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How much worse can things get for competitive voice service providers like Vonage? Quite a bit, especially if you take into account the results of two major cable providers – Comcast and Time Warner – and the recent bundling efforts by Verizon and AT&T.
Comcast added 419,000 new voice customers in the fourth quarter 2006, increasing its net adds from the previous quarter. The cable giant ended the year with 1.9 million voice customers. They plan to add another 2.6 million. Time Warner added 211,000 new voice customers in Q4 2006 and now has 1.9 million customers.
Companies like Vonage and Sunrocket have to come up with a different value proposition than just cheap minutes. AT&T Unity and Verizon Freedom are making the price game pretty tough.
In a client advisory, research firm Pike & Fischer reported that the “cable digital phone offerings — when bundled — are within $10 of what the independents are charging. And as VoIP usage continues to expand from early adopters to the mass market, independent providers will be at a fundamental disadvantage, since they cannot guarantee the same reliability and ease of use that a cable company can deliver. “
Sunrocket CEO Lisa Hook told us a while back that the trick is fiscal discipline and introducing value added services. It is OK for a private company like Sunrocket to talk like that, but publicly traded Vonage needs to show growth – lots of it – or get punished even further by the investors.
UBS Research sent out an interesting note this morning which caught our eye. They pointed out that Cablevision, which has 25% market penetration of its voice-ready homes, is beginning to see a slowdown in net additions. If that trend holds for the entire industry, then there might be some hope for the competitive voice service providers.
This will be an interesting thread to follow in coming weeks – Charter, Cablevision, Cox and Vonage are going to report soon.