Skip to main content

Study: Cable Telephony Competition Worth $111B Over Five Years

A report commissioned by Comcast projected that cable telephony services will generate $111 billion in savings to consumers and small businesses from 2008-12, with $87 billion of that the result of phone companies lowering rates in response to cable competition.

The report, conducted by Washington, D.C.-based Microeconomic Consulting & Research Associates on behalf of the nation’s largest cable operator, calculated $17.2 billion in direct savings from cable providers over the five-year period.

Cable’s voice customers save an average of $11.70 per month compared with legacy telephone services, the report said. MiCRA projected that cable telephony subscribers in the United States will increase from 16.1 million in 2008 to 31.8 million 2012.

The lion’s share of the projected $111 billion in savings is from “indirect benefits”-- the assumed price difference between what telcos would have charged in the absence of competition and their rates given competition from cable operators.

MiCRA estimated that customers of phone companies’ voice services will save an average of $12 per month as a result of cable competition. The firm based that on an analysis of telephone service rates between 1998 and 2004, intended to measure the effect of competitive local exchange carriers’ entry into the market.

However, the report warned: “Competition is not a sure thing.” MiCRA said consumer benefits from cable’s offerings in the telephony market “will not be realized unless Congress and federal and state regulators maintain vigilance” over the interconnection requirements imposed on incumbent telcos by the Telecommunications Act of 1996.

As part of the total for 2008-12, MiCRA also included an estimated $6.1 billion in benefits from over-the-top voice providers like Vonage based on a difference of $21.70 per month with incumbent phone companies’ rates.

Consumers have already saved $23.5 billion from cable voice services in the past four years, MiCRA’s report concluded, a figure that factors in phone companies lowering rates in response to cable.

The report is an update of a study released in September 2006 that was commissioned by the National Cable & Telecommunications Association. In that report, using the same methodology, MiCRA estimated cable telephony would provide a five-year economic benefit of $101.5 billion from 2007-11.