The Net Economy – Services – Cable Calling Still on Hold – Comcast’s bid for AT&T Broadband is a signal that cable telephony may be put on the back burner
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Cable Calling Still on Hold

Comcast’s bid for AT&T Broadband is a signal that cable telephony may be put on the back burner

August 6,2001

When the first merger talks between AT&T Broadband and Comcast fell apart last month, cable telephony may have been the biggest loser. Now that talks may be heating up again, that probably won’t change.

For AT&T and its embattled CEO, Michael Armstrong, voice service was a primary driver for sinking more than $100 billion into buying up cable networks. Comcast has dabbled in using its networks to deliver voice, including a trial of IP-based cable telephony service in Union, N.J. Comcast came away from that trial less than impressed by the prospects for IP-based cable telephony.

The fact that Comcast CEO Brian Roberts pitched his bid for AT&T Broadband as a back-to-basics move � and that investors responded positively to that pitch � makes the case for IP-based cable voice service shakier than ever.

Even though cable IP telephony has played a starring role in vendor announcements and trial news (about 15 service trials are now going on), it now looks as if the first commercial service won’t hit the family den until 2003. Even then, analysts predict the number of subscribers will not be greater than the current number of circuit-switched cable telephony users, which now stands at a fairly unimpressive 1 million.

“There is a lot of hype about voice over IP, but cable is just looking at it as one more feature,” says Erin Thompson, an analyst at Allied Business Intelligence. “It may not have the importance that another service would.”

The reasons for the big yawn? While about 70 vendors are building and testing products based on Version 1.0 of the PacketCable standard developed by CableLabs, the industry’s governing standards body, the spec does not support direct calls to 911, a.k.a. lifeline service. That means operators can sell services based on the PacketCable standard only as second-line service, rather than more lucrative primary-line service.

Version 1.1 of PacketCable will support lifeline services, while Version 1.2 promises to deliver end-to-end IP connections for multimedia applications, says Venkatesh Sunkad, senior software engineer for the PacketCable project. But the problem is timing. The 1.1 spec won’t be ready for prime time until next year, and 1.2 won’t be out until 2003, he says.

“The standards that haven’t been ironed out are keeping voice over IP cable technology on the back burner for now,” says Keith Kennebeck, senior analyst at Strategis Group.

Wait ‘Til Next Year, Again

Here’s a likely timeline and projected pricing for cable IP telephony services:

4Q 2001: Secondary phone lines; cost to user, $15 per month.

2002: Primary phone lines; cost to user, $30 per month.

2003: Primary phone lines with value-added features such as video chat and ability to set up temporary phone lines on the fly; cost to user, $40 per month.

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