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IP Telephony Approaches Are Growing On Big MSOs

10/01/2000 8:00 PM Eastern

Cable's conversion to IP telephony has picked up steam. AT & T Broadband plans to launch an Internet protocol-based telephony trial in the next several months, utilizing the LightWire technology used in its Salt Lake City test to build a primarily passive cable network.

"We're looking to deliver IP as quickly as possible," Jim Wood, vice president of advanced technology at AT & T Broadband, said at a Paul Kagan Associates conference in New York on Sept. 21.

And Cablevision Systems Corp. is slowing its circuit-switch rollout of residential telephony, based on its belief that IP telephony will be ready for consumers in a year.

"We have slowed the development of HFC [hybrid fiber-coaxial]-delivered service," said Eric Tveter, Cablevision's senior vice president of business telecom services. "We're in the process of a pilot trial of IP telephony. IP is not quite ready for primetime, but I think it's going to be done quicker than you think."

While AT & T and Cox plow ahead with circuit-switched telephony deployments, Comcast Corp., Charter Communications Inc. and others have been waiting for IP telephony to mature beyond the lab. Charter is testing IP service in Wisconsin using Cisco Systems Inc. and Telcordia Technologies Inc. gear, and will add a trial using Nortel Networks equipment in St. Louis later this year. It doesn't expect to roll out IP telephony commercially for another year, however.

The cost savings for IP telephony remains a big draw for cable operators, Wood said. AT & T is looking at a $15 per subscriber savings for voice-only subscribers, but that figure jumps to $270 per subscriber for a voice and data customer, Wood said. Quality-of-service and powering are the two key obstacles to overcome, Wood said.

As AT & T continues to work on IP in the labs, its broadband division is racing against the clock to reach 500,000 cable-telephony subscribers by year's end. Wood said the company installs almost 10,000 new telephony subscribers a week. It now serves more than 200,000 subscribers.

The MSO recently introduced five free months of service for four primary telephone lines to goose penetration rates.

"We think that's a very good value proposition for our customers and investors," Wood said.

On IP, Wood said: "We're seeking a vendor solution where the vendor performs system integration of necessary components. The IP cost must be better than the HFC constant bit rate circuit-switched product."

AT & T is looking at combining cable-modem termination systems and routers for data services with IP-telephone technology at headends that serve 100,000 homes. There's been some internal debate over what the consumer demand for bandwidth will be for these CMTSes and routers as other services are deployed, such as interactivity, streaming media and video telephony, Wood said.

Wood said he's been impressed with two demonstrations of video telephony in recent months, hinting at new services that may come from the MSO.

"The quality-of-service is phenomenal," he said. "It could drive that market itself."

Entering into the bandwidth-usage equation is the topology that AT & T tested in Salt Lake City through its LightWire project. LightWire gave AT & T the ability to test passive networks that use far fewer amplifiers.

"It looks to be extremely beneficial to be adding a passive network, unlike what we've seen in cable," Wood said, especially if new-service revenue more than covers the cost.

Wood said AT & T remains undecided between centralized and distributed power for IP telephony. "The debate continues to rage on," he said.

Part of Cablevision's decision to pull back on circuit-switched telephony stems from its success in high-speed data, Tveter said. "The data market is growing at 40 percent a year," he said, while voice growth has been slower. "We've chosen to focus on high-speed data. Getting the modem into the house will help the rollout of IP telephony later.

"Waiting, for our company, is the right decision," he added. "We think IP telephony will be a great application."

Cablevision's Lightpath business-telephony subsidiary serves 100 buildings with 58,100 activated access lines. But that remains a fraction of the potential 620,000 businesses in the New York market that generates $15 billion in phone revenue to existing suppliers, Tveter said.

Cablevision's circuit-switched residential service, Optimum Telephone, serves 11,000 subscribers with 20,000 access lines across 135,000 marketed homes.

Tveter said Cablevision is enticed by the cost advantages of IP technology, through which video and voice data can be sent through an entire network. Because of the problems inherent in New York-area commuting, Tveter said Cablevision is working with Cisco to develop virtual private networks for businesses.

"We think telecommuting will be a very powerful application," Tveter said. "We think it will also help sell cable modems. VPN service will be priced $25 a month for a secure connection."

Tveter said development advances in soft-switch technology by Lucent Technologies, Convergent Networks and others should help operators transition from circuit switch to IP by lowering costs.

Competitive pressures also play into Cablevision's IP plans. "We have to be ready to roll it out, because DSL is out there in each market," Tveter said.

Equipment vendors agreed that IP telephony could be integrated into existing systems, saving operators money.

"There are some tremendous cost-per-user savings to have an integrated bundle from a technology standpoint," said Dan Moloney, senior vice president and general manager of Internet-protocol network systems at Motorola Inc. "You could integrate whole devices or some parts of different services."

With IP telephony, users can share existing CPE, CMTS and OSS systems.

"You have the ability to leverage the commonality," Moloney said. In some cases, operators like AT & T may not replace existing class-5 switches deployed for circuit-switched telephony, he said.

"Even using IP in the local loop, there are still pretty substantial savings."

Sharing a CMTS might save an MSO $20 per subscriber, Moloney said. But using the same in-home device-a digital set-top with a DOCSIS cable modem and IP technology-could save operators hundreds of dollars per subscriber.

John Slevin, vice president of marketing, strategy and business development for Lucent Technologies' broadband access group, said: "We're seeing early trials and deployments and over the next year to next 18 months you'll see a significant rollouts. The key to launching is to have all the back-office systems in place."

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