این متن را با ذکر تمام تیترهای مربوطه به انگلیسی ساده و روان خلاصه کن   Chapter     8


Strategy and Competition in the Broadband Communications Market

It is evident from our previous discussions about ETV that many tele- phone companies have had an interwoven relationship with multichan- nel media firms because of the increasingly blurry market boundaries between different communications networks. No longer regarded as a medium that carries merely user-generated voice content, the telco-based broadband system is now considered one of the essential building blocks of future digital entertainment because its platform en- ables the delivery of digital videos with the personalization and on-de- mand nature of the Internet via telecommunications networks (Bratches & Rooney, 2001). In fact, as the two leading broadband service providers (BSPs), DSL from the telephone sector and cable modem from the MVPD market, continue to expand, we are witnessing a new phase of development for the television medium. Just as the introduction of MVPD television added the multichannel, narrowcasting capability to broadcast television, the arrival of the Internet and the broadband infra- structure brought more enhanced functions such as interactivity and personalization to MVPD television. Such an expansion of television functions and content varieties means more opportunities for product differentiation in the marketplace and thus more strategic options for the market participants, now including the telecommunications firms (e.g., telcos) with broadband products. Considering the significant role telcos play in today’s digital media environment, in this chapter, we tackle the broadband communications aspect of the telephone industry and compare the strategic differences between these firms and their MVPD counterparts in the emerging broadband multimedia industry.

THE DEVELOPMENT OF AND COMPETITION
IN THE BROADBAND MARKET

Broadband communications are the convergence of television, tele- phone, and computer networks that enables the interactive communi- cation of voice, data, and video (Sawyer, Allen, & Lee, 2003). Because the increasing demand for higher-bandwidth networks is largely due to the growth in Internet traffic, broadband is typically discussed in the con- text of high-speed Internet connections. Accordingly, we begin this chapter by reviewing the market development of DSL and cable modem broadband access services. Note that the focus here is not on the growth of enhanced multimedia contents such as VOD, gaming, and interactive advertising, which have been covered in the previous chapter, but on the different strategic approaches and competition between providers of broadband networks.
The modern deployment of broadband communications can be traced back to the unsuccessful introduction of the integrated services digital network (ISDN) in the 1980s. Although various network compa- nies such as GTE and Time Warner attempted to launch high-speed, in- teractive connections to homes in the early 1990s, most have faltered. The well-publicized broadband service Excite@Home floundered re- gardless of the backing by leading MSOs. It was not until the widespread popularity of the Internet that the utility of broadband communica- tions was highlighted. In fact, most asymmetric digital subscriber line (ADSL) trials from telcos such as GTE and Pacific Bell (now SBC) were not introduced until 1996. SBC was one of the most active telcos in de- ploying ADSL, with an aggressive pricing strategy, serving up to 8 mil- lion residential customers by 1999 (“SBC Tries to Knock,” 1999). The rollout of broadband was even cited by SBC’s proposed buyout of Ameritech as a main reason of the merger, noting that the combination would enhance the efficient introduction of broadband technology to homes and neighborhoods (Rohde, 1999).
As the United States entered the 2000s, the deployment of cable mo- dem led the race among high-speed data services due, in large part, to the fact that cable operators rapidly upgraded their passive one-way networks to two-way hybrid fiber/coax (HFC) networks and the 1996 Telecommunications Act, which opened up the telephone market to competition. Comparatively, the telcos’ DSL service was distance sensi- tive and not available to many phone customers too far from the central office at that time. In addition, many telcos, although experienced in providing Internet access through their traditional dial-up services, were initially reluctant to push DSL in fear of cannibalizing their older, higher-priced services such as T-1 data lines. As a result, cable system operators have had a head start in attracting broadband consumers, signing up almost four times as many subscribers at the initial stage of broadband development (FCC, 2004).
 
