Most cable companies have launched Voice over Internet Protocol (VoIP) phone service, or digital phone service, providing consumers a true alternative to standard telephone service. Cable’s digital phone service is now available to well over 100 million U.S. homes and more than 21.7 million households currently subscribe. One significant benefit of digital phone service is the substantial consumer savings, with one recent study saying residential cable telephone consumers could save an average of $144 each year.

While some cable operators have offered traditional circuit-switched telephone service for years, most are now offering digital phone service. This service often comes as part of a “bundle” where multichannel video, high-speed Internet and voice services are offered as a package and billed in a single invoice, providing a better value and more simplicity for customers.

Recent economic studies have also shown that cable’s digital phone service has provided  tremendous savings for both consumers and small businesses. According to a study by Microeconomic Consulting & Research Associates Inc. (MiCRA), consumers and small businesses across the country could save a total of $111 billion on their phone bills by 2012 as a result of robust competition. MiCRA estimates that residential consumers could save an average of $144 or more each year, while small businesses could save 50-70% on their phone bills – nearly $500 each year on average.

Here’s how cable’s digital phone service works: Through the use of software, digital phone service provides all the functionality of the public switched telephone network (PSTN), while making possible new features not available through traditional telephone service, such as Web portals that allows customers to review their calling history or listen to voicemail messages online when away from home. Digital phone service is a revolutionary technology that has the potential to completely change how phone calls are made and how voice services are used.

Calls are placed over an IP-based data network and voice is transmitted with data "packets," which are bundles of digital data that can be reassembled at their destination. For example, the IP data packets used by services from some of the Internet telephone providers travel over the public Internet. Facilities-based cable offerings, in contrast, transport IP data packets over their private managed IP networks with end-to-end guaranteed quality of service (while still interconnecting with the PSTN as necessary).