Time Warner Dials Into the Big Apple

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Time Warner Cable launched its Digital Phone product in its flagship New York City division last week, taking a different approach in the pricing and rollout strategy with the service than fellow metro New York operator Cablevision Systems Corp.

When Cablevision launched its Optimum Voice product in November of 2003, it marketed the Internet protocol-based service to its entire subscriber base in the New York DMA. Time Warner is making Digital Phone initially available to only about 500,000 of Time Warner Cable of New York and New Jersey’s 1.2 million households.

Time Warner corporate executives have said Digital Phone would be available on every system nationwide by the end of 2004, but officials at the New York division said the service wouldn’t be accessible to all of the households it serves in the market until summer 2005. Digital Phone is currently available in parts of the New York City boroughs of Manhattan, Queens and Staten Island and the Westchester County, N.Y., city of Mount Vernon.

Time Warner Cable is charging customers that subscribe to both digital cable and its Road Runner high-speed data service an additional $39.95 per month for Digital Phone, which includes unlimited local, regional and long-distance calls.

Customers that subscribe to either digital cable or Road Runner will pay a monthly $44.95, while analog cable customers will have to pay $49.95 more per month for Digital Phone.

“We think the product we’ve gone out with is very well-priced for our customer base,” said Howard Szarfarc, president of Time Warner Cable of New York & New Jersey.

UNDERCUTTING VERIZON

Time Warner’s pricing for Digital Phone undercuts the $59.95-per-month fee that Verizon Communications Inc. charges customers in metropolitan New York for an unlimited local, regional and long-distance calling package. But Verizon, which also recently rolled out an IP-based phone service, offers a less expensive bundle of high-speed data and Internet phone service, charging customers of its new VoiceWing IP phone service $34.95 per month, provided they subscribe to its digital subscriber line service.

Cablevision offers deeper discounts than Verizon or Time Warner, charging new customers that order its triple-play of Optimum Voice, Optimum Online and iO: Interactive Optimum digital cable $29.95 for each service, which works out to $89.95 per month for the entire bundle. Time Warner customers in New York that order a comparable bundle will have to pay $132.90 — $42.95 per month more than Cablevision customers pay for a bundle of video, voice and Internet service.

While Cablevision doesn’t compete head-to-head with Time Warner Cable, the MSO has flooded the New York metropolitan market with marketing materials for its discounted telephone service during the last year.

Szarfarc said he didn’t think Cablevision’s marketing strategy and pricing would impact Time Warner’s bid to widely distribute its Digital Phone: “Their product is different than ours and their approach is different than ours.”

Time Warner officials declined to discuss subscriber projections for Digital Phone.

The New York system is offering free installation for the product, which requires a new modem. Voice mail costs an additional $3.95 per month.

Time Warner planned to begin running ads in New York newspapers for Digital Phone last Thursday. This week, the company will begin running cross-channel spots touting the new phone service, according to Szarfarc.

NO MARKETING WORRIES

Even though Digital Phone won’t be available to the New York division’s entire subscriber base until next summer, Szarfarc said marketing the service system-wide wouldn’t be an issue.

In addition to Manhattan, Queens, Staten Island, western Brooklyn and Mount Vernon, Time Warner’s area footprint extends to several counties in New York’s Hudson Valley and parts of Bergen and Hudson Counties in New Jersey.

Time Warner spokeswoman Harriet Novet said the New York’s system plant has been upgraded, but technicians will check parts of the system before offering digital phone to all New York-area customers.

“In order to ensure that every consumer who chooses Digital Phone has an excellent experience, we are requalifying all aspects of our physical plant and drops in each area,” Novet said.

Time Warner first rang up Digital Phone for its Portland, Maine, system in May 2003. Time Warner officials have said about 75% of its telephone customers around the country also subscribe to its video and high-speed data products.

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