Whose profile is rising: Cable voice grows up
In the span of less than a week, Time Warner Cable and then Mediacom both decided that they, not Sprint Wholesale, would be better off running their own voice business. Up till now, the two cable operators had been leveraging Sprint Wholesale's voice service.
First on the list is Time Warner Cable. The New York-based MSO announced earlier this month that it would transition away from its voice network outsource agreement with Sprint Wholesale and take those functions in-house. Of course, TWC is not revealing details about how long this transition will take or how much they currently pay to Sprint Wholesale.
Mediacom, which is the seventh largest cable operator, had depended on Sprint Wholesale for its voice service since 2004. Other than saying that it has begun a project "to transition these services in house," Mediacom, like TWC, is also being tight-lipped about its plans.
Although their voice revenues did not go through the roof in 2009, during the recent quarter both Mediacom and Time Warner Cable grew their voice subscriber base by 13,000 and 120,000, respectively.
But it might signify a larger industry-wide trend. Cable operators, which have aggressively upped the ante of their residential broadband speeds to 50 and 100 Mbps via DOCSIS 3.0 and business service plays, also likely feel that perhaps with their voice experience in hand and a steadily growing voice base that it might be time to take control of their own service destinies.
Whose profile is falling: Sprint Wholesale's wireline cable voice
While TWC and Mediacom's respective moves to bring their voice operations in house were an inevitable reality of their growing comfort level with running a voice network, it came at the cost to their supplier Sprint Wholesale.
As of the end of 2009, Sprint Wholesale saw "slight increase" in cable VoIP subscribers, Q4 voice revenue declined to $611 million from $648 million in Q3 09.
While TWC did not reveal what it pays to Sprint Wholesale, a report by Bernstein Research calculated that the revenue it gets from TWC is about $249 million a year.
At this point, Sprint Wholesale maintains that since it will have time to transition off its service so that it won't see an immediate impact in revenue.
What's more, as TWC and Mediacom migrate off of Sprint Wholesale's service, Sprint Wholesale's President Dan Dooley maintains that the company built its cable business from ground up to a multimillion enterprise, sees other opportunities to work with cable. Not surprisingly, those other opportunities with cable will include a wireless play.
Such a play makes sense given the usage patterns by residential and business user's drive to be mobile.
"While the cable companies have done really well in moving people away from ILECs to their bundle of digital voice, we think what you'll see in the future is people move away from their home phone even more and wireless becomes more ubiquitous," Dooley said. "I don't think there will be zero digital phone penetration, but I don't think people will be $30 for a home phone. We're riding off that curve and I think it makes sense for them go deploy their own facilities."