Over the past two or three years, the nation's top cable firms have made a concerted effort to target small and mid-size businesses for voice telephone service.
As a result, the business has gone from zero to more than five million subscribers and the prospects for future growth are bullish, says Elroy Jopling, an analyst with Gartner, the Stamford, Conn. research firm. "It's growing at a rate that's probably even astounding to cable companies," Jopling says.
The traditional telephone companies still have a lot of the pie left, though. According to The Yankee Group, of Boston, the top cable companies -- Comcast, Cablevision, Time Warner and Cox Communications -- have a total of six percent of the small business market versus 31 percent for the top telecom vendor, AT&T.
Advantages of cable
The cable firms have a big advantage over telecoms for now though: While the latter have refrained from promoting their cheaper voice over Internet Protocol (VoIP) service for fear of cannibalizing sales, the cable firms are all about promoting VoIP as an add-on to broadband service. Why? For the cable firms, voice revenues are seen as an additional source of income while phone companies see VoIP as a threat to their bottom line. Either way, however, VoIP is a cheaper option.
Small businesses that opt to go with cable firms for their voice service find their monthly bills are about 10 to 15 percent cheaper than with plain old telephone service a/k/a "POTS." Moreover, few take any issue with the voice quality, especially Mike Arden, principal analyst with ABI Research, of Oyster Bay, N.Y. Arden says that quality is mainly a problem when you contract with third parties. "The really inexpensive services can't control the quality," he says.
There are two ways to get VoIP service. One is to get a hosted service. The other is to install a PBX router over a broadband line. Arden says in each case, the grade of voice reception depends on the amount of bandwidth. Arden added that his research showed that small businesses often gravitated to cable-based VoIP so they can get more features for the same price as basic POTS, not necessarily because they wanted to save money.
Such features include things like unified messaging that let employees keep voicemails on their desktop PCs as audio files.
Voice as an add-on to a broadband buy
Cablevision, the Bethpage, N.Y., cable operator, began offering voice service in 2005. Joe Varello, vice president of product management for Optimum voice in the consumer and business markets for Cablevision, says it's digital, cable-based voice service is better than POTS. "You don't experience some audio anomalies like static and hum," he says.
Varello says voice is most often an add-on service to a broadband buy. With such service, voice usually costs about $30 a line per month and customers usually opt for features like voice mail, Caller ID, call waiting and a feature called VIP Ringing, which emits a special ring for notable callers (like a respondent to a sales pitch). Most customers also usually have a PBX box in house to handle the call routing.
Gerard Cerniglia, co-owner of Rolling Thunder Cycles, a Hempstead, N.Y., motorcycle dealership, signed up with Cablevision about a year ago for his voice service. His impetus was buying broadband from the cable, after he tried DSL from a telephone company but found it too slow. He thought cable was too expensive, but when he found out he could get voice as part of the package, he was sold. Now he gets all his voice calls for $35 a month and is thinking of adding a line for the seven-person operation.
Cernigilia said the voice quality is great. "I've never had a problem with it," he says.
On the other hand, Jopling points out that the telecoms have a tremendous asset in their favor: inertia. "If you're starting from scratch, you'd probably go for cable," says Jopling, "but if not it's a case of 'if it's not broken, why fix it'?"