Nevertheless, telcos began to forge ahead with their DSL services by improving operational efficiencies, marketing, pricing, and service area coverage, gradually surpassing the speed and service satisfaction of- fered by cable (Greenspan, 2002). The waves of mergers between RBOCs also enhanced the resources and access to potential customers for lead- ing telcos. For example, Verizon, after combing the assets of Bell Atlantic and GTE, and Qwest, after its acquisition of US West, were able to signif- icantly boost their broadband offerings with aggressive pricing strate- gies (Greene, 2000; “Qwest Communications Offers,” 2001; “Qwest Offers New Broadband,” 2000). By 2004, DSL acquired a collective mar- ket share of 39% whereas cable reached 61% of the market (wire-line only) (see Table 8.1). In fact, more than half of the at-home Internet con- nections were broadband by year 2004, largely fueled by the growth of DSL services (Greenspan, 2004; Horrigan, 2004a). Overall, 34% of all adult Americans had access to high-speed Internet connections either at home or at work by the spring of 2004, a 60% increase from the year be- fore (Horrigan, 2004a). With a 58% broadband penetration rate in the spring of 2005, it was estimated that broadband connection for home users would break 80% by the fall of 2006 (“May 2005 Bandwidth Re- port,” 2005). Most analysts believe that cable will continue to lead the
U.S. residential broadband market with DSL remaining a formidable competitor (Greenspan, 2002; Leichtman Research Groups, 2004).
Table 8.1 depicts the state of competition between the top MSOs and telcos in terms of their perspective market shares in the broadband mar- ket in 2004. Whereas the top four cable firms commanded almost 45% of the market, their telephone counterpart had about 33% of the mar- ket. The top MSO, Comcast, and the top telco, SBC, were the most signif- icant broadband market leaders, together controlling one third of all broadband subscriptions. Time Warner and Verizon are the other two noteworthy broadband players with a combined share of almost 22%. Overall, the top broadband services listed in Table 8.1 reached 95% of all subscribers. The CR4 in 2004 for this market is 55.7 and CR8 is 77.5. Ac- cording to Shepherd (1987), a CR4 between 40 and 60 identifies an in- dustry with firm concentrations optimal for competitive behavior. Scherer and Ross (1990) also reported findings that the optimal CR8 for a competitive industry is 70 (which roughly corresponds to a CR4 of 50 in the U.S. economy). According to these rules of thumb, the broadband communications market is relatively competitive with leading firms from both the cable and telephone sectors.
We believe that the race between cable and DSL is likely to stay com- petitive and become even more strategic while the growth rate tapers off. As an emerging industry, the broadband market exhibits the charac- teristics of technological uncertainty; high initial costs; entry barriers such as access to distribution channels, and input, and materials; and cost advantages due to experience (Hitt, Ireland, & Hoskisson, 2001; Porter, 1980). Consequently, market activities such as strategic alliances are becoming more critical as the broadband firms attempt to minimize

 
uncertainty, share resources, and obtain access. In this next section, we discuss how the broadband firms have formed strategic networks to gain competitive advantages.

STRATEGIC NETWORKS IN THE BROADBAND MARKET

Careful observations of the partnerships in the past few years involving BSPs reveal certain alliance tendencies. They include the formations of strategic networks with technology firms, retailers, content developers, and branded Internet firms.

Strategic Alliances With Technology Firms and Electronic Retailers

BSPs have sought alliances with software and hardware tech firms to enhance the value of their residential network services and reach poten- tial customers through Internet access hardware (i.e., PC). For example, Comcast and Intel partnered to develop home networking products for Comcast broadband services. Comcast and Charter also formed alli- ances with PC manufacturers such as HP, Compaq, and Gateway, offer- ing PC users easy signup for their broadband access services. In the telephone sector, SBC and Dell Computer partnered to equip Dell Dimen- sion desktop PCs with ADSL modems and services (“Dell Computer Strikes,” 1998). There was even a loose broadband consortium, the Uni- versal Asymmetric Digital Subscriber Line Working Group (UAWG), formed by tech companies like Compaq, Intel, and Microsoft with the then five RBOCs (i.e., Ameritech, Bell Atlantic, BellSouth, SBC, and US West), as well as GTE, Sprint, and MCI (“Consortium to Push ADSL, 1998b). Most recently, SBC signed a 10-year, $400 million agreement with Microsoft to provide next-generation television services using Microsoft’s TV Internet protocol television software platform. The high-profile move aims to counter cable’s television advantage by en- abling viewers to channel surf in a small window on their TV screens while watching another program. Subscribers also could get alerts for their upcoming favorite shows, caller ID, instant messaging, VOD, DVR, and program guides (Gonsalves, 2004).
BSPs have also attempted to form strategic networks with electronic re- tailers that have the most direct contact with potential broadband users to augment their marketing efforts. For example, Comcast partnered with Best Buy, RadioShack, and even Office Depot, working together to develop a point-of-sale presence at many of these retailers’ stores nationwide.

