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Cable TV hopes to wire up home phone
By DAVE GUSSOW
© St. Petersburg Times, published July 17, 2000
Not so many years ago, consumers frustrated by their phone or cable TV service could get mad, but not even. Lousy service or not, they couldn't switch to another company because there were no competitors.
Times have changed. Satellite TV services now challenge cable companies for viewers, and keeping track of the long-distance phone providers and various rate plans almost requires a calculator.
Residential local phone service has remained mostly free from competition, but change is on the horizon there, too. And some of it may come from cable TV companies, including a stalwart from the telephone industry, AT&T.
"We want to be an end-to-end communications provider," said Sarah Duisik, an AT&T spokeswoman, with the company adding local phone service to a menu that includes long-distance, cable TV and Internet access.
AT&T provides local phone service to about 75,000 customers in 10 states. While Florida is not yet among them, Time Warner, the dominant cable provider in the Tampa Bay area, says it is negotiating with AT&T to offer such services to its customers. But it's making no predictions on when area customers will get a cable phone option.
Unable to crack local phone markets after the 1996 Telecommunications Act was passed, AT&T has spent billions acquiring cable TV companies such as Tele-Communications Inc. and Media One, making it the country's largest cable TV provider. "We needed wire to get back to customers' homes for the first time since '84," Duisik said. He was referring to the breakup of the old AT&T monopoly, which created the "Baby Bells" (such as Bell Atlantic, which recently merged with GTE Corp., the bay area's dominant local phone provider, to form Verizon Communications).
For the marriage of cable and phone to work, experts say, companies are going to have to solve some technical issues, as well as persuade the public that images of so-so customer service are behind them. A lot is at stake for the companies and consumers.
The Strategis Group research firm predicts that by 2005 about 12.5-million people will use cable companies for local phone service, up from about 500,000 now, and revenues will grow to $2.67-billion from an estimated $133-million this year.
What will attract those customers, Strategis says, is saving money by getting all those services in one package, called bundles, at a discount from one company and on one bill.
"Customers want simplicity," said Keith Kennebeck, a Strategis analyst. Citing a 1999 Strategis survey of about 600 households, Kennebeck said 93 percent favored packaging communication services "provided that those services are being provided in a secure manner, reliable manner, and that all the customer service issues are ironed out." The top choices for a package: cable TV and phone.
Unlike cable TV, the telephone is a vital service, one that can't go out during a power blackout. "If video is down for 10 minutes, it's not as bad as calls not going through," Kennebeck said.
Rex Bullinger, director of broadband technology for the National Cable Television Association, says as cable companies have upgraded their networks, they also have improved their power backup. That, he wrote in an e-mail, makes cable systems comparable to traditional phone systems on reliability.
Cox Communications, for example, says its phone system works 99.97 percent of the time, according to Forbes magazine.
"The network has to be 99.99 percent reliable," AT&T's Duisik said. "That's the number we're striving for."
The cable companies are pumping billions into upgrading their wires to handle all the communication services the companies want to provide, with AT&T alone reportedly spending $4-billion.
To get cable phone service, people will not have to rewire their homes. Cable companies will connect their wire to the outside box used by the phone company, with the internal wiring untouched. The cable companies plan to offer Caller ID, voice mail and other enhanced services as well.
Another question: Will there always be a dial tone? What happens if too many people are on the system at once?
If too many people in a neighborhood log on to the Internet over cable modems, the access speed slows. On the other hand, if everyone on a traditional phone system picks up their phones at one time, not everyone would get a dial tone. (In fact, that was a fear of phone companies New Year's Eve when everybody was excited about the Y2K bug, though no problems were reported.)
Again, Bullinger of the cable TV association says cable phone users can expect similar reliability on getting a dial tone as they do with traditional phone systems.
The cable companies concede that they need to upgrade their historically poor record on customer service to attract phone customers. "When customers have a choice, companies strive harder to keep customer service better and prices competitive, and quality of service improves," Duisik said.
Cable operators say their prices are 20 percent to 60 percent below those of the leading telephone company in the areas where they compete. Rates in Florida would have to be approved by the state Public Service Commission.
Verizon Communications doesn't fear competition for residential phone service, says company spokesman Bob Elek in Tampa. He said the company has held its own in service for businesses, where there already are choices.
"The only thing we would like to see, particularly as it goes residential, is that all the players in the game are kept to the same standards, both for price and regulation," Elek said.
Predicting what might happen to rates is difficult, Elek says.
"We're limited to what we can charge for local phone service," Elek said. "We're generally charging less than it costs to provide it."
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