Cable Operator Mediacom Partners With Sprint

In the latest alliance between a cable and telephone company, cable operator Mediacom Communications Corp. on Wednesday said it would use Sprint Corp.'s network to eventually offer Internet telephony to the 2.7 million households reached by Mediacom.

Mediacom, the nation's eighth-largest cable company, said it plans to begin rolling out the voice over Internet protocol (VoIP) service in the first half of 2005, making it available to all households within its 23-state region by the end of 2006.

As part of the agreement, calls will first travel over Mediacom's cable wires, then Sprint will switch them over to the public switched telephone network. The Overland Park, Kan., telecom will also provide long distance, 911 emergency service and directory assistance.

Mediacom, based in Middleton, N.Y., has 1.5 million cable subscribers, mostly in small and midsize cities and rural areas. The company also services parts of a few bit cities, such as Los Angeles and Chicago.

The Mediacom/Sprint deal follows a trend among cable operators to develop bundles of phone, television and high-speed Internet access to undercut comparable services bought separately from individual companies. Cable companies have come under increasing competitive pressure from telephone companies also looking to sell the same kind of service packages to consumers. Satellite TV companies have also cut into cable's traditional market.With Sprint, Mediacom can move into the VoIP market faster than it could on it own, while enabling consumers to switch to the service using existing phone numbers, directory listings, telephone equipment and wiring, Mediacom officials said. Beyond VoIP, Mediacom is considering adding Sprint's wireless phone service to its bundle.

For Sprint, the deal is the latest in its strategy to offer its cellular network wholesale to cable operators and other companies. AT&T Corp., for example, recently said it would offer wireless service under its brand name using Sprint's network.

In a deal similar to Sprint and Mediacom, AT&T recently entered an alliance with cable operators Comcast Corp., Cox Communications Inc. and Time Warner Inc., which have agreed to carry AT&T's VoIP offering "CallVantage." In a research note released Wednesday, market researcher Probe Group LLC said the deal was a "win-win" for all the parties.

The AT&T alliance enables the cable companies to enter the VoIP market with minimal risks, and having the option to expand the service through AT&T, Probe Group said. Keeping tight control on costs is important to cable operators, given the fact that satellite TV companies gained 800,000 subscribers in the second quarter while cable operators' growth stalled. In addition, competition from companies offering digital subscriber lines (DSL) have forced prices down for broadband services.

"Cable operators need to find ways to reduce their risk profile and the alliance with AT&T gives them an instant VoIP arrow in their quiver, at very little cost," Probe analyst Allan Tumolillo said.0