Strategic Alliances With Content Developers/Providers

There are also alliances to enrich the variety of contents for broadband delivery and to comarket broadband access with branded content pro-
 
viders, thus increasing the attractiveness of the overall broadband ser- vice. For example, Comcast allied with RealNetworks, which offers its Rhapsody, an Internet jukebox service, via a cobranded Web site accessi- ble on Comcast’s broadband customer destination home page at Comcast.net. Working with Disney, Comcast launched Comcast Kids Channel, an interactive environment designed for the broadband family with content from Disney Online. Disney also formed a joint venture with the RBOCs BellSouth, SBC, and Ameritech to develop, market, and deliver video programming to consumers. Three other Bells (before the consolidation)—Bell Atlantic, Nynex, and Pacific Telesis—initiated a programming partnership aided by Hollywood agent Michael Ovitz, whereas the seventh Bell, US West, teamed up with Time Warner to ex- plore video-programming opportunities (Leslie, 1995). Time Warner and Intellicast.com continued to ally to offer Broadband Weather, an online service that delivers weather information especially suited for high-speed Internet access.
Strategic Alliances With Branded Internet Firms
As the provider of connections to the Internet conduit, BSPs have also partnered with established Internet brands to take advantage of the ex- isting brand equity of leading online brands in comarketing efforts. For example, SBC and Yahoo! formed a so-called “landmark alliance” to pro- vide cobranded high-speed Internet DSL service to residential consumers in SBC’s networks nationwide (“Yahoo, SBC Sign, 2001b). Microsoft jointly sold and marketed high-speed Internet services with Verizon Communications (Buckman, 2002). Verizon also partnered with Ex- cite@Home to be the provider of directory services for all of Ex- cite@Home’s Web properties, whereas Charter and the MSN network allied to make MSN content and services available to customers of Char- ter high-speed Internet service.

TELEPHONE COMPANIES’ VIDEO STRATEGIES

The promise of broadband Internet goes beyond the high-speed surfing of the Internet and VoIP (Voice over Internet Protocol) services. The capabil- ity of delivering ETV features is another exciting new area of revenues en- ticing many telcos that are faced with a decline in traditional landline telephone services. Chapter 7 has already examined the ETV ventures from the MVPD perspective. We now scrutinize the video ventures initi- ated by the telcos to assess their strategic emphases in this area.

Acquisition of Resources to Facilitate Video Services

Lacking the video services and marketing experience, telcos were at a competitive disadvantage initially compared to cablecasters who have
 
acquired years of video programming expertise. To move from acting as a common carrier to a programming supplier, many telcos not only be- gan to hire programming veterans like Sandy Grushow, former presi- dent of Fox Broadcast Group, and Howard Stringer, former president of CBS, from the broadcast and cable television industries (Sharkey, 1995), but also formed alliances with technology firms to facilitate their deliv- ery of video services over phone lines. For example, Microsoft joined Southwestern Bell to provide software for the telco’s interactive video service in the early 1990s (Cauley, 1994). To better their video offerings, telcos such as BellSouth and SBC also formed joint ventures with con- tent firms like Disney and CinemaNow.com (Leslie, 1995).

From Video Dial-Tone (VDT) to Video on Demand (VOD)

Beginning with VDT ventures in the early 1990s, many telcos had tack- led the complicated, expensive undertaking of delivering video services via telephone lines with mostly disappointing results (“FCC Approves BellSouth,” 1995; Kapadia, 1995). For example, Bell Atlantic, the most aggressive telco in testing various VDT trials, failed to sustain its ambi- tious so-called “Stargazer” service, which offered shopping via televi- sion and more than 700 educational and entertainment program choices (Kapadia, 1995). Another high-profiled VDT service, Tele-TV, put forth by a consortium of three RBOCs—Bell Atlantic, Pacific Telesis, and Nynex—was formed to deliver programming content and link in- teractive elements to the video systems of the Baby Bells (Sharkey, 1995). The venture eventually folded after the 1996 Telecommunica- tions Act, which distracted the RBOCs with the possibility of a more lu- crative revenue stream, long-distance service. Citing the regulatory uncertainty and difficult application process for VDT ventures, telcos like Ameritech also decided to abandon their VDT services and instead use the cable TV model to build digital video networks with cable TV franchises offering both analog and digital video channels (Kapadia, 1995; McCarthy, 1995). In essence, the original VDT ventures by the telcos failed to materialize because of regulatory complications, prob- lems of inefficiency in integrating a wide range of interactive options into a usable product not yet demanded by consumers, costly equip- ment, other business opportunities opened up by the 1996 Telecom Act, and the fact that interactive television was losing much of its luster as public interest began to shift to the Internet.
The new broadband VOD model seems to hold better prospects for the telcos. After waves of mergers, the remaining telcos are able to invest in broadband services with pooled resources and develop VOD as an appli- cation to enhance one of their core businesses, broadband services. To ensure a smooth transition to the VOD platform and the availability of attractive content products, telcos have formed alliances with technol- ogy and content firms. For example, SBC and Microsoft partnered to test
 
