VoIP Costs Getting Better for Cablevision

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Washington -- Cablevision Systems Corp. cable and communications president Tom Rutledge said Tuesday that he continues to be pleasantly surprised by the costs associated with the rollout of voice over Internet protocol.

"I can't budget my capital costs low enough. I keep being shocked at how quickly the price of modems continues to fall [and] the cost of switching continues to fall," Rutledge said at a conference here hosted by telecommunications-research firm The Precursor Group.

Cablevision has made its "Optimum Voice" VoIP service available to 4.4 million homes since late last year. The company is planning to report VoIP-subscriber totals for the first time March 2, spokesman Jim Maiella said. Wall Street analysts are keenly interested in Cablevision's VoIP numbers.

VoIP generates 40% operating margins, which translate into about $15 in monthly cash flow per customer. Margins and cash flow should improve steadily because as VoIP penetration increases, Cablevision realizes a reduction in call-termination payments to the Baby Bells, Rutledge said.

"The interesting thing about the business going forward that I'm not sure everyone perceives is that the more subscribers you have, the less the costs are," Rutledge said, adding that consumer self-installation would help to keep VoIP-rollout costs down.

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