The video and telephone market in Texas and across the country is highly competitive.
Video Competition
Cable companies face intense competition in the video market. Federal law prohibits cities from granting exclusive franchise rights to one cable provider. Many cities in Texas have more than one cable operator and there is statewide competition from satellite providers.
Multiple video providers – including Direct Broadcast Satellite (DBS), alternative broadband providers like RCN, local telephone companies, and utilities – compete, each trying to provide unique new products while trying to outdo those provided by their competitors. As a result of this competition, a wide new array of services – both video and non-video – is available to consumers over several alternative broadband platforms, including cable, telephone, wireless, and DBS. Consumers today have real choices in the video market – and they are exercising those choices as Congress and the Texas Legislature intended.
Phone Competition
“For 130 years, traditional telephone operators have been kings of the home phone castle. But watch out–Ma Cable is making herself heard.” CNET
A number of Texas cable operators offer telephone service to consumers, thus providing customers the convenience of receiving all communications services from one company. This relatively recent competition has given traditional phone providers a rin for their money. In addition to the deployment of traditional circuit-switched telephone service, many cable companies have begun to use their digital cable networks to offer new services such as “voice over Internet protocol” (VoIP). VoIP utilizes the data path the cable industry has already built to offer cable modem service and allows a telephone call to be transmitted as compressed data. Speech is converted to digital format and transmitted as data that are split up and sent in packets over the Internet and then reassembled at the receiving end. VoIP technology allows cable operators to provide a competitive choice for traditional local phone service and, in the future, will allow the provision of innovative combinations of voice, data and fax.
In Texas, more consumers are choosing a cable company as their voice provider. In 2006 Time Warner Cable San Antonio hit a significant milestone by signing up its 110,000th digital phone customer, accomplishing this goal in under two years. San Antonio continues to be one of the fastest growing digital phone markets in the company, as one in six San Antonians subscribe to Time Warner’s phone service.
Nationally, cable phone service is now available to more than 75 million homes and more than seven million customers currently subscribe to the service. By the year 2011, cable telephone customers are projected to grow to 24 million which is expected to result in over $100 billion of savings for both residential and small business users, concludes the economic research firm Microeconomic Consulting and Research Associates, based in Washington, D.C.
These projected savings are based on two primary factors:
- the amount that existing cable customers currently save by using lower-priced cable telephone service vs. the increased cost they would pay for service from the incumbent telephone providers (direct savings); and
- the competitive response by the incumbent telephone providers to reduce their prices to compete with cable’s new telephone service (indirect savings).
In short, cable companies are gaining telephone customers because they are setting the standard for innovation while delivering more advanced and affordable services.