The voice-over-IP landscape shifted again last week, with America Online announcing its VoIP service and promising ease-of-operation and a trusted brand along with low-cost calling.

But AOL's announcement was almost anticlimactic, coming a day after Verizon announced a lower-priced option for its VoiceWing service in a national marketing blitz and in the same week that cable companies were trumpeting extraordinary progress in their own VoIP sales.

Time Warner Cable is adding 10,000 new VoIP subscribers per week to the 220,000 it had at the end of 2004. Cablevision is adding 1000 subscribers per day, and Cox Communications, the industry's voice service veteran, has achieved 40% market penetration in its original voice markets of Omaha, Neb., and Orange County, Calif. Executives of all three companies discussed their success at National Cable TV Association's The National Show 2005 in San Francisco.

“I think Time Warner and Cablevision can take the lead in VoIP from Vonage this year,” said Teresa Mastrangelo, principal analyst with Broadbandtrends.com. “The cable companies are being very smart in making their VoIP look like traditional phone service so that customers don't have to make any extra effort to change services.”

By contrast, services such as AOL's Internet Phone Service and even Verizon's VoiceWing are not touted as primary-line replacements but as an additional service with extra features, she said.

Cable VoIP sales are going so well that Time Warner Cable successfully experimented with using voice sales to drive cable TV and high-speed Internet in its San Antonio market, which happens to be the home of SBC Communications.

“We wondered what would be the impact for the entire business if we used this as an opportunity to get DSL removed from the picture — to rip the wire from the house,” said Sam Howe, senior vice president of marketing for VoIP at Time Warner. The results were extraordinary, he said, as selling voice first worked to buoy TV/Internet sales that had dipped slightly following a price increase.

“We are encouraging all 31 divisions to think about selling phone service first,” he said. “We have never marketed a product with the kind of satisfaction scores we're getting on digital phone service.”

“I love how unapologetic that is,” said management consultant William Markey of ReliantC. “It's not a polite upsell. We may have underestimated how many people hate the phone company.”

Customer feedback has been very positive, Howe said. In Maine, where Time-Warner trialed its VoIP service, 95% of customers said they were likely to keep it. One primary point of appeal is that the price — $39.95 for unlimited local and long-distance calling — includes all fees, taxes, etc., he said. Cox, which is now adding VoIP to its traditional phone service, is already the country's 11th largest telco — and ranked at the top of the J.D. Power & Associates customer satisfaction survey, said David Pugliese, vice president of product marketing and management.

The phone service the cable companies sell looks to consumers just like existing service and comes with E911, battery backup and professional installation. AOL, Vonage, AT&T and others ship customers the necessary software with a phone line adapter for self-installation, linking the VoIP line to the PC.

U.S. Mobile Subscriber Consumption of Content & Applications

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