Callahan to roll out cable VoIP in Europe - Company Business and Marketing

CommunicationsWeek International, Feb 19, 2001 by Peggy Salz-Trautman

Callahan Associates, an investment group founded by former executives of US West Inc., will roll out the first extensive European deployment of integrated voice, Internet and video services on a cable system. Dick Callahan, president of Callahan Associates Inc., of Denver, Colorado said the company's strategy is to begin operations in Germany and then extend its integrated services across its networks around Europe.

In Germany, Kabel NRW, the Cologne-based private cable network venture owned jointly by Callahan Associates and Deutsche Telekom's subsidiary, Kabel Deutschland GmbH, will upgrade its network to deliver a triple-bill of television, fast-speed Internet access and Europe's first cable-delivered Internet protocol (IP) telephony to German subscribers. Services are planned to begin in the third quarter of 2001.

"This project...will be connecting 1,000 homes a day [in Germany] by late this year," said Callahan. "Other IP telephony trials are either just announcements at this point or only cover thousands or ten of thousands of lines."

The project will also rival the plan announced late January by United Pan-Europe Communications NV, of Amsterdam, to build the first cable voice over IP (VoIP) network in Europe in partnership with Cisco Systems Inc., of San Jose, California. That project will cover a minimum of five cities and will allow up to 500,000 residential customers to use the service. But UPC does not expect to be in commercial test before the third quarter of this year.

Analysts say other cable network operators across Europe are also planning to integrate VoIP technology into existing cable systems. 'There are huge operating efficiencies in these new services," said Gareth Lewis, project director for the Cisco Alliance service provider solutions partnership at KPMG Consulting, in Stockley Park, England. "By moving voice onto the cable system [cable telephony operators] only need one box in the local network where they previously needed two."

Kabel NRW's upgrade, in which Callahan will invest more than DM9 billion ($4.3 billion) over the next two years, is the largest of its kind in Europe, claims Callahan. It is also key to the company's push into providing broadband services on a pan-European scale. Nortel Networks will provide integration services under the terms of a deal.

In France, Callahan Associates also plans to acquire control of NC Numericable, a French cable network it has operated jointly with France Telecom and broadcaster Canal+ since December 1999, providing TV, Internet and telephony services to over 670,000 subscribers.

In Belgium, Callahan expects to close negotiations soon with Telenet, a Flanders-based operator, to buy 55% of the company's cable operations. The network, in the process of being upgraded to provide broadband services to around 1.6 million homes, passes 2.5 million homes and has 2.2 million total subscribers.

"When the [Flanders] deal closes we'll have a base of 23 million (homes passed)...This will position us to take advantage of the full flower of the three key revenue streams: digital TV, fast Internet and IP telephony," Callahan said.

Callahan Associates is also in negotiations with Telekom to acquire a majority stake in another cable network in the German state of Baden-Burttemberg. The network passes more than 4 million homes and provides services to 2.2 million subscribers.

Callahan is also back in negotiations with shareholders of the Cologne-based regional carrier NetCologne. Exclusive talks broke down in January 2001, but are continuing, and the German competition watchdog Kartelamt has also given Callahan the green light to buy NetCologne-if the company wants to.

Callahan said that the model the company is following for Kabel NRW is ONO, a Spanish cable network Callahan Associates built from scratch, together with Cableuropa, a consortium of Spanish investors. Begun in 1997, ONO is now Spain's number one broadband provider with 890,000 homes passed offering Internet and telephony services to over 168,000 subscribers and connecting an additional 2,100 customers per day.

Kabel NRW operates in one of Germany's most attractive regions, North Rhine-Westphalia, which has a population of over 18 million people. Currently, the network passes 6.3 million homes and provides service to 4.2 million subscribers. Upon broadband rollout it is anticipated that Kabel NRW will be the only cable-based Internet service provider in the region.

"There is no bigger or more significant project [worldwide] we are pursuing than this one [in Germany]," he said.