Cable, telecoms ready to rumble

NEW YORK — Vonage tanked after its IPO. It's not entirely clear anymore why eBay paid $2.6 billion for Skype.

And the long-awaited rollout of advanced TV services based on Internet technologies has resembled the drip of a faucet.

It wasn't a banner year for some of the biggest names in Internet Protocol, the technical standard that makes the Web hum.

But the technology itself continued to blossom, with newer innovations chipping away at every corner of the telecommunications business, from voice to video to wireless.

No doubt the main event for 2007 will be the impending smackdown between the traditional phone and cable-TV industries.

Bells ramp up

The regional Bell companies, after losing millions of customers this year to cable providers' phone services, are starting to ramp up their risky push into TV.

Verizon Communications expects its FiOS TV service will be available to 1 million homes by January.

AT&T finally appears to be pushing past technological holdups with U-verse, maintaining the IP-based service will be offered in parts of 15 markets by the end this month.

The competitive response couldn't come a minute too soon, as cable companies have had a field day in the phone business.

About 6 million homes will have switched to cable phone service by the end of 2006, a gain of 2.5 million for the year, research company TeleGeography estimates.

In advance of the TV push, Verizon and AT&T have battled back with DSL Internet connections priced as low as $15 a month, hopeful of keeping and winning households that can be sold FiOS or U-verse later.

The effort has borne some fruit.

Although a rapid overall decline in residential phone lines continues, the percentage of remaining homes with phone and DSL service is growing fast, and the Bells are signing up more first-time broadband users than their cable rivals.

Small rivals challenge

As the giants of phone and cable do battle, however, both sides will find themselves flicking away at technological termites that threaten their victories by offering new ways to communicate and deliver content, always for less and sometimes for free.

Daily, it seems, there's another renegade company launching some form of calling or video that bypasses the normal mode of consumption. They do it usually by exploiting IP, a network language that reduces all forms of communication into simple building blocks of data, one indistinguishable from the next.

In the past month alone, a half-dozen small companies have introduced applications and services to enable cellphone users to make cheaper wireless calls.

Some of the new services, with names like Talkster, Efonica's Mobilink, Jajah and iSkoot, mimic aspects of a long-distance calling card — providing cheaper rates by first connecting with a local phone number — while blending in new capabilities drawn from the world of instant messaging and Skype.

It's entirely possible, maybe probable, that all these newcomers will fail to catch on with enough people to ever resemble a real business.

Yet collectively, Skype and all the would-be Skypes keep nibbling away at the core business model of the telecom industry.