WASHINGTON, D.C. – Consumers and small businesses across the country could save a total of $101.5 billion on their phone bills over the next five years as a result of robust competitive entry from facilities-based providers of Voice over Internet Protocol (VoIP) service, according to a new economic study conducted by Microeconomic Consulting and Research Associates (MiCRA).

The potential for consumer savings inherent in facilities-based VoIP telephone service, a field in which cable companies are the leading providers, is a “compelling argument for meaningful interconnection requirements,” MiCRA said.

Residential cable telephony consumers could save an average of $135 each year or more, while small businesses could save 70% on their phone bills – nearly $500 each year on average -- by using a cable provider’s telephone service, the study finds.

Dr. Michael Pelcovits, Principal at MiCRA and lead author of the study, said:  “Robust facilities-based phone competition is a huge win for American consumers.  This study shows that preventing a phone company lock on the market provides residential and small business customers innovative new services at enormous savings.  The economic impact of $100 billion of phone savings is truly dramatic.”

Using widely accepted economic data sources and forecasting tools, the study finds that by 2011, nearly 24 million Americans are likely to purchase phone service from their cable companies.  Equally important, the study concludes that the traditional phone companies are compelled to respond to competition by cutting prices – creating yet additional savings for the customers that the incumbent phone companies retain.

The study also concludes that these savings can be ensured through meaningful interconnection rules, such as those being advanced in the House and Senate telecom reform legislation being shepherded by the Chairman of the House Committee on Energy and Commerce, U.S. Rep. Joe Barton (R-TX), and the Chairman of the Senate Committee on Commerce, Science and Transportation, U.S. Sen. Ted Stevens (R-AK), respectively.

Pelcovits added:  “We are on the cusp of the kind of intermodal competition that Congress envisioned over a decade ago.  With simple, pro-competitive policies that will ensure the seamless transmission and interconnection of calling to and from VoIP customers, the American consumer – and the American economy – will see a windfall as a result of this technological revolution.”

“Ensuring that facilities-based VoIP providers can obtain interconnection on reasonable terms and conditions is the single most promising way of bringing competition and enormous savings to wireline telephone service, where incumbents still control roughly 85% of the residential and small business market ,” Pelcovits said.

Other findings include:

• Comprehensive cable telephony services are priced as low as $34.95 per month, plus approximately $6.00 in taxes and other fees.  Comparable services from AT&T and BellSouth cost approximately $50.00 monthly, plus fees and taxes.

• Residential users of cable telephone services are estimated to grow from 10.0 million in 2007 to 23.7 million by 2011.

• Residential customers of incumbent telephone companies could save $70 billion over five years if incumbent telephone companies are forced to respond to the competitive challenge by facilities-based VoIP providers.

• Small businesses could save over $2 billion annually on existing bills due to the new competition offered by facilities-based VoIP providers.  By way of example, Cablevision offers the Optimum Voice service to its online business customers at a price per line of $34.95 for 3 lines or fewer and $29.95 for 4 or more lines.  Verizon’s comparable product is in the range of $42 to $66 per month.

The study was commissioned by the National Cable & Telecommunications Association (NCTA) and conducted independently by MiCRA.  MiCRA exclusively arrived at the findings.

The study is available on the web at www.micradc.com/news/news.html and is also attached below.

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9/21/2006
"Consumer Benefits from Cable-Telco Competition"Email this Document
Abstract: Report prepared by Microeconomic Consulting & Research Associates, Inc. (MiCRA), which projects that subscribers to cable telephone services will achieve annual savings of $1.3 billion in 2007, climbing to $3.2 billion in 2011.Attachment: MiCRA_Report_on_Consumer_Benefits_from_Competition_09.21.06.pdf (121 KB)Issue Brief(s): Digital Phone / Cable TelephonyPublication Type: Expert Study