anidifranco

Dec. 9, 2003 | KANSAS CITY, Mo. (AP) -- Time Warner Cable is working with Sprint Corp. and MCI Inc. to offer phone service using the up-and-coming voice-over-Internet technology, one of the surest signs yet that cable companies are assaulting the local phone industry.

While other cable companies sell phone service to their customers in selected markets, the deal announced Monday is the first time the "voice-over-IP" technology will power nearly nationwide phone service by a cable company.

"We've moved out of the talking stages and into the reality," said Jeff Kagan, an independent industry analyst based in Atlanta. "2004 is going to be the year cable and phone companies get into each other's business and start competing."

The technology will let Time Warner customers make calls with their regular phones, but the calls will travel as packets of data over the cable line that feeds into the house, rather than going through traditional, circuit-based phone wires.

At a switching station, the calls will be transferred to either the MCI or Sprint phone networks and into the traditional format that reaches most phone users.

Though the quality of voice-over-IP calls often aren't quite up to the standard of the traditional telephone networks, the technology is improving.

That gives cable companies an efficient way to break into the phone business. Meanwhile, telephone providers are increasingly going after the cable companies by cutting prices on digital subscriber line (DSL) high-speed Internet service and by bundling satellite TV service with local phone bills.

Overland Park, Kan.-based Sprint and Ashburn, Va.-based MCI, formerly known as WorldCom Inc., said they were in talks to facilitate phone service for other cable providers but provided no other details.

"It's a whole new business for Sprint and MCI to get into," Kagan said. "It helps to diversify the business. It's a whole new revenue stream for Sprint and MCI and it's a huge opportunity because Time Warner is just one of many cable companies they can work with. ... This is just what the long-distance industry needed."

The companies provided no details about how much the deal was worth.

Time Warner began offering the service in Portland, Ore., in May and in Raleigh, N.C., late last month. The company plans to gradually add other cities next year, eventually serving 31 markets in 27 states. Sprint will serve 17 markets, with the rest handled by MCI.

Time Warner's cable and high-speed data customers in Portland and Raleigh pay $39.95 for unlimited local, in-state and domestic long distance calling. Customers that don't receive other Time Warner services pay $49.95 a month for phone service.

Time Warner Cable spokesman Keith Cocozza said prices will remain similar when the program is expanded nationally.

"What we've always wanted to do is offer our customers a wider range of services for the best value," Cocozza said. He said voice-over-IP "allows us to get into a market we haven't been in."

Martin Dunsby, an analyst at inCode Telecom Group, a consulting firm, noted that the technology also provides consumers with other options because the calls are carried by lines that can handle other kinds of data as well. That makes picture messaging and video conferencing possible.

"Really, it means more choice for consumers," Dunsby said. "Instead of having to go to the local phone company for phone service and cable company for cable you can go to a range of providers for a range of services."