Cablevision to give new customers free phone service in package

The long-anticipated phone-service battle between cable and telecommunications companies may finally be upon us.

Cablevision Systems Corp. could start a price war with Verizon Communications Inc. with its offer yesterday of what amounts to free phone service for new customers who also buy cable television and Internet access.

By Associated Press

http://www.boston.com/business/technology/articles/2004/06/22/cablevision_to_give_new_customers_free_phone_service_in_package/

The company, the nation’s sixth-largest cable provider with about 3 million customers in the New York region, will charge $90 a month for a package of TV, broadband Internet, and unlimited local and long-distance calling.

”Long-term, the question is whether Verizon can effectively compete against Cablevision, not the other way around," said Matthew Harrison, a managing director at Janco Partners.

It’s more cost effective for Cablevision to give away voice-over-Internet phone service than it is for Verizon to discount its DSL Internet access, he said.

Cablevision stock fell on the news, dropping 78 cents a share, or 3.5 percent, to $21.22. Price wars are seldom good for profits, and some analysts wondered whether the company was dropping prices because it lost subscribers.

Cablevision said it has about 100,000 voice customers. It would not release projections for its phone service.

The technology it uses to offer voice service, voice over Internet protocol, requires a broadband Internet connection. Reliability is still spotty compared to traditional wired phone service and some issues surrounding it are unresolved, such as whether, or how, it will be regulated.

But companies from AT&T Corp. to tiny Vonage Holdings Corp. are looking at the technology as a way to challenge the regional Bell companies.

Some of the regional Bells have made forays into offering television over their lines. However, there is currently no way to buy TV service directly from Verizon.

Verizon does offer a package with unlimited local and domestic long-distance calling together with Internet for $90; video service from DirectTV is another $34.

Verizon spokesman Jim Smith downplayed the Cablevision offer.

”You gotta read the fine print, it will make you nutty," he said. ”We consider this a promotional price. Our stack of services is taller than theirs. We pitch, to our customers, value. We don’t need to respond punch for punch. This is the way cable plays; cable plays with promotional deals."
© Copyright 2004 Globe Newspaper Company.