January 2004

Time Warner Cable: A Whole New Game

Service providers delivering broadband access are expanding their service portfolio to include voice, as well as broadcast video and high-speed Internet access, all in a single package. While many cable operators are still in the trial stages with their voice offerings, Time Warner Cable hit the playing field in May 2003 when they announced �Digital Phone,� their residential voice service to customers in Portland, Maine. Using standards-based technologies and intelligent networking from Cisco Systems, Time Warner Cable is now delivering a �triple-play� bundle of services: IP communications, as well as entertainment and Internet access to all of its customers in its Portland service area. In just the first couple of months, more than 4,000 customers have signed up for the service.

This is an important milestone -- both for broadband service providers and for residential telephone customers. It�s in the same league as the launch of HBO and the first rollout of high-speed Internet access broadband data services.

Consumers now have a choice of residential voice service providers. Time Warner Cable�s service offering provides all the same features as their current local carrier, including important features like emergency 911 services as well as innovative features like unlimited long-distance calling in the continental United States. Time Warner Cable provides a single monthly phone bill for all its triple-play services.

By adding this new service to its existing advanced multiservice network infrastructure, Time Warner Cable gains a new revenue stream -- with minimal investment in new technology -- while reducing customer churn and laying the foundation for continued innovation of its communications service portfolio. The bundle also enables Time Warner Cable to maximize the return on its IP network investment while at the same time increasing the average revenue per user.

Digital Phone
Subscribers to the new service get unlimited calling anywhere in the continental United States as well as standard features such as 411 directory assistance, 611 service calls, enhanced 911 service, operator-assisted calls, and the ability to view call detail records online. The package also includes caller ID, call waiting, and call waiting ID. The cost: a flat fee of $39.95 per month.

The Triple Play
The Time Warner milestone is great news for consumers. They can have the convenience of receiving all bundled services from one company, and they�re being offered competitive rates.

And according to Gerry Campbell, senior vice president of Voice for Time Warner Cable, the company -- along with other cable operators that are rapidly following suit -- is more than happy to be that one company for the consumer. It�s a differentiator, and that�s important in such a highly competitive market, says Campbell. �As cable operators, we�re able to offer a combination of services that potentially no one else can. We can offer a full suite of services, whereas the consumer would have to go to two companies to get the same range of services from our competitors.�

In an In-Stat MDR analyst report, Cox Communications was reported as saying that monthly churn is demonstrably lower for consumers who subscribe to cable TV, high-speed data, and voice from a single service provider:

Service (Monthly Churn)
Cable TV only (1.5%)
Cable TV and high-speed data (1.1%)
Cable TV, high-speed data, voice (0.7%)

Cox estimates the cost per churned customer to be $50 for cable TV and $150 for high-speed data. It concludes that voice adds about $1 of free cash flow per subscriber per month from reduced churn on cable TV and high-speed data.

The Right Network for the Job
To add telephony to its bundle, Time Warner Cable needed a communications-grade infrastructure for voice, video, and data. For cable operators, preparing their infrastructures to support voice introduces some challenges. For example, providing toll-quality telephony requires a cable network infrastructure capable of delivering the quality of service required for voice communications coupled with a voice infrastructure providing the call processing intelligence and voice features required by Time Warner Cable�s customers.

But for Time Warner Cable, offering this service was not difficult. The Digital Phone primary-line service was built on top of the company�s existing IP infrastructure for high-speed Internet access. The enhanced network enables reliable voice services that can scale as Time Warner Cable�s Digital Phone service grows in the future. Because it was building on an IP infrastructure, Time Warner Cable has been able to put another revenue stream -- voice -- in place with minimal effort and cost. �We have greater utilization of an asset, which means greater return on our investment in existing systems,� Campbell says.
The standards-based IP technology provides many advantages. For example, a standards-based packet network makes it much easier for Time Warner Cable to integrate new multimedia and interactive capabilities. Further, standards-based equipment will endure in the operator�s network for many years without becoming obsolete.

Open-platform, flexible architectures are important because they help enable interoperability among different vendors. �As the cable industry rolls out IP communications, by using common platforms we�ll be able to interconnect our systems to one another, greatly expanding the reach of our services. Also important, because this solution is standards-based, we�ll have a choice of different vendors that support the same technology,� says Campbell. �And Moore�s law comes into play -- so the cost to deliver the service will continue to go down.�
A standards-based infrastructure also provides the foundation for future services. �Because cable is all one common network platform, companies that develop innovative services will reap the reward of being able to deploy these services across the cable industry as a whole,� Campbell predicts.

In order to upgrade its network to handle the VoIP services, Time Warner Cable selected the Cisco Broadband Local Integrated Services Solution (BLISS) for cable, which is a fully integrated, tested, and Cisco supported residential voice solution consisting of all the Cisco and partner products necessary to deliver a PacketCable primary line service offering. BLISS enables cable operators to deliver IP-based voice services over their CableLabs DOCSIS IP network infrastructure. The Cisco BTS 10200 Softswitch, the Cisco uBR7246VXR Universal Broadband Router, and the Cisco MGX 8850 Voice Gateway products are key elements of the network infrastructure.

Softswitches provide the call-control plane and service intelligence for delivering telephony over packet networks. Because softswitches appear as an application server on IP networks they enable service providers to support new, enhanced communications services and features by melding voice communications, data communications, and entertainment services together in unique ways. Soon it will be commonplace to see not only caller name and number displayed on your TV set when the phone rings, but you will also have the ability to retrieve your voice mail through the TV set in between innings of your favorite baseball game, all without leaving the comfort of your favorite chair.

�We already had a strong relationship with Cisco,� says Campbell of his company�s decision to work with the networking technology provider. �And Time Warner Cable wanted to go with a company that was sure to move forward with the PacketCable standard so that we knew the network would adhere to future standards.�

Ahead of the Game
Even though it has been forecast for some time that cable operators will move in to take some market share from existing telecommunications operators by offering VoIP services, it�s only recently that the technology has matured and the costs have decreased enough for this vision to become a reality.

�We�re the only ones out there with a network capable of competing with phone companies,� says Campbell. �This has never happened before -- we�re ahead of the game.�

It�s not a happy milestone for the local phone companies across the country (often called regional Bell operating companies, or RBOCs). Already today, more people use cable modems for their home-based broadband connections, preferring them over other broadband options and giving cable operators a distinct advantage in the residential services market. With this milestone, cable operators have an even greater advantage: the ability to offer video, data, and voice services. In contrast, the best that phone companies can deliver over their network is a double play of data and voice.

Time Warner Cable has been very pleased with the acceptance rate for its Digital Phone service to date. �It has proven to us that this is going to be a good service to continue to roll out across the country,� says Campbell. The company expects to launch Digital Phone later this year in Rochester, New York, and parts of North Carolina.

In baseball, double plays are impressive -- but it�s the rare triple play that really blows the crowd away. If Time Warner Cable�s initial success is any indicator, cable operators that bundle voice with their other offerings are going to find the same reaction to their �triple play� of cable services.

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