Time Warner offers phone line alternative

PORTLAND – Time Warner is blurring the lines between telephone and cable services with a pilot program that offers phone service, in addition to Internet access, via television cable lines.

Line Runner represents Time Warner’s first foray into telephone service and poses a potential challenge to Verizon Communications’ domination of local phone service in Maine.

Time Warner quietly has been offering 1,000 selected residential and business customers Line Runner, a line connected by a standard telephone jack to the user’s cable modem. About 200 have signed up so far.

Customers who were selected already subscribe to Road Runner – Time Warner’s high-speed Internet service.

Verizon is aware of the challenge.

“They’re certainly a competitor, and it’s something we’re watching closely,” said Verizon spokesman Peter J. Reilly. “It’s just one of several disruptive technologies that are forcing us to rethink our basic business model.”

Time Warner is charging $9.95 per month for a residential line. Verizon’s charges range from $12.51 to $16.91. For business customers, Time Warner is charging $17.95 per month, while Verizon’s charges range from $30.68 to $35.81.

Toll charges on Time Warner’s service are billed by WorldCOM and are 8.9 cents per minute within Maine and 2.65 cents outside the state.

The trend of cable companies offering phone service, spawned by a telecommunications deregulation law Congress passed in 1996, places traditional phone carriers on the defensive, analysts said.

Drake Johnstone, a telecommunications analyst with Davenport & Co., said a cable company’s ability to package television, phone and high-speed Internet access uniquely positions them to attract customers.

“The point is they [Time Warner in Maine] are cutting into the position of Verizon for local phone service, and long-distance carriers are also getting hit,” Johnstone said from his office in Richmond, Va.

He said he plans to order that package of services from AT&T Broadband, his area’s cable provider. That company has 481,000 customers nationwide who also buy the telephone service, making it the leader among cable companies, he said.

Cox Communications is second among cable companies providing phone service with 244,000 customers, he said.

Fewer than a million customers nationwide receive phone service through their cable company, Johnstone said.

Rob Frieden, a professor of telecommunications at Pennsylvania State University, said cable companies generally undercut the local phone carrier’s charge by 15 to 20 percent.

Packaging services can be lucrative for cable companies, Frieden said. Someone who buys premium cable service, phone service and high-speed Internet service could pay $100 or more per month, he said.

Verizon welcomes the competition, said Dan Breton, the company’s director of public affairs.

Breton said the cable company has several advantages when it comes to pricing for a pilot program. One is that Verizon must offer service across the state, even in sparsely populated areas where it is more expensive to provide the service, he said.

Verizon also provides state-mandated discounts to low-income residents. Those discounts are built into the charges for other lines, he said.

If Time Warner continues the service past the trial period and seeks to expand it, the cable company would likely face more regulations, he said.

“When the trial is over, we would expect all the rules and regulations that apply to anybody will apply to all of us,” he said.