Cable Operator Launches Free Internet Phone Calls

22 June 2004

US cable and entertainment giant Cablevision Systems launched a new era of cheap mass market telecoms with Monday's announcement of the introduction of free internet-based phone calls.

Consumers are invited to sign-up to a $90 (£49; €74) per month package also covering telecoms, digital cable TV and high-speed internet access. But since many customers already pay the same amount for the two latter services -- Cablevision charges $40 and $45 respectively -- the telephony element is effectively thrown in for free.

Explaining this pricing sleight of hand, svp of consumer product management and marketing Patricia Gottesman said: "These low price points give us the opportunity to talk about the savings in many different ways; one way is to show the customer that they are essentially receiving their voice service for free".

And it's a trick that has certainly caught the eye of Wall Street's entrail-rakers. Goldman Sachs for one has suggested cable operators could steal 7% of residential telephone business from the traditional Bell companies over the next two years – and a whopping 20% in the next ten.

But the Bells – already facing competition from cable operators in other areas – are not blind to the threat. SBC Communications already provides an equivalent $105-per month phone, TV and internet package in conjunction with EchoStar Communications.

However this is still $15 shy of the Cablevision service, which breaks calls into binary units that are then sent across its network in a similar way to email, providing audio quality comparable to traditional telephony.

Data sourced from: The Wall Street Journal Online; additional content by WARC