Converging Voice Over Cable

Next-Generation Cable Telephony is on the Eve of a New Epoch

The telecommunications revolution has given rise to a new generation of cable operators on a mission to change the competitive dynamics of the industry. Cable operators are already the preeminent providers of video services, but not content. To adopt the "business as usual" model of the past, next-generation cable operators have embarked on an aggressive program of network conversion and upgrades to meet the growing needs of service-hungry consumers. With cable modem services already leading broadband data communications to the home, the cable industry is ahead in the convergence of voice, video and data services.

Adding voice to cable's existing mix of video and data services provides cable operators with a competitive advantage. The work already undertaken to provide interactive and data services, such as two-way plant upgrades and data over cable service interface specification (DOCSIS) networking standards, has paved the way for cable operators to provide telephony services. With the physical infrastructure to provide high-quality voice services in place, the cable industry has all the elements of a convergent network capable of delivering an entire suite of voice, video and data services. These capabilities are embodied in the next-generation network.

A next-generation network comprises two fundamental characteristics: a high-speed packet or cell-based network capable of transporting and routing a multitude of services, including voice, data and video; and a common platform to deliver new applications and enhanced services.

This type of network is a formula for profit for cable operators. By using a single piece of customer premises equipment (CPE), next-generation cable operators can achieve significant reduction in capital costs as they utilize advanced packet technologies for voice services while offering new, revenue-generating services over a single network. These operators no longer have to wait for their switch vendor to deliver a proprietary software upgrade. Rather, by leveraging open standards and promoting open application program interfaces (APIs), operators have a system with a highly flexible environment to support rapid development of new services.

Nobody is pushing faster into rollout of first-line services over cable than Canada's Le Groupe Videotron. Serving most of the Quebec province with networks in more than 2 million households, the company has gone far enough in its preparations for late 1999 commercial launches to get a feel for what to expect from next-generation network architecture. A key aspect of a successful service rollout is the reliability of the operations support systems (OSSs).

A next-generation OSS will seamlessly handle the various aspects of service request capture, number administration, interconnection management, network provisioning, network inventory, trouble management and end user billing. These functions need to be accomplished with maximum automation, or flow-through, that results in a minimum amount of manual intervention. It is also essential to detail the services in a single, easy to understand monthly customer bill that can be presented electronically.

MediaOne Group, Englewood, Colo., the third-largest cable operator, offers MediaOne Digital Telephony service in Atlanta; Boston; Jacksonville, Fla.; Los Angeles; Pompano, Fla.; and Richmond, Va. Bill Sumner, vice president of operations and business development at MediaOne, says his company is "110 percent committed to providing telephony services, along with Internet service and other new services made possible by broadband connections." MediaOne is deploying an advanced integrated operations suite to consolidate its ordering and provisioning processes.

Cable operators are also discovering new business opportunities in the evolution of next-generation networks. One potential application that many operators are considering is unified messaging, which allows customers to have one integrated mailbox from which they can access any kind of message in the most convenient manner. With this service, customers can view and manage their voice and fax messages, store incoming faxes and then retrieve them from a remote machine, access their e-mail from any telephone and organize all types of messages in one simple filing system. GTE Corp., Stamford, Conn., recently unveiled the first carrier-grade, Internet protocol (IP)-based unified messaging service available for wholesale to service provider in the United States. Initially appealing to "road warriors"--mobile professionals, small businesses and the growing small office/home office (SOHO) market--unified messaging is expected to eventually replace separate e-mail, voice mail and fax systems on the vast majority of business desktops.

Next-generation networks also have applications for e-commerce. Cambridge, Mass.-based Forrester Research Inc. predicts that in the United States alone, e-commerce transactions will grow from $22 billion in 1998 to nearly $350 billion by 2002. According to a recent "E-commerce in the Telecommunications Industry" study by Fairfax, Va.-based American Management Systems Inc., "The majority of industry initiatives in e-commerce have been focused on retail customers."

The recent growth in e-commerce transactions, along with the previous success of home shopping channels on television, suggest that creative marketers will use the new medium to develop ways for next-generation consumers to buy products and services. Cable operators should be concerned about who they partner with to deliver e-commerce services, whether the cable operators' call center has the capacity to handle calls about customer purchases and about the security of the e-commerce system.

When an operator offers advanced services to its customers, a number of security issues may arise. A cable operator that offers telephony has a greater portion of the service "at risk," since a customer can run up a bill for services that is significantly higher than usual. Customer data regarding services requested becomes critical data, making a security breach one of the easiest ways to lose customer confidence. It will be important for cable operators to both effectively secure their systems and educate their customers about potential risks and safeguards.

When in the next millennium will this advanced service set be available? Sooner than you think. Initial trials are under way. Carriers such as Cablevision Systems Corp., Woodbury, N.Y.; Cox Communications Inc., Atlanta; and MediaOne are finding success in providing plain old telephone service (POTS) by packaging services and under pricing incumbent carriers to experience take rates in the 20 percent range.

By the end of 1999, there will be more than 500,000 data modem subscribers, outpacing telcos in the race to offer broadband Internet access. Mountain View, Calif.-based Frost & Sullivan predicts that by 2004, revenues from cable voice services will reach $1.69 billion, representing a compound annual growth rate of 75.8 percent from 1997. These numbers validate business models and encourage further development. AT&T Corp.'s announced acquisition of Comcast Corp., Philadelphia, MediaOne and Tele-Communications Inc. (TCI), Englewood, Colo., would serve to accelerate the time frame, both in the area of the creation of a critical mass of customers and in the development of the necessary technology and infrastructure.

Significant hurdles still exist. Standards for cable modems, packet cable IP telephony and other system components need to be completed and accepted. Integrated home networking will be a key factor for combining multiple televisions, computers and other devices over a single integrated home network. Customer acceptance of interactive applications still remains to be proven, but the rewards will be significant for the cable companies that have the focus, management talent, technical expertise and vision to make the promise and potential of next-generation networks a reality.

Peter Schorsch is director of marketing for Next-generation Network Solutions at Telcordia Technologies Inc., Morristown, N.J. He can be reached at pschors@telcordia.com.

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