Cable Operators Surpass 2.5 Million VoIP Subscribers at Year’s End

The early indications are that N. American cable operators, coming off a strong 3rd quarter for cable IP telephony, continued to sign up VoIP subscribers at a brisk pace in the 4th quarter. For instance, Kinetic Strategies estimates that the 10 or so biggest MSOs netted more than 400,000 voice customers in Oct. and Nov., after gaining nearly 590,000 VoIP customers in the 3rd quarter.

As usual, Time Warner Cable appears to have led the way in the 4th quarter, signing up at least an estimated 225,000 IP phone customers. Time Warner, which closed the 3rd quarter with an industry-leading 854,000 VoIP subscribers, announced in early Dec. that it had hit the 1 million subscriber milestone, about a month ahead of schedule. As a result, Time Warner still accounts for about 40% of the industry’s IP phone customers and is quickly catching up to Vonage as the nation’s largest VoIP provider.

Speaking at an investors conference in N.Y.C. in early Dec., Time Warner Cable CEO Glenn Britt said the inclusion of voice service in the company’s new triple play bundle is “driving everything,” boosting high-speed data, digital video and even basic analog cable sales. “We're growing subscribers, which we didn’t do much for a couple of years,” Britt said. “I think voice is very powerful and it is helping to drive our results at the moment.”

But Time Warner is far from alone in reaping the benefits. Several other large MSOs are also enjoying strong VoIP sales, including Cablevision Systems, with more than 600,000 customers, and Cox Communications, with more than an estimated 150,000. The list also includes such Canadian cable operators as Rogers Communications, Shaw Communications and Videotron.

In fact, Videotron, the Quebec-based cable operator that’s far smaller than Rogers and Shaw, captured 4th place in the most recent VoIP subscriber count rankings compiled by Kinetic Strategies. Videotron closed the summer quarter with 96,000 IP phone customers, more than every U.S. or Canadian cable provider except Time Warner, Cablevision and Cox.

Even some of the cable laggards are showing signs of picking up the digital phone pace lately. Take Mediacom Communications, which launched its VoIP service in its first markets last summer after taking longer than expected to upgrade and groom its cable plant for phone service. Partly hampered by Hurricanes Dennis and Katrina in its markets, Mediacom signed up just 2,000 IP telephony subscribers by the end of the 3rd quarter as it slowly rolled out the new voice product.

But Mediacom executives, noting that the company boasted 8,000 VoIP customers by early Nov., said the product has since gained sales momentum. At an investors conference in early Dec., MSO officials said the company has achieved 6% penetration in its first phone market after just 5 months. With the service now available to about 1.2 million homes, they aim to double the number of “marketable” households to 2.5 million by the end of 2006. -- Alan Breznick

.HEADLINE Decision Said to Accommodate U.S. Law But Leave EU Compliance Unclear

France’s data protection agency completed rules to help U.S.-listed companies, including communications services providers, comply with the anonymous whistleblower requirements of the Sarbanes-Oxley Act while respecting French privacy laws. The Dec. guidelines from the Commission nationale de l'informatique et des libertes (CNIL) appear to signal a “serious effort to compromise and accommodate the goals” of the U.S. law, said Alan Raul, an attorney with Sidley Austin Brown & Wood LLP. Nevertheless, multinationals eyeing whistleblower hotlines still face a patchwork of European data protection laws, said Axel Spies, a European attorney with Swidler Berlin.

Sarbanes-Oxley requires companies listed on a U.S. stock exchange to establish whistleblower channels by phone, or other hotlines for anonymous reporting of violations of corporate accounting and auditing laws. Recently, French companies, too, have begun setting procedures for reporting breaches of law and corporate policy, CNIL noted in a Nov. 10 guideline document. Whistleblowing systems “are neither allowed nor banned” under French law, but any such procedures must comply with the country’s data protection act.

CNIL guidelines reiterated in the “unique authorization” issued last month seek to limit the scope of whistleblower reporting. For whistleblowing systems to be approved, companies doing business in France must agree to several conditions. They must be restricted to cases involving alleged internal financial wrongdoing or bribery. Anonymous reports must be handled restrictively, so a whistleblower’s identity remains confidential, and employees mustn’t be encouraged to report anonymously. Reports must contain only relevant data, which should be deleted immediately if found to be unsubstantiated, or held no more than 2 months after verification unless disciplinary or legal proceedings are begun. Anyone incriminated must be notified of the allegations and given access to the information for correction or removal, if appropriate.

The guidance signals a sea change for CNIL, which in May rejected 2 multinationals’ whistleblower proposals, Raul said. But despite CNIL’s assertion that it’s no longer opposed to anonymous hotlines, “it continues to harbor concerns,” leading to the restrictions in the guidance. U.S. companies doing business in France should tailor their whistleblowing channels to CNIL’s decision, he said.

In formulating its rules, CNIL conferred with the SEC. A Dec. 8 meeting with SEC staffers failed to identify “any major incompatibility” between the guidance and Sarbanes-Oxley, CNIL said. But Spies said “there is no official word from the SEC whether these rules are in line with U.S. law.”

There’s also no European Union (EU)-wide solution, and other EU members states may have different data protection rules, said Spies: “This poses quite a challenge for U.S. multinationals seeking to have worldwide whistleblower hotlines.” Raul urged U.S. companies to “review national obligations on a country-by- country basis.” They should bear in mind that transfer of personal information to the U.S. and outside the European Economic Area in connection with internal investigations under Sarbanes-Oxley or otherwise “remain subject to the EU Data Protection Directive and national privacy laws.” Safe Harbor membership, model contracts or binding corporate rules for data exchange could be adequate to legitimate whistleblower data transfers, he said.

The EU Art. 29 Data Protection Working Party is considering a pan-European approach to whistleblower reporting based on the CNIL decision, the agency said. The document was well received at the last meeting of the European data protection officials, and “conscious of the urgency,” the group intends to take a position on the issue Q1 2006, CNIL said. Nevertheless, said Spies, “it remains unclear what the outcome will be and how the EU member states will implement the recommendations.”