Comcast Enters VOIP Market

The cable TV giant will roll out its Digital Voice Web-based phone service in phases throughout 2005.

Comcast Corp., the largest cable TV and high-speed Internet service provider, has decided to delve into the VOIP market, with a goal of snagging 8 million customers in five years.

The new Comcast Digital Voice plan will cost customers $40 per month, about $10 (and then some) more than other voice-over-IP services. Comcast says customers will be willing to pay the higher price because of the enhanced services that come with the plan, including unlimited local and domestic calls, caller ID, voice mail, call waiting and battery backup. The latter feature is designed to keep the phone line functioning for at least 16 hours during a power failure.

The company is also hoping that the prospect of an all-inclusive bill—cable, Internet and phone—will appeal to customers.

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Comcasts success will depend on whether customers will choose to use VOIP in lieu of a regular phone service and whether theyll be willing to pay more for a Comcast service when other providers offer similar services for less.

Ben Silverman, contributing editor for investment newsletter, says the higher price will be a sticking point for customers. "The company will have to lower its prices to be competitive and, quite frankly, were surprised by the high price point of the initial offering," Silverman said. "However, the price point does serve to indicate the confidence with which Comcast is deploying the service."

No matter what the customer reaction, Silverman said, Comcasts move will cause huge waves among phone companies and VOIP providers.

"Comcasts move should send shivers down the backs of executives at Verizon, Qwest and SBC Communications—the companies most likely to lose landline customers to Comcast," Silverman said. "The Baltimore/Washington, Chicago, Dallas, Denver and Philadelphia areas should prove to be serious battlegrounds for the incumbent phone companies."

Digital Voice is currently available in Philadelphia, Indianapolis and Springfield, Mass. Comcast says it plans to roll out the service in 20 new markets by the end of 2005, and then fill in the rest next year.

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