Comcast (CMCSA) has taken aim at the phone business, but it's unclear when the company might make its mark.In recent years, Comcast has become both the nation's largest operator of cable TV systems and its biggest provider of high-speed Internet service. Now it's looking to fully tap into the potential of a related but rival industry. In a presentation to the news media last week, Philadelphia-based Comcast unveiled some of its still-fluid strategy for winning the phone business from the regional Bell operating companies. And, addressing some of the investor concerns that have driven down cable stocks in recent months, a Comcast executive insisted that the threat of telcos stealing cable operators' video business was overblown. The attention Comcast and other cable operators are paying to the telephone business illustrates one of the great unanswered questions for investors trying to value the cable business. Like high-speed Internet service and digital video services, Internet-style telephony represents a huge potential revenue stream for Comcast. Yet with Comcast now providing the next-generation service to only a few hundred homes, the success of such a rollout -- and its impact on Comcast's cash flow -- remains unknown. On Friday, the stock rose 4 cents to $27.87.
But unlike Cox's service, and unlike the AT&T-initiated service (which Comcast has ceased marketing), Comcast's new service relies on Internet technology to communicate over Comcast's cable network. Like other new services, Comcast's system is referred to as VoIP, for "voice over Internet protocol," though in Comcast's case, calls don't actually travel over the Internet. Using VoIP, says Comcast, will enable the company to offer something better than the service now available through the Regional Bell Operating Companies, or RBOCs. That, they say, is preferable to simply duplicating RBOC service, or offering nearly-as-good service at a lower price. As of last week, Comcast had 450 users of VoIP telephony in the western suburbs of Philadelphia and an added 200 in a Comcast system in Indianapolis, according to Wren. A third test area in Springfield, Mass., went live one week earlier. Virtually all the users are Comcast employees; the areas in the trials, he said, cover areas with over a million potential subscribing households. The service the company is testing, Wren said, is the equivalent of basic telephone service. The customers in Pennsylvania and Indianapolis receive their telephone, data and video charges in a single bill. A backup battery preserves service for eight hours after a power failure. Customers can keep their previous phone number when they sign up for service with Comcast.
Other elements of the message center would make it easy to instant-message a caller who had phoned earlier, or call back that person by clicking on his or her name onscreen. Users might also be able to selectively put their home phone in a "Do Not Disturb" mode, letting only certain callers through while shunting the rest to voice mail. "We may be taking our time, but we are doing it deliberately," Wren said. While Comcast plans to have half of its footprint ready for VoIP by the end of the year, the company hasn't decided exactly what half it will be. But it will probably include areas where Comcast offers the telephone service inherited from AT&T. To provide that service, Wren said, Comcast still leases equipment from AT&T. "We think we could do better by controlling our own technology," he said. The nature of any VoIP rollout, Wren said -- such as to what extent the company enters new phone territories rather than old ones, and exactly how it markets the service -- is also not set. That will depend on such elements as the lessons learned from the current trials, and the 2005 budgeting process, which starts this summer. "The plans are not developed just yet," he said.