Cable giant Cox Communications Inc. will begin marketing residential telephone service today in parts of Fairfax County, positioning itself to challenge Verizon Communications, the nation’s largest local phone company.
“I think when there’s competition, consumers win,” Cox spokesman Alex Horwitz said.
Consumers in Merrifield and Tysons Corner will have the first chance to subscribe to local and long-distance service from Cox. It will be available in the rest of the company’s franchise area by the end of the year.
Cox has 258,000 cable customers throughout most of Fairfax County, and 6.6 million subscribers nationwide.
The company has wanted for years to sell phone service in the county, but plans were delayed while it spent about $500 million over four years to replace its aging copper network with fiber-optic cable.
Cox sells phone service in 12 other U.S. markets, including Virginia’s Hampton Roads area and in Roanoke.
Phone service isn’t available to customers of Comcast Corp., the Washington region’s other major cable provider, unless they already have it because the company has stopped marketing the service.
Cox will charge $49.95 a month for service. That includes a single phone line, unlimited local and long-distance service, voice mail and other features.
Verizon charges $49.95 a month in Virginia for its Freedom program, which offers unlimited local and long-distance calling.
Cox customers will pay significantly less for phone service if they also sign up for digital cable and high-speed Internet. The package of services will cost $125 a month, Mr. Horwitz said. The same services cost $145 a month when purchased separately, according to figures from the company.
Cox’s decision to become a phone company is another chapter in the so-called bundling wars. Phone and cable companies are offering a wider range of communications and entertainment services to customers.
Verizon this year reached an agreement with DirecTV and is selling satellite television service at a discount to its phone subscribers in a small number of states. Verizon plans to begin marketing the service to its Washington-area customers later this year to chip away at the customer base of cable companies Cox and Comcast.
“We are leaving no stone unturned to protect our customer base. Bundling is the name of the game. It’s the strategy that is going to work for the telephone and cable companies,” Verizon spokesman Jim Smith said.
Verizon sells local and long-distance calling, high-speed Internet and satellite television service in Rhode Island, where it first began to market the bundling option in February, for about $137 a month.
Bundling is the best way for media companies to reduce prices and keep customers from defecting to a competitor, said Lindsay Schroth, senior analyst at Yankee Group, a technology researcher in Boston.
“Bundling really is the wave of the future. It’s what will let companies keep their subscribers,” she said.
But cable companies have few telephone customers so far.
Cox was among the first in the cable industry to market phone service. It entered the business in 1997, but has only 1 million phone subscribers, compared with its 6.6 million cable subscribers. Comcast has 1.25 million phone customers, but it no longer markets the service and isn’t signing up new subscribers.
“Telephony is a difficult business. For a variety of reasons, it’s been a sideshow for cable companies,” said Cynthia Brumfield, senior analyst at Pike & Fischer Inc., a media analyst firm in Silver Spring.
That is about to change.
Cable and phone companies are working aggressively to use the Internet to support local and long-distance calling. The service, called voice-over-Internet protocol, promises to be popular because calls over the Internet will be less expensive, Miss Schroth said.
There were an estimated 100,000 Internet phone customers in 2003, but that number is likely to grow to 12 million by 2008, according to the Yankee Group. Pike & Fischer estimates the Internet-calling market will grow to 17.5 million by 2008 and that 68 percent of people who subscribe to Internet phone service will sign up through cable companies, not phone companies.
“The phone companies are quite frightened,” she said.
Cox is a bit of an anachronism because it uses Internet protocol to deliver phone calls in only one market — Roanoke.
“They are kind of an anomaly, but Cox has been pretty successful with its circuit-switched offering,” Miss Schroth said.
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