Skip to main content

A new year brings another phone service pledge from Comcast (CMCSA) .

The No. 1 cable company says it will have cable modem-based calling available to about 75% of its customers in 20 markets by the end of 2005. All of its subscribers should have the service by the end of next year.

Previously, Comcast had promised to have half its system voice-over-Internet protocol ready by the end of 2004 and 90% complete at the end of 2005.

The latest announcement, which was part of a presentation to investors at a Smith Barney conference in Phoenix on Monday, marks another skirmish in the fiercely competitive press release battle between the cable and phone industries. Call it the battle of the bundles or pursuit of the triple play: the sides say they're ready to square off and take one another's customers with compelling video, phone and fast Net packages.

"Comcast has been talking about this for quite some time, and they've had 12 months of trials," says RHK analyst Teresa Mastrangelo. "I think now they are putting the stake in the ground and saying this is our service offering."

"It combats the influx of announcements from the Bells about video services," says Mastrangelo.

The Bells --









-- have plans to offer video services either through satellite TV partners or by upgrading local phone networks to accommodate advanced digital services like high-definition video and TV programming.

The problem for both camps is trying to appease growth-hungry investors with new offerings without ransacking the budget and racking up frightening costs.

There are obvious perils to entering the phone business. Cable companies must invest a great deal of money to match the quality of conventional phone service. That includes battery power backup in the event of blackouts, as well as 911 emergency calling and federally mandated call-tracing and eavesdropping capabilities.

Plus, to avoid the quality lapses that come with basic voice-over-Internet protocol, the cable companies have to

hire the services of phone companies so they can actually carry and connect calls. Typically,






have played the background support role for the cable industry.

One problem, however, is that after all the cost and effort of duplicating the Bells' phone services, the cable companies have put themselves in roughly the same position as the phone rivals, watching hefty investments fester as customers flee to cheaper services.

Though Comcast's plans seem to blanket a huge swath of the population with its upgraded cable facilities, ultimately the phone service offer is limited to cable modem customers. At the end of last year, Comcast had about 7 million fast Net customers, a chunk that represents about a third of its subscribers.

Just a Sliver
Cable phone use remains but a fraction of the market

*FCC figures as of June 2003. Source: Federal Communications Commission, Cellular Telecommunications and Internet Association

During a question-and-answer period after his presentation Monday, CEO Brian Roberts said the phone service wouldn't be limited to existing video or high-speed Internet customers.

The company isn't hoping to entice customers through low prices: The Comcast digital phone service is expected to cost $40 a month. Instead, the company intends to lure customers with features like TV caller ID, videophone and message forwarding.

The bold strategy seemed to resonate on Wall Street. Comcast shares rose 61 cents, or 2%, to $33.18, while Verizon, SBC and BellSouth dropped about 1% each.