an IP-based switched television service that enables features like stan- dard and high-definition programming, customizable channel lineups, VOD, DVR, multimedia interactive program guides, and event notifica- tions (OneSource, 2004). BellSouth entered an agreement with Movielink, an online movie rental service supported by the major stu- dios that allows broadband users to download and watch hundreds of films on their PCs (Mahoney, 2003).

Strategic Alliances for DBS–Broadband Bundling Services

In recent years, we are also witnessing a new wave of strategic networks containing telcos and cable’s wireless counterpart, DBS service provid- ers. The move seems to be designed to blunt MSOs’ marketing of bun- dled broadband and video services. For example, SBC formed a marketing and distribution agreement with DirecTV, making SBC’s subsidiary Southwestern Bell a one-stop communications supplier for the apartment complex market (“SBC, DIRECTV Enter,”, 1998). SBC continued to partner with the number two DBS firm, EchoStar, with both companies selling each other’s services and offering discounts to customers who sign up for both video programming and high-speed Internet service. BellSouth has also allied with both DirecTV and EchoStar to bundle the DBS providers’ TV services with BellSouth’s voice and data services. Another telco, Qwest, took a more limited ap- proach by signing strategic marketing agreements with both EchoStar and DirecTV to make satellite TV services available to customers in sin- gle-family homes in Qwest’s residential phone market (“DBS Turns to Bells,” 2003).
STRATEGIC DIFFERENCES BETWEEN TELEPHONE AND CABLE BROADBAND FIRMS
It is evident that the telephone and cable broadband firms have different core competencies and thus different strategic preferences in conducting their broadband businesses. In this section, we examine the different strategies adopted by telephone versus cable firms in the context of a broadband, ETV industry value chain. Because of the essential role of strategic networks and M&As in this market, we review how the two groups of competitors differ in alliance strategies and discuss the impli- cations of this strategic divergence.
Using “industry” as the unit of analysis, Chan-Olmsted and Kang (2003) examined the alliance activities of the cable and telephone firms occurring during the period of 1996 to 2001 based on the ETV strategic architecture proposed in the previous chapter. In this empirical investi- gation, a series of criteria was established to identify the relevant struc- tural (M&A) alliances occurring in the broadband television industry from a total of 63,452 domestic mergers and acquisitions recorded dur- ing the 5-year period. To be included in the dataset, the target or acquir-
 
