out perform because the infrastructure is newer.

      Has Vonage or any cable company had large price increases on voice products since launching. I don’t think so.

      I dont see Telco’s recapturing any voice customers any time soon. Why would you go back to a telco thats not dont much to keep you?

  6. And yet I and many people I know have cut their phone service because all we need is our wireless phone. I have to laugh every time I get one of those Comcast phone offers.

  7. Voice over IP is truly the Cable MSO’s secret weapon. Watch these deployment numbers continue to rise as leading MSOs rollout VoIP to SMBs using SIP.

    Many service providers already working with Sigma Systems for residential VoIP are extending these deployments to include a Hosted Busines VoIP product offering for SMBs using SIP.

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