Ready and cable

VoIP, other broadband<@SM>services could be entrée<@SM>to federal market

With the telecommunications industry rapidly consolidating, cable television companies are starting to see opportunities to grab business in the federal market.

"We will ... see the rise of cable providers in the communications business, expanding beyond the consumer to the commercial side, including the government," said Charles Viator, president and partner of C.H. Viator and Associates LLC, a Springfield, Va., telecom and technology consultancy.

Cable companies are offering broadband Internet services, such as voice over IP to residential clients and will use that capability to enter the federal sector, some industry observers said.

They are looking to break into traditional carriers' space by offering cheaper IP phone services, high-speed Internet and converged services to federal agencies.

Two of the largest national operators, Comcast Cable Communications Inc. and Cox Communications Inc., "have the capability of providing high-end services to the government," Viator said.

Some cable companies have been doing business with the federal government, selling fiber as subcontractors, said Warren Suss, president of Suss Consulting Inc. of Jenkintown, Pa. They naturally would look to expand into other markets once they saturate their residential clients with Internet calling services, he said.

But a strong push by cable companies to make the government market a major part of their business is likely to be years away, cable company officials said.

However, the prospect of cable companies entering the federal market has been noted by some industry executives at traditional telecom carriers.

Edward Whitacre Jr., chairman and chief executive officer of SBC Communications Inc., told Congress last month that cable companies will be viable competitors in the future.

"They're offering this broadband path, if you would, which can handle data and voice over IP, doing everything. So there is a tremendous amount of competition now for customers out there," he told the House Energy and Commerce Committee.

Cable companies have not yet shown a strong interest in marketing their nascent VoIP services to federal customers. They also are absent from industry events, a sign that they won't compete for government business in the near term, Suss said.

Although big cable operators are still in the starting phase of delivering IP telephony services to residential customers, two of the country's largest firms plan to jump eventually into the federal market.

"We plan to offer [IP voice service] to businesses, schools and government institutions in the near future, but we do not have anything to announce at this time," said Keith Cocozza, a spokesman for Time Warner Cable Inc. of Stamford, Conn.

David Grabert, media relations director at Cox Communications, a privately held cable operator in Atlanta, said: "Our plans for IP-based calling services for business and government customers is not at a stage where we are ready to discuss them."

Comcast of Philadelphia, the nation's largest cable company, will stay focused on residential markets as it launches digital VoIP in three small markets -- the beginning of a larger rollout that will extend into the first half of 2006, said Bob Smith, senior director of corporate communications at Comcast. When this project has been completed, the company will assess whether it wants to offer the services to government and corporate markets, he said.

Other traditional telecom carriers and industry observers dismiss suggestions that an aggressive advancement by cable companies onto their turf over the next few years poses a threat. They contend that the cable companies would have to invest unknown amounts of money in expanding their infrastructures and workforces to provide services to the federal marketplace.

The federal sector "is a whole different business that will take a lot of time," said Jeff Kagan, an independent telecom industry analyst in Atlanta. The cable companies "are capable of handling it, but they have to set up new units and get new people."

Because government agencies have security concerns about using cable for communications, they will hesitate to embrace the technology, Suss said. On the other hand, he added, the government is always interested in finding cheaper communications solutions.

Staff Writer Roseanne Gerin can be reached at rgerin@postnewsweektech.com

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