ing firm in a merger or acquisition has to: (a) belong to a primary SIC (i.e., Standard Industrial Classification) code that is one of the identified broadband SIC codes (e.g., Telephone service’s SIC is 4813, whereas ca- ble’s is 4841), and (b) contain at least one of the broadband television key words in the officially filed description or synopsis of the transac- tion. All alliances were then classified into either structural alliances (i.e., mergers and acquisitions) or nonstructural alliances (i.e., joint ventures and non-M&A agreements) and as either related or unrelated based on the SIC codes of the participants (e.g., an alliance is classified as related when at least two of the participants’ primary SICs are of the same first two digits).
The study analyzed more than 1,700 cases of mergers and acquisi- tions and 1,300 nonstructural alliances involving cable and telephone companies during this period. Whereas there were more M&A activities throughout the years, other alliances such as joint ventures were prac- ticed modestly and remained fairly stable (see Table 8.2). The trends be- tween M&A and non-M&A alliances were similar and increased gradually during the first 3 years (1996–1999) when non-M&A alli- ances were adopted somewhat more frequently than M&As (see Fig. 8.1). The number of activities increased substantially during the 4th year, especially for M&As. Whereas the number dropped sharply the fol- lowing year, M&As continued to outperform non-M&A alliances by more than 110 cases. In sum, the levels of alliances have increased over the years as M&A moved from a slightly less favored model to the domi- nant method of structural alliances by the end of 1999.
Differences in Strategic Alliance Patterns Between Cable and Telephone Firms
In regard to M&A activities, cable has been a target of acquisition much more frequently than telcos during the 5-year period (16.2% vs. 4.7% of all M&As) (see Fig. 8.2). The difference, however, became much nar- rower in 2000–2001. Cable continued to be more aggressive than the telcos as an acquirer in M&As, though the range of difference was 
somewhat smaller than it was for cable as a target of acquisition (14.8% vs. 8.2% of all M&As). The situation changed during 2000–2001 as telcos slightly passed cable as an M&A acquirer. In gen- eral, cable television firms were more likely to be the target than the acquirer, whereas telcos were more likely to be the acquirer than the target during this period. As for non-M&A alliances, telcos appeared to be more active than cable, though the difference is marginal and be- came minimal in the last year of comparison (see Table 8.3). Overall, cable’s non-M&A alliances followed its trend of M&A activities except for the year 1999–2000 when cable was aggressively involved in M&A activities as the number of its non-M&A alliances dropped. In contrast, telcos preferred non-M&A alliances over M&A (as an acquirer or tar- get) for the first 3 years until 1999–2000 when it changed its alliance strategy, actively acquiring firms through M&A in the broadband tele- vision industry. Its M&As continued to surpass non-M&A activities in the 5th year, even with a substantial reduction of alliance numbers. In general, cable firms were most interested in acquiring firms from their own industry (SIC 4841) (81.8%), followed by television broadcast stations (SIC 4833) (5.5%) and information services (SIC 7375) (4.7%) (see Table 8.4). On the other hand, telcos were most interested in ac- quiring firms from the information services sector (SIC 7375) (41.4%), followed by their own industry (SIC 4813) (24.3%) and the cable in- dustry (SIC 4841) (16.4%) in broadband TV–related M&A activities. Fi- nally, cable was more likely to form joint ventures than were the telcos (30.2% vs. 15.1% of all non-M&A alliances).

Alliances for Relatedness Versus Complementary Resources

It was found that cable firms were overwhelmingly more likely to ac- quire related communications firms (90.1% for SIC 48). The partner pref- erence seems to go beyond relatedness as more than 81.8% of the cable acquirers chose firms within their industry (see Table 8.4). In contrast, telcos were more likely to branch out of their industry as only 42.1% of its M&A targets were in the related industries. Telcos were aggressively tar- geting the business services sector (52.8% for SIC 73), especially aiming at the information services market (41.4% for SIC 7375). The telcos consid- ered firms from their own industry as an M&A target only about a quar- ter of the time. It’s interesting that whereas cable rarely pursued telcos for M&As (2.7%), telcos were much more likely to approach cable as an M&A target (16.4%). As for non-M&A alliances, both cable and telcos were much more likely to form such partnerships with firms from re- lated industries (see Table 8.5). Cable television was slightly more active in forming related non-M&A alliances than the telcos (81.3% vs. 73%). Cable was also more likely to ally with firms from the same industry than the telcos (61.5% vs. 43.7 %). As in the case of M&As for the telcos, the infor- mation services sector was most likely (more than the telcos) to be in- volved with nonstructural alliances in the telephone sector, whereas cable
 
companies continued to be the major players for such alliances in the ca- ble market. In sum, relatedness seemed to be the main partnering strat- egy for the cable television firms, whereas the telcos were more likely to look for partners that complement their resources, except in the case of non-M&A alliances in which the telcos might ally with related but not necessarily similar communications firms.
In summary, M&As have played an important strategic role for these broadband firms in their quest for competitive advantages in the emerg- ing broadband market. It is clear that the cable firms have in general been more active in forming alliances than the telcos. Specifically, cable television was a more attractive target as well as more active acquirer for M&As than the telcos. Nevertheless, telcos have changed their alli- ance strategy, moving away from non-M&A alliances and becoming a more aggressive acquirer in recent years. This change in alliance strat- egy suggests a learning curve as the telcos increasingly regard many components of the television industry as relevant and valuable while they reposition themselves beyond the traditional common carrier role and extend to the content/integrated telecommunications services sec- tor. “Relatedness” appeared to be a more important M&A strategy for the cable firms than the telcos because the latter have aggressively pur- sued firms outside of their market in the information services and soft- ware sectors (i.e., the ETV enablers and facilitators), practicing a complementary resource alliance strategy (see Fig. 8.3). The different alliance strategies between the telcos and cable firms affirm the notion
of “path dependency” in this industry as cable played to its historical strengths through the M&As with related television firms while the telcos attempted to counter their resource weaknesses in this emerging industry by extending into complementary sectors via M&As. Note that when it comes to non-M&A alliances, both cable and telcos were more comfortable allying with firms from related sectors; it seems that flexi- ble access to specific, related resources is an important alliance strategy for both the telcos and cable firms.
The differences in alliance strategies between telcos and cable illus- trate the two groups’ different emphases in the development of their core competencies for the broadband-based ETV market (see Fig. 8.3). It seems that the telcos have focused on expanding their ability to offer a seamless, top-down, integrated broadband television service by secur- ing access to Web-based content packagers and better navigating/inter- facing tools. In contrast, the cable firms have emphasized developing their ability to offer attractive, enhanced cable programming by allying with the traditional as well as new television-programming packagers. However, it is plausible that television applications of broadband may yet become the top priority in telcos’ broadband strategies at this stage because the telcos have chosen to focus on their existing core competen- cies in areas of communication networks and informational services, rather than on consumer television content services.

