News

Snaring the Elusive Business Sub

5/16/2004 8:00 PM Eastern

A lucrative opportunity is close for the cable industry. With a potential revenue stream running between $85 billion to $100 billion annually by 2008, according to most analysts, the small-to-medium business commercial market is drawing the attention of cable and a number of competitive providers.

Historically, commercial operations based in small office parks have been just out of reach of cable’s existing residential networks. Others, in downtown areas, have already been passed by cable, but undersubscribe or do not subscribe because of a lack of business-centric products.

In both instances, these customers have been close enough to see the cable lines, but far enough away that they haven’t been a major focus of cable’s sales force.

As a primarily residential service, cable has attended first to building out a reliable hybrid fiber coaxial network for video services, then developing and implementing Data Over Cable System Interface Specification standards to feed high-speed data services and, soon, voice-over-IP telephony to those subscribers. Since these residential customers are the base that supports the industry — and justify the infrastructure investment cable made over the past decade — they logically receive the most attention.

Now that most residential customers can receive high-speed data service via cable modems, digital and interactive video entertainment, and (increasingly) voice services, it’s time to proceed to the commercial market that in most instances parallels or is adjacent to those residential networks. Businesses generally receive their high-speed data services from local-exchange carriers or other competing phone companies. As a rule, they pay high monthly fees for slow data speeds and low bandwidth.

A T1 customer can pay as much as several hundred dollars per month for 1.5 Megabits per second of bandwidth while a typical cable subscriber gets about 3 Mbps for residential service for about $45 a month.

Cable has the tools, existing, rebuilt two-way networks and new, higher-bandwidth technologies, to bring those cost and speed advantages to the commercial market.

Using DOCSIS specifications and cable’s inherently bandwidth-rich networks, a cable operator could inexpensively service a commercial customer from an existing residential network feed.

Cable’s problem has historically been cost-effectively reaching these customers. In today’s constrained capital markets, cable operators are loath to invest any more capital into a “last-mile” network infrastructure rebuild. In fact, most depend on the capabilities of current networks to pay dividends.

While each operator will choose the technology that is most appropriate for a particular market, the attention the sector is receiving from competitive providers suggests the need for rapid action by cable. Targeting and acquiring commercial cable customers has grown in importance in recent years, with the deployment of data and voice services and the industry’s growing emphasis on operating margins and free cash flow.

By doing what they do best operators finally can realize the potential of the lucrative, untapped commercial market.

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