Comparison voip

After many disappointments, viable local residential voice competition has finally arrived--and it's not UNE-P. It's VoIP-over-broadband.

It seems, in retrospect, that we should have predicted it. Yet no one did. By riding the data connection on a DSL or cable modem, voice calls now can be handled more economically, enabling service providers to offer local and long-distance service for a flat monthly fee.

The hitch is that this service can only be delivered to people with a broadband data connection--which means that its success depends on how widely and quickly broadband is deployed. And since broadband VoIP took center stage a few months ago, I've been wondering whether it will boost or block broadband deployment.

The threat

On the one hand, because VoIP makes broadband more useful, it should increase broadband demand. But the incumbent telcos that control the majority of residential DSL lines have not embraced VoIP because it would cannibalize existing voice revenues. Another concern is that VoIP-over-broadband enables a competitor to ride an incumbent's DSL line (and siphon off voice revenues) without the incumbent's knowledge--and telcos' fiber-to-the-premises (FTTP) plans face the same technology threat.

To date, the incumbents have taken a defensive approach toward broadband VoIP. Three of the four Bell companies--BellSouth, Qwest and SBC--have attempted to fend off the VoIP threat by requiring DSL customers to also buy local voice service. And despite how distasteful that strategy may seem from a consumer standpoint, one has to admit that it could help prevent VoIP from becoming a broadband blocker.

Ultimately, though, upstart broadband VoIP providers, and even long-distance company broadband VoIP initiatives, are small threats compared to a much bigger one that the telcos now face from the cable companies. Where broadband VoIP will make its biggest impact is by providing cable companies with a viable way of delivering local and long-distance voice services. Cable modem users already outnumber DSL users by more than two-to-one--and cable operators are embracing broadband VoIP as a tremendous potential revenue booster. Telcos realize that to fight back, they will have to offer video and high-speed data services--and to do so, they'll need broadband. Indeed, the threat of cable may push telcos to act more promptly on deploying FTTP, as the limitations of DSL in comparison with cable are likely to become increasingly problematic.

The opportunity

Although telcos are, in effect, being forced into the video business, it could be a good opportunity for them. Video services offer the same sort of "green field" opportunity for telcos that voice offers for the cablecos. And to their credit, telcos seem to realize that to make any significant inroads, they will have to outperform the cable companies at the cable companies' own game.

FTTP may provide the opportunity to do just that. By delivering unprecedented bandwidth, it will enable telcos to deliver more channels than their cable counterparts and will make it easier to offer customized streaming video. Ironically, this is one area where regulators seem to have had uncharacteristic foresight. It seems inter-modal competition now may be more powerful than it appeared, for years, to be--and not just on the voice and data front. The big questions now: How much ground will the cable companies gain on the voice front--and how quickly? How quickly can telcos deploy FTTP, and how widespread will those deployments be? And will the telcos have sufficient programming smarts to make significant inroads against the cable companies?

As for the final question, telcos, unlike cable companies, would prefer not to be in the programming business--which means that the two industries have different ideas about how they'd like to see open access regulated. Look for the next round of telco/cable battles to occur on that front.

Joan Engebretson is a contributing editor to America's Network.