FINAL THOUGHTS

The analysis of the broadband communications market thus far depicts the current competitive dynamics and points to the prevalence of certain strategies. Although the overall market is still emerging and remains rel- atively competitive, dominant industry leaders have emerged from each sector, namely, Comcast from cable and SBC from telephone market. Both firms have actively pursued M&A/alliance strategies and experi- mented with different broadband trials. Both firms have also acquired their leading status from a series of aggressive M&As, which enabled them to explore new broadband business opportunities with more re- sources. In fact, M&A and strategic network strategies that facilitate the sharing of risks as well as resources appeared to be central to the develop- ment of broadband services. Specifically, alliances seem essential in ac- quiring access to technology firms’ expertise, content firms’ attractive products, electronic retailers’ consumer contacts and knowledge, and Internet firms’ established brand images. One interesting recent phenom- enon is the partnership forged between cablecasters’ two prime competi- tors, DBS and the telcos. The strategic networks between these two parties allow both to remain truthful to their core competency while compensating for the telcos’ lack of video expertise and DBS’s inability to provide reliable broadband access. It might prove to be the best transi- tional strategy in competing with cable’s current bundling advantage.
 
It is important to note that many past ETV services have failed be- cause of the lack of interest from consumers. Thus, it is fruitful to also review the characteristics of today’s broadband subscribers in antici- pating the effectiveness of potential broadband deployment strategies. It is said that the current broadband subscribers tend to be well edu- cated, younger, and of higher socioeconomic status and choose broad- band subscription mainly due to impatience with the dial-up speed than dissatisfaction with service pricing. Broadband users are also big spend- ers online as they account for almost a third of online spending al- though representing only 19% of online adults in the United States (they spend about 50% more than narrowband users) (Kerner, 2004). In terms of content preferences, broadband users are very active information gatherers, multimedia users/downloaders, group/forum participants, and content creators/managers. Furthermore, broadband users engage in multiple online activities on a daily basis. They not only search more for information about products and services, but also generate content about their thoughts and share them in online forums (Horrigan & Rainie, 2003). Interestingly, most broadband users would be willing to download a branded interactive video channel to their computers and accept content from a trusted marketer on that channel (Newcomb, 2004). What are the strategic implications for these consumer traits? First, it is obvious that broadband holds tremendous marketing utilities. It offers an attractive target market and great opportunities for market- ing communications with the group (e.g., short-form video communi- cation delivered directly to the consumer). It also highlights the importance of information, communication, brand equity, and multiplatform marketing.
This chapter has not discussed extensively another nonvideo broad- band service, VoIP, which is becoming a more viable product option as broadband continues to expand. Although about 27% of Internet users in the United States have heard of the service, it still has a relatively low consumer adoption rate. While many have a favorable impression of VoIP, they are mostly early adopters and small in number (Horrigan, 2004b). Both telcos such as AT&T, SBC, and Verizon and cable compa- nies like Cablevision, Cox, Charter, Time Warner, and Comcast have en- tered the residential VoIP market with various trials. Note that whereas telcos are more experienced in providing such voice services, many cable companies, including the five largest MSOs, are certified local exchange carriers in more than 15 states across the country, serving approxi- mately 2.7 million residential subscribers of circuit-switched cable tele- phony across the country (National Cable & Telecommunications Association [NCTA], 2004). We believe that VoIP service, although it will not become the core application of broadband for cable firms, would add to the multiplicity, versatility, and thus value of cable-based broadband services. Especially, it might serve as an effective tool for reducing churn rates for cablecasters in a bundling marketing strategy. In fact, a tri- ple-play, multi-point competition of cable TV, broadband, and tele-