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Cable Firms Launch Assault to Draw Phone Users

The San Diego market for telephone services is increasingly becoming more competitive as cable and phone companies alike scramble to gain a foothold.

In hopes of luring customers away from local phone provider San Antonio-based SBC, which services 15 million customers in California, Time Warner Cable and Cox Communications have both entered into the phone business.

Time Warner began offering digital phone services in September following Atlanta-based Cox Communications, which has been offering digital phone service to its customers since 1998.

And as Time Warner and Cox work to increase their market presence, SBC looks to stand its ground.

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“Customers need to ask themselves if you’re in a business and your lifeline depends on telecommunications, do you want a company with a 100-year history of success or do you want a cable company?” said John Britton, an SBC spokesman.

Cox, however, is hoping to broaden its market share and lure customers away from SBC and Time Warner by offering an incentive to all San Diego businesses that currently use SBC.

Through April 30, Cox is challenging all businesses that are SBC customers and currently spend more than $100 monthly to turn in their phone bill, and if Cox can not save the companies at least 15 percent, they will provide them with a gift card to CompUSA, an office and supply store.

“This is our way of communicating to the business community that they have a choice,” said Mary Ball, Cox’s vice president of government and community relations. “That they can save money.”

Cox, which has spent $1billion on rebuilding its network, is confident that it can save money for the majority of businesses, Ball said.

“When a business switches to Cox they will get better service at a cheaper price,” Ball said. “Essentially any service that SBC offers, we offer.”


Competition Heats Up

The promotion is just one sign that competition between cable and phone companies is getting more and more aggressive.

“We compete head to head with SBC for residential customers,” Ball said. “The competition is now spreading into the business arena. Here in San Diego there is a great deal of competition between Time Warner and SBC. We want customers to know they do have choices out there and in San Diego that means it is getting more and more competitive.”

Digital telephone services through Cox costs customers $38.89 monthly and includes one phone line, unlimited nationwide calling, any one Cox feature, such as call waiting or caller ID, and the Cox Service Assurance plan, which protects the inside wiring connection of customers Cox services.

Cox, which also offers high-speed Internet, also has a basic phone package for $19.99.

Time Warner, based in Stamford, Conn., is also increasing its competitive drive for digital phone services, touted by the company as a replacement for a current phone line with unlimited long distance coverage throughout the United States and U.S. territories.

Time Warner’s digital phone price is comparable to Cox’s services, ranging in price from $39.95 for customers who already subscribe to Time Warner’s high-speed Internet and digital cable to $49.95 for customers who only want digital phone services, which includes unlimited local and long distance.

SBC offers unlimited local and long distance calling with features for $48.95.

“It’s not just about price, it’s about value,” SBC’s Britton said.


Increasing The Numbers

Time Warner, which has already launched the service to some of its customers, is hoping to offer digital phone services to 80 percent of its residential customers by the end of March and to all commercial customers by the end of summer, said Marc Farrar, vice president of public affairs for Time Warner.

The company has 350,000 subscribers throughout its territory, which includes the northern half of San Diego, Coronado, portions of Poway, Palm Springs, Palm Desert, Barstow, and other desert communities.

Time Warner has already launched its digital phone services to all customers in the desert communities.

The launch of digital phone completes the package of service for Time Warner, enabling the cable company to offer multiple services via one company, Farrar said.

In addition to digital phone, the company also offers cable and high-speed Internet.

“Digital phone delivers the full value of the network,” said Judy Walsh, Time Warner Cable-San Diego division president. “It is a natural extension and people like getting a package of all their services from one company. As San Diego grows, we grow with it.

Known in the industry as bundling, when one company offers multiple services, the cable industry has evolved to offer these multiple services at the request of its customers, Walsh said.

Both Cox and SBC also offer bundling services.

Cox’s bundling service includes cable, Internet and phone.

Like the cable companies, SBC also provides high speed Internet, which was introduced to its customers in 1996, and provides wireless service through its relationship with Cingular, which is owned by SBC.

“If you intend to be a serious player you have to have a bundle of services,” Britton said.


‘Open Market’

But Britton noted that the competition between the industries is getting more competitive as the cable and telecommunications companies services begin to merge into the same arena.

“It’s an open market. There is intense competition and there are lots of competitors out there,” Britton said. “There is a big transition under way. Telecommunications has totally changed. Companies are not competing for just one line of service anymore. SBC has traditionally offered telecommunications but now we are moving into entertainment services. We are investing $4 billion that by the end of 2007 to bring what we call IPTV to 19 million homes.”

IPTV will be SBC’s move into offering video services, which for so long has been the core service of cable companies, Britton said.

“This is going to be way beyond cable,” Britton said. “We are in a new market place where both industries are all providing the same services competitively to be a solution for customers.”

Boyd Peterson, the senior vice president of research at Boston-based Yankee Group, a market research firm, said the presence of cable companies in the telecommunications market is not surprising.

“If (cable) companies have the means by having that data service already , that’s infrastructure that they can leverage (to offer phone services),” Peterson said. “It certainly makes sense for cable companies to cut them off at their leg.”

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