IP Democracy: Cablevision Engages in VoIP Price Competition

Most cable companies view their nascent but rapidly growing VoIP-based voice services as cash flow generators. As a consequence, they don’t want to treat voice as a commodity nor do they wish to engage in price competition. But, Long Island-based cable operator Cablevision, which doesn’t always march to the industry’s tune, clearly hopes to snag market share by offering prices that are lower than those of competitors.

The company announced this morning a flat-rate plan for international calls that gives customers 500 minutes of overseas calls per month for a price of $19.95, or $.04/minute, cheaper than most comparable services out there. AT&T, for example, has an unlimited international calling plan that costs $49.95/month.

Joe at TechDirt is right on target when he says this move is probably just another competitive reaction to Skype’s free phone calling announcement and Vonage’s upcoming IPO. But Joe is probably (although not certainly) off the mark when he says that other cable operators will follow suit.

Cablevision continues to demonstrate that they get the appeal of the triple play. While other broadband operators think of it as a way to raise prices and tack on charges, Cablevision realizes that the appeal to the consumer is in adding features and cutting prices. Eventually, the other operators will have to realize that this strategy actually works.

Cablevision has gone its own way on a host of issues, including a la carte, while the rest of the industry has stood pat. Cable operators like their 40% cash flow margins on the voice business too much to starting cutting prices, or engage in price competition, just yet.

Posted by Cynthia Brumfield on May 17, 2006 3:27 PM to IP Democracy