Copyright 2003 The Austin American Statesman

Austin American-Statesman (Texas)

September 9, 2003, Tuesday

Turning up the heat in the telecom wars, Time Warner Cable has applied for permission to offer phone service in Texas. It's among the first cable companies to jump into the phone service arena.

Time Warner would provide the service using its own high-speed Internet network. Customers would need a cable modem but could get phone service without subscribing to Time Warner's high-speed Internet service.

Time Warner already is offering phone service in Portland, Maine, has approval to do so in New York, and has filed an application in North Carolina.

In Portland, customers are paying $39.95 a month for unlimited in-state, local and long-distance calling.

Lidia Agraz, a spokeswoman for Time Warner in Austin, said Monday that the company won't decide on a rollout schedule or other details until after the Public Utility Commission rules on the application, which was filed last month.

SBC Communications Inc. and AT&T Corp. have filed to intervene in the case, saying that the commission needs to set policy regarding Internet-based phone service. A coalition of 80 cities, including Austin and Houston, also filed to intervene, saying they want to know how they'll be compensated. Time Warner already pays the cities where it provides cable service for using public rights of way.

The entry of Time Warner, the region's dominant cable TV company with 300,000 customers, into the phone business would increase the pressure on SBC, which already is under assault by a growing list of rivals that are trying to pick off its customers.

In Central Texas, for example, customers can choose from among as many as seven companies to get phone service. The newest entry is Sprint Corp., which two weeks ago said it would start offering phone service in Texas and 34 other states.

But so far, only Vonage Holdings offers Internet-based calling in the region using a technology called voice-over-Internet Protocol. It's cheaper to send calls over high-speed Internet lines, and customers can use regular phone handsets. However, a cable blackout shuts down phone service.

Phone service is the new frontier for cable companies, which have been in a fierce battle with regional phone companies for high-speed Internet customers.

"This is a very real threat to the incumbent telephone companies," Charles Golvin, a senior analyst at Forrester Research, said in a recent interview with Newsday. In New York, Cablevision Systems Corp. has been testing phone service in Nassau County and plans to roll it out to 1 million customers this year. Time Warner will roll out its service in Rochester, N.Y., later this year.

Cox Communications Inc., which operates a cable system in parts of Williamson County, already offers phone service in other parts of the country via a technology that switches the calls to regular phone lines. The company is testing pure Internet-based calling and plans a rollout next year. Cox Enterprises Inc., the owner of the Austin American-Statesman, is the majority shareholder in Cox Communications.