Tuesday, June 15, 2004

Cable phone service works, but will consumers buy it?


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As Time Warner Cable rolls out its new Digital Phone system in the coming months, the fight with stalwart Cincinnati Bell could make things awfully confusing for consumers.

But let's get one thing straight before we start - the new phone system works.

The new system being touted by Time Warner Cable - which uses Internet-based technology - is as clear as a regular phone line over Cincinnati Bell's local lines. The system also is clear over a long distance.

During a test last week at Time Warner Cable's Blue Ash offices, I held a 15-minute conversation with a colleague in Georgia, which sounded every bit as good as if I called on my home phone. In fact, they even had the same model of Motorola cordless handset that I use in my kitchen.

But making it work and getting potential customers to buy into it are two separate issues. Virgil Reed, president of Time Warner Cable's Cincinnati division, already knows this.

"We are ready for the fight - it should prove invigorating," Reed says of his competitor, Cincinnati Bell. "They are a very well-run phone company. And as for whether we're doing the right thing, we'll let the market decide that."

So apart from the technology itself, local consumers will have some hard thinking to do, because the choices are dizzying.

The cable company is offering to switch over existing customers for free, then charging them $39.95 plus tax each month for local phone service and unlimited long distance.

Time Warner Cable started rolling out its new phone system in Southwest Ohio last week in Hamilton County. Most Hamilton County cable customers can now sign up for phone service through the cable company, although some outlying communities (portions of Anderson Township and Blue Ash, for example) are not set up.

The rest of Time Warner's 350,000 Southwest Ohio customers should be able to switch phone systems by the end of this year or early next year.

Initially, only existing or new cable TV or Internet customers will be able to get cable phone service, but noncable customers will have to wait. And those new, noncable customers will have to pay more as well ($44.95 a month).

(Northern Kentucky residents note: Insight Communications, your cable operator, is considering whether to offer a similar service, but has made no decision.)

While Cincinnati Bell uses standard phone lines, Time Warner will use its existing cable lines, individual modems and a private computer network. The technology is a variant of Voice Over Internet Protocol, which sends phone calls as information packets over the Internet, descrambling them with modems.

The difference locally is that the calls do not go over the open, public Internet, but are confined to a private network.

There is a 911 service, along with caller ID, voice mail and most of the bells and whistles offered by the phone company. And, yes, the system interacts just fine with non-Internet phone systems and standard phone companies.

At Cincinnati Bell, it costs $34.95 for local service, plus 20-plus other features (including several that the cable company is not offering). Phone company officials also say they realize that having a phone dependent on the electric supply (as cable currently is) is not as big a deal as it once was, but they still raise it as an issue.

But more to the point, they say their "bundling" strategy puts the phone company on par with Time Warner when it comes to cost. For example, local service along with unlimited long distance and high-speed Internet access goes for about $80 a month.

"Considering that's what you would pay for cable and phone or cable and Internet bundled together with them, we feel that we are very competitive," Bell spokesman Mike Vanderwoude says. "We're quite prepared for this, especially since they've been saying they're coming out with this since early this year."

There are some outstanding regulatory issues that could complicate the issue further. But for now, it appears that one of the last great monopolies - local phone service - is starting to crumble.

Whether the market decides cable phone systems are better than standard phone service, the battle has been joined.

Regardless of the outcome, only the market - meaning customers - here will win.

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E-mail jpilcher@enquirer.com




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