Despite its debt load and continuing basic-subscriber losses, Charter Communications Inc. is proceeding with the voice-over-Internet protocol telephony rollout the MSO believes will help in its battle with satellite providers and telephone companies.
“We began this year with 100,000 homes phone-ready and will finish the year with nearly 1 million phone-ready homes,” says Tom Cullen, Charter executive vice president of advanced services and business development.
Much of 2004 has been devoted to understanding what the rollout of phone service requires. “We created a smaller group at corporate to understand what has to occur cross functionally and replicate those processes” through the company, Cullen says.
The current management team inherited several different telephony operations, including a VoIP trial in its Wisconsin system, launched several years ago, and about 25,000 circuit-switched subscribers inherited from AT&T Broadband in St. Louis.
The MSO has since added VoIP and a soft switch to the St. Louis rollout and increased the subscriber count in that market, Cullen says. It also has expanded the Stevens Point, Wis., trial to a full-scale launch covering several other Wisconsin communities. Charter plans to launch telephony in a third market, Worcester, Mass., later this year.
“In 2004, we're trying to capture the learning on the processes,” Cullen says. “We'll be much more aggressive in 2005 in terms of expansion.” In recent analyst meetings, Charter CEO Carl Vogel has talked about getting eight markets serving 40% of Charter's footprint up and running in 2005.
The company is using soft switches from Nortel Networks and cable-modem termination systems (CMTS) and embedded multimedia terminals from Arris Interactive LLC for the VoIP rollouts in Wisconsin and St. Louis. In Worcester, Charter will use Cedar Point Communications Inc.'s gateway and switch, along with Motorola Inc.'s BSR 64000 CMTS and an Arris telephone adapter.
The rollouts give Charter insight into two different architectures going forward. “We will be able to use one or the other solution in other markets we go to,” Cullen says.
Charter has both large and small systems, making VoIP a bit more challenging to launch, than for, say, Time Warner Cable.
Some smaller systems launching VoIP use a more turnkey approach, outsourcing not only interconnection and long-distance, but provisioning and other services.
“We've looked at the model,” Cullen says, “but the economics were better for us to piecemeal it. There are certain aspects we want to control ourselves.”
The MSO has signed Sprint Corp. and Level 3 Communications Inc. to handle interconnectivity and long-distance functions. “And we signed a provisioning support agreement with Accenture, to handle number portability,” Cullen says.
But launching telephony is more than just getting the infrastructure in place. In addition to plant readiness and system preparedness, launching telephony touches every department — marketing, operations, legal, customer service — in a cable system, Cullen says.
“There is a level of coordination necessary, and that is a gating factor,” he says. Work began last year to get competitive local-exchange carrier (CLEC) certifications in all the states where Charter operates. “We did interconnection agreements,” he says. There is also training for technicians and customer service representatives.
Charter is considering a package full of features, including long-distance phone service for $39.95 a month, with lower prices depending on the services included in the bundle.
“At $39.95, we're not only competitive with the LECs, we have attractive margins,” Cullen says. Charter counts 150,000 data-only subscribers, and the MSO won't be adverse to selling phone-only subscriptions.
“I'm more optimistic about the phone-only customers than the data-only customers,” says Cullen, who came to Charter in August 2003 after a year with a private-equity firm and nearly 20 years with MediaOne Group Inc. and predecessor phone company U S West in various Internet-related development roles. “It does give us an opportunity to get into non-customer households. From there you can upgrade into bundles. We're seeing a pretty good take from non-customers.”
The work is beginning to pay off. “We're seeing very good early returns with bundling. The two- and three-product bundles appear to be very good. There is a retentive aspect to this,” Cullen says.
Looking ahead, he says “it's imperative for the industry to focus on a unique feature functionally that transcends the product line.”
That could include caller ID on the television as a first step, voicemail, video mail on the TV, or having the TV or digital video recorder pause when the phone rings. “The more those are integrated, the more retentive they become,” he says. “It's not only bundled in price; it's integrated across the three products. That's a really important 2006 type of initiative.”