Get out the suits and ties. Major cable operators are mobilizing this year to tap into enterprise telecommunications services, estimated to be a $55 billion market in the United States, according to Wall Street analyst firm Sanford Bernstein.
Comcast last week launched “business-class” voice service in New England, offering small and medium-size businesses a triple-play bundle with cable TV, high-speed Internet and voice starting at $99 per month. The operator will widen the rollout to its other territories through the rest of the year.
As part of the nationwide SMB initiative, Comcast has hired more than 1,000 sales and support representatives in the past year, according to one of its technology suppliers. (Comcast would not confirm the specific number of hires.)
Industry analysts said cable has a rich opportunity to pick off business from incumbent providers, such as AT&T and Verizon Communications.
“Pricing in the [small to medium enterprise] segment is typically very high, leaving the door open to a telco alternative,” Sanford Bernstein senior analyst Craig Moffett wrote in a report on the commercial telecom services sector last week.
The goal: to steal away business voice and data customers in the same way cable has siphoned subscribers from telcos' traditional landline services.
“Cable sees their sweet spot in the small-business space — they think that's a lot of money they've left on the table,” said Andrew Audet, vice president of Juniper Networks' cable products business.
Ken Fitzpatrick, senior vice president of Time Warner Cable's Business Services division, said the strongest demand has been from small and midsize business customers for lower-cost alternatives to phone companies' T-1 lines, which provide 1.5 Megabits per second.
Time Warner Cable offers symmetrical 2 Mbps metro-Ethernet service to SMB customers, delivered over a DOCSIS network, priced roughly 15% to 20% less than competing telco T-1 services, the company said. T-1 lines can cost as much as $400 per month, according to Bernstein research.
“We've seen phenomenal growth,” Fitzpatrick said, noting that business-service revenue has increased roughly 40% per year over the last five years. Time Warner Cable counts almost 300,000 business customers today.
Another key part of the Time Warner Cable strategy is its ability to map out which locations in its network can be built out to reach business customers.
“What's really enabled us to grow this business is the understanding of the marketplace, and identifying where we expand the reach of our addressable network,” Fitzpatrick said. “You have quite a large percentage of businesses that hang off a small number of nodes.”
Cablevision Systems, too, is targeting the SMB space. In February, it announced a service offering up to 12 phone lines to small businesses. The voice service is bundled with cable-modem Internet service (advertised as providing up to 15 Mbps downstream) for $29.95 per month including four lines, with additional lines $29.95 each.
Cablevision has 600,000 business customers of all sizes in its service area, vice president of media relations Jim Maiella said.
Some cable operators, notably Cox Communications and Cablevision Systems's Optimum Lightpath division, have successfully catered to larger companies.
Historically, though, cable has had trouble reaching businesses that need more than a 12-line voice adapter and more than 10 Mbps of data connectivity — but less than a fiber-optic connection, said Jeff Brooks, Arris senior director of business development for broadband.
Many cable operators want to leverage their existing hybrid-fiber coax infrastructure to reach SMBs, instead of laying costly fiber-optic lines. “Ethernet over DOCSIS is something they absolutely want,” Brooks said.
Arris and Cisco Systems are both supplying Ethernet-over-DOCSIS equipment. Joe Fernandez, director of business development for Cisco's cable group, said the issue with fiber is that it addresses only 20% to 30% of the addressable businesses in an operator's territory.
With Ethernet-over-DOCSIS services, “we think cable companies will try to go upmarket,” targeting businesses with eight to 50 employees, Fernandez said.
But Juniper's Audet said operators ultimately will opt for true metro Ethernet, rather than layering business services on top of DOCSIS. “Ethernet over DOCSIS is for the small guys,” he said.
Either way, operators also are finding the need to augment their provisioning and billing systems to handle SMB-targeted services, according to Scott Ortiz, director of product management for CSG Systems' business services platform.
If a customer has one or two voice lines, “the system requirements for supporting them aren't very different than a residential customer,” he said. “But beyond that, you start getting into more complex service-provisioning needs.”