Cable Operators Score Big in Business Market

CEN Feature (Aug 2 2011) Cable / MSO

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   Cable operators have been quietly making huge gains in the business services market, driven in no small part by offering Carrier Ethernet services. One industry analyst who has taken note of this growing trend is Heavy Reading’s Alan Breznick.

   “Cable companies have gotten serious about targeting small business and knowing what works,” said Breznick in an interview.

   Three of the largest cable multiple systems operators in the U.S. — Comcast, Time Warner Cable and Cox — all had business service revenues of more than $1 billion for 2010, marking a new milestone for the industry. Comcast, which entered the carrier Ethernet market last, but now has the largest addressable base, topped the list at $1.2 billion. “At this rate, Comcast could grow business service revenue to $1.5 billion for 2011,” said Breznick.

   Data represents the biggest chunk of total business revenues, Breznick said. “Voice is a strong second and video is a healthy third.”

   Although the company doesn’t break down data revenues by service type, Breznick said Ethernet could possibly be the biggest service type within the data category.

   Breznick believes cable companies’ success in the small business market could be attributed in part to small businesses not being a key focus for the telcos that traditionally have served that market. Small business represents a sizable market, Breznick said, “and today small businesses are looking for an alternative to telcos and cheaper service — and some small businesses believe they’ve been underserved by telcos.”

   Breznick argues that the small business market has long been a viable business opportunity for the cable companies to pursue. Considering cable companies’ success in the market, he said, “it was simply a matter of them getting up to speed.”

   Nowadays, Breznick said, cable companies are “paying better attention to local business needs and they are devoting more salespeople than their competitors to pitch this market.”

   Carrier Ethernet, in particular, tends to receive more attention from cable company salespeople because “they don’t have to worry about cannibalizing their base the way the incumbents do,” noted Breznick.

   Breznick also notes that cable companies differentiate Carrier Ethernet and other business offerings in part through lower pricing and in part through their network infrastructure, citing that “cable companies also may have more fiber lines.”

   An increasingly important portion of cable business revenues comes from providing backhaul network connectivity for wireless networks. “It was a $200 million to $300 million business last year for the entire cable industry,” Breznick said. “They’re starting from a small base because they only got into wireless backhaul in the last two years.” Currently, he estimates that cable operators are experiencing backhaul revenues growth in the range of 40 to 50 percent.

   Cable companies only recently entered the backhaul market because “they weren’t ready before — the equipment wasn’t ready and customer service operators weren’t ready — they didn’t have enough people focused on it,” Breznick said.

   Equipment used previously may not have been able to meet wireless carriers’ strict performance standards, said Breznick. “There was also a bit of a corporate culture change taking place,” he said. “Cable companies were never in the wholesale business before.”

   He added, though, that changes made to accommodate the backhaul market also should benefit cable companies in the mainstream business market, as they increasingly target larger size businesses. “Carriers have the most stringent requirements, but as cable companies go up market in pursuing larger businesses, they’re encountering the same thing,” Breznick said.

   Looking forward, the future of Carrier Ethernet opportunities for cable companies is promising, with a trend towards greater and continually improving service offerings to meet the demands of both small and growing businesses.  

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