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Cable Telephony On Hold Until VoIP Matures
The cable telephony market, having grown robustly
over the past year, has slowed as many cable operators wait for
IP cable telephony technology to mature before launching voice services.
IP-based cable telephony technology should become widespread by
early 2003, propelling the market to fast growth, according to Cahners
In-Stat Group. Worldwide cable telephony revenues will rise from
$1 billion in 2000 to over $6.5 billion in 2005, In-Stat forecasts.
Over the next 12 months, the cable telephony subscriber
growth rate will be about 25%, still a healthy rate, but much lower than during
the past year. "During the next year, cable telephony providers like AT&T Broadband
and Cox Communications will continue to expand telephony service within their
existing footprints, but spend little effort to introduce service to additional
systems," says Mike Paxton, In-Stat senior analyst. During this period, cable
operators will focus on improving customer service and boosting operating margins,
he says.
Supporting voice service is a huge challenge
for cable companies, as they must offer near-perfect network reliability,
integrate service with back office functions, solve unfamiliar engineering
problems, and enact wholesale changes in marketing and customer
service. Even though launching a telephony business over cable can
cost almost $1,000 per subscriber-making a return on investment
several years off-most major operators in the United States and
Europe believe the investments are well worth the effort.
That's because almost 85% of the world's telecom
revenues come from voice services and average revenues from the
"triple play" of voice, video and data services are projected to
be well above $120 per month per subscriber. Even with just 10-15%
of customers subscribing to voice service, revenues can be significant,
Paxton says. A number of surveys show that a noteworthy percentage
of RBOC customers are dissatisfied with their voice service and
would change carriers if they had an alternative.
Early entrants in cable telephony have already
had success in signing on customers. By the end of 2001, there will
be nearly 1.7 million cable telephony subscribers in North America
alone, In-Stat says. By 2005, the worldwide subscriber base will
surpass 15 million, In-Stat predicts.
One reason for this success is price discounts,
as cable operators are routinely undercutting incumbent carriers
on price. Consumers have been particularly receptive to adding a
secondary cable-based phone line instead of ordering a new line
from their existing voice carrier. These secondary lines are often
used by teenaged children or earmarked as a dedicated fax line.
The roll out of cable telephony services is
in the early stages of a three-phase evolution:
- Phase 1 - Circuit-switched Voice over HFC.
This phase began in 1999 and will continue through 2002
- Phase 2 - Migration from Voice over HFC to
a hybrid HFC Voice (Switched IP) solution. This is based on a
circuit-switched network with IP capabilities, and the period
runs from late 2000 through 2003.
- Phase 3 - This period marks the end of circuit-switched
technology and completes the move to a total Voice over IP solution.
While some operators are already testing Voice over IP, it will
likely be late 2003 before there are large-scale service offerings.
The initiation of this stage hinges on the certification of DOCSIS
1.1 CMTS and cable modem equipment.
IP-capable equipment and HFC architectures that utilize
VoIP should become available over the next 12 months. When that occurs, cable
telephony will heat up and become a key source of income for cable operators.
This research highlight is drawn from the Cahners In-Stat
Group report, Waiting
for IP: Cable Telephony on Hold (# MB0108DC), examines telephony
services over hybrid fiber coaxial networks and covers the issues surrounding
the introduction of cable telephony service, including the development of standards,
the different voice architectures/technologies available, and cable telephony
service challenges. In addition, it profiles cable telephony equipment vendors
and cable MSOs in order to highlight their service strategies.
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