battle heats up
Qwest, Comcast, others shoulder into Internet calling fray
By Joyzelle Davis
Rocky Mountain News
Tuesday, November 8, 2005
Internet-based phone service is growing up in a hurry.
Telcos, ISPs - even cable-TV companies - have entered the
race to provide voice over Internet protocol, giving
consumers more choices even as the technology continues to
Denver's Qwest Communications, which this year launched its
own Internet-based phone service to stanch customer
migration, already is competing with several companies
offering VoIP in the metro area and Colorado.
And the space will soon get more crowded. Comcast, in the
middle of its nationwide rollout of its Comcast Digital
Voice service, is expected to announce Denver service this
month. Comcast already serves about 40 percent of Qwest's
market - including Portland, Ore., Seattle, Salt Lake City,
St. Paul, Minn., and Denver - with its cable-TV and
high-speed Internet, said Donna Jaegers, an analyst with
Qwest's total phone lines in its 14-state region are down
4.8 percent in the past year. Further competition from
Comcast's new service could potentially spoil hopes by Qwest
to break even next year.
"If Comcast gets really aggressive in Qwest's footprint, it
could cost Qwest 4 or 5 cents a share next year," Jaegers
Qwest said in a statement that "starting with reliable local
phone service, Qwest continues its commitment to customers
by offering excellent service and the latest in voice,
high-speed Internet, wireless, long-distance and TV services
at very competitive prices."
More than a dozen VoIP services are available in Colorado.
Qwest's own recently introduced Internet-phone service costs
$29.99, with domestic long-distance ranging from an
additional minimum of $2.99 a month to a maximum of $19.99.
AT&T's CallVantage offers unlimited local and long-distance
phone service for $29.99 a month, while Vonage's priciest
plan is $24.99 for unlimited calling.
In the markets where Comcast Digital Voice has debuted, the
company offers the Internet phone service for $39.95 to
subscribers who already receive high-speed Internet and
cable service. Customers who subscribe to one of those
services pay $44.95 a month, and those who want only Digital
Voice pay $54.95 a month.
With a $39.95 price tag, Comcast likely will win over
primarily existing cable or high-speed Internet customers
who want the convenience of several services bundled onto
one bill, Jaegers said.
Cox Communications' discounted phone service helped knock
Qwest from its dominant position in the Omaha market, said
Brian Washburn, an analyst with Current Analysis, and Cox
has eroded Qwest's market share in Phoenix as well.
Comcast comes late to
Comcast is one of the last major cable operators to
introduce Internet-based phone service, in part because of
time needed to digest its purchase of AT&T Broadband and
because it wanted to make sure its service was as much of a
"lifeline" - capable of making calls during power outages
and not dropping calls - as possible, Washburn said.
"It has a lot of the look and feel of traditional landline
service," Washburn said.
Internet-based phone services aren't regulated, and they
don't have many of the regulatory fees and taxes that are
levied on traditional phone services. But customers should
be aware that comes at the cost of not having any federal or
state regulators to complain to if their Internet-based
phone service isn't working properly, said Jim Greenwood,
director of the Colorado Office of Consumer Counsel, a
"There's no one to call other than your customer service rep
- if you can get through to them," Greenwood said.
"Customers should make sure they read their contracts before
Comcast Digital Voice is part of the cable company's almost
decade-long, $39 billion investment in upgrades to transform
itself into a provider of Internet, video and phone services
to customers all on the same bill. The "triple threat" play
is an effort to make Comcast subscribers less likely to
defect to satellite providers like Douglas County-based
EchoStar Communications and telephone companies, which are
just getting into the video market.
Comcast has already introduced the service in 21 markets
nationwide, with a total of 12 million homes, and says it
will reach all of its markets with a potential 40 million
homes by the end of next year.
Comcast has set a goal of 250,000 phone customers by the end
of this year. By comparison, Time Warner in August reported
614,000 digital phone subscribers and Cablevision Systems
Corp. has more than 478,000.
Telephone companies are moving in turn onto cable's turf.
Three of the Baby Bells - Verizon, SBC Communications and,
to a lesser degree, BellSouth Corp. - are working on plans
to debut Internet protocol television, or IPTV, which
carries television over the same fiber-optic lines that
transmit voice and broadband Internet service.
Verizon last month introduced its service in Keller, Texas,
and has plans to introduce the service in 15 states. SBC
Communications, which has a marketing agreement with
EchoStar's Dish Network that allows it to include the
satellite-TV service as part of one bill, plans a limited
rollout of its IPTV service next year.
The majority of Colorado residents aren't likely to get
television from their phone company anytime soon. Qwest,
which offers digital television as part of a package with
DirecTV Group, doesn't currently have plans to offer IPTV,
said spokeswoman Carey Madsen. The company for years has
offered video over DSL lines in Phoenix, Highlands Ranch and
Omaha, and in recent months began laying fiber to transmit
digital television to new housing developments in Lone Tree
and suburban Salt Lake City.
"Qwest has a couple of little projects, but they're really
not pushing into TV" like some of the other phone companies,
said Brahm Eiley, an analyst with the Convergence Consulting
Comcast and other cable companies are moving into the
telephone business in an effort to lock in customer loyalty.
Last week, Comcast and three other cable companies announced
an alliance to offer their own cell-phone services through
Sprint Nextel Corp., creating a "quadruple play" of voice,
video, Internet and wireless products. The service would
pursue combinations of wireless and landline technology,
such as a shared voice mail or transferring among phones as
a subscriber walks into their home.
The rationale behind bundling is that the more services a
customer receives from a company, the less likely they'll
switch over to a rival because of the convenience and
Moving into phone service "is absolutely necessary for
Comcast to remain competitive if the telecoms get into video
services in a significant way," Washburn said.
Cable companies have already beat the phone companies out of
the gate. By the end of 2007, 12 percent of residential
cable subscribers are forecast to take phone service, up
from 5 percent at the end of this year, according to
Convergence. By comparison, only 2 percent of Baby Bell
subscribers will also order video services by the end of
"The cable companies over the past decade have spent $100
billion to deliver" on their vision of a 500- channels
universe that could provide high-speed Internet and phone
service, Eiley said. "The phone companies only got
residential broadband religion a few years ago and have been
VoIP carries sound
With Internet-based phone service, analog voice signals are
converted into digital signals, transported in data packets
over the Internet or a private fiber-optic line and
reassembled into sound at the other end. By comparison,
traditional phone conversations travel on dedicated
Internet-based telephone subscribers in the U.S. are
projected to grow to 12 million homes by the end of 2010
from about 3 million at the end of this year, according to
The growth of VoIP services has been slowed in part by
consumers' concerns about voice quality, power outages and
lack of 911 emergency services.
Comcast says its service has taken measures to address two
of the criticisms about VoIP providers: The service has five
to eight hours of battery backup, and calls to 911 deliver
location information and the telephone number to
Comcast's service is run entirely on its own fiber-optic
cables, which the company claims gives it higher quality and
reliability than other Internet telephone operators.
Internet phone services
CallVantage, $29.99 Includes unlimited local and
long-distance phone service.
Digital Voice, $39.95 Offered to customers with high-speed
Internet and cable service; expected soon in Colorado.
$44.95 for subscribers to only one service. $54.95 for
Digital Voice alone.
$29.99 Domestic long-distance costs from $2.99 to $19.99 a
$24.99 Includes unlimited local and long-distance phone
davisj@RockyMountainNews.com or 303-892-2514