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Customers Place Premium on VoIP Reliability

5/02/2004 8:00 PM Eastern

When it comes to voice-over-Internet protocol services, consumers care more about reliability than quality — and surprisingly, they have no clear-cut preference as to whether their bundled services come from cable operators or telcos.

Those were among the findings of a new Gallup Poll commissioned by UBS Warburg cable debt and equity analyst Aryeh Bourkoff.

Gallup interviewed 803 U.S. consumers about VoIP, and found a relatively strong appetite for alternatives in telephony service.

More than one-third of respondents without broadband telephony (34%) said they were likely to switch if they could save 20% or more on their phone bill.

Three-fourths of respondents (74%) expressed no preference when asked if they’d prefer to receive a bundle of voice, video and data services from a cable provider or a telco.

According to poll results, quality seemed less important in phone service than reliability, as 59% of respondents said lower voice quality was acceptable, while only 41% said they could live with lower reliability from their broadband phone service.

Wireless telephony didn’t play a major role in the bundle. More than 50% of respondents indicated that they didn’t necessarily prefer to get wireless service from the same company that provided their wireline service.

As for the number of subscribers willing to switch for a 20% discount, Bourkoff wrote in a research report: “We believe this is a fair representation that would consider leaving their local exchange provider for a broadband telephony provider over time.” He noted that Time Warner Cable has sold VoIP to 9% of its video subscribers, and 23% of its cable-modem subscribers, in Portland, Maine.

On the reliability issue, Bourkoff said cable is well positioned as it moves away from thinking about VoIP as a second service and concentrates on delivering primary-line quality.

“We note that Cox [Communications Inc.] and Time Warner [Cable]’s strategy to use the inside wiring and existing phone jacks of the home actually improves the functionality of the VoIP service,” he wrote.

Consumers’ general lack of preference on bundle providers is good news for cable, said Bourkoff, as it shows they’re primarily interested in value.

“In our view, the provider that is first to market with the three-product bundle will benefit from lower-acquisition costs and customer loyalty as customers are less likely to move when they purchase these services from a single provider,” he wrote.

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