Cable Operators Phasing Out Sprint VoIP

Mediacom and Time Warner Cable have decided to phase out Sprint’s wholesale VoIP services and take their IP voice service operations in-house, the companies said. Cost is the primary reason that cable operators plan their own IP voice operations, companies and analysts said.

Mediacom is in the process of planning to transition away from Sprint, as the company’s Executive Vice President John Pascarelli had said on the latest earnings call, a Mediacomm spokesman said. By going in-house, Mediacom will be able to reduce its overall expense related to its phone product, he said. Mediacom didn’t detail when or how it will transition off the Sprint network. “We have initiated a project to transition these services in-house, beginning in 2010,” said Mediacom in a March Securities and Exchange Commission filing. Sprint had been handling Mediacom’s IP voice needs, including routing PSTN traffic, E-911 in addition to assisting local number portability and long-distance traffic carriage.

It’s completely an economic decision, a Time Warner Cable spokesman said, calling the initiative “Go It Alone.” The transition will occur in several phases over the next few years, he said. The end of Time Warner Cable’s VoIP business could cut Sprint’s annual wireline profits by about $250 million, or 25 percent of EBITDA, several analysts said. Time Warner Cable’s payment to Sprint will start diminishing from the second half of 2010 and may come to zero by the beginning of 2014, they said.

Sprint and Mediacom are in daily contact with one another and those communications cover a wide range of topics, including long range strategic planning, cost management, performance and other topics, a Sprint spokeswoman said. Meanwhile, any potential changes to Sprint/TWC relationship wouldn’t be material to 2010 financial results, she said, emphasizing that TWC remains a key strategic partner of Sprint in areas including 4G. Mediacom isn’t among the cable operators investing in Clearwire.

"Time Warner Cable and Mediacom are closer to marking the end of the transition to in-house VoIP services than they are to marking the beginning,” Bernstein Research’s Craig Moffett said in an interview. Outsourcing was an expedient way years ago to enter the voice market without the time-consuming process of signing interconnection agreements, he said. But now cost has become the main issue, he said, saying Comcast, Cox and Cablevision have already gone this route. “Time Warner Cable and presumably Brighthouse along with them, and now Mediacom, largely completed the process,” he said. All that’s left are some smaller independents, he acknowledged.