As residential customers continue to cut the cord, cable telecommunications firms are increasingly focusing their sights on commercial customers, offering broadband, video, voice, hosting and cloud-computing services that generate healthy margins and foster long-term relationships.
Initially, most operators had basically offered their triple-play services to small and midsized businesses. Today, the business-services segment has expanded into new products and is catering to bigger, national clients.
It’s profitable, too. Business clients typically spend more each month, with some spending as much as $1 million a year, Douglas Fantuzzi, vice president of operations support systems and network solutions, cable and satellite, at software and services vendor Amdocs, said.
STABLE, HIGH MARGINS
Commercial clients also offer stability, often signing multi-year contracts at profit margins higher than those for residential customers.
Revenue from No. 2 MSO Time Warner Cable’s commercial-services business more than doubled to $2.31 billion in 2013 from $1.11 billion in 2012, and now accounts for more than 10% of the company’s overall revenue, per Forbes.
Cox Communications, among the first operators to dive into the commercial-services pool more than a decade ago, is on track to generate $2 billion from the category by 2016, Steve Rowley, senior vice president of Cox Business, said. Today, it counts 330,000 commercial clients; about 80% of those are small businesses that account for 65% of the unit’s revenue.
Mediacom Communications, serving predominantly small and rural markets, has seen the internal rates of return from business services grow by more than 20% annually each of the last four years, Dan Templin, senior vice president of Mediacom Business and president, Mediacom Telephony, said.
Mediacom is working with local governments and economicdevelopment organizations in its service territory to deliver broadband services considered vital to their economies.
“Broadband today is like the railroads were 100 years ago,” Templin said. “Without it, towns die. We are all about public-private partnerships to make sure that connectivity exists in our rural communities.”
Central Iowa, for example, is increasingly attracting high-tech companies wanting to build informationtechnology facilities, call centers and data centers that require reliable, high-speed connectivity. Mediacom’s Gigabit+Fiber solution is an enticement those towns need to lure those businesses, Templin said.
Commercial services require a higher level of network reliability and customer service. Most MSOs are retooling and stabilizing their automation processes to handle the greater volume.
A recent survey conducted by website Heavy Reading for Amdocs found that operators need more tools to automate those procedures and monitor the complex order execution processes. Of the 50 operator entities surveyed, 44% said they aren’t satisfied with their current Operations System Support (OSS) solution and are willing to invest in a better one.
The most common order-related complaint from commercial customers is missed installation deadlines (47%). This creates a need for a unified orchestration process, Yosi Mor Yosef, marketing manager for Amdocs’s OSS division, said.
Being able to see where an order is in the process at any given time, and providing self-service capabilities for commercial customers, were rated the most important feature by 35% of respondents.
The wholesalecarrier business has perhaps the most significant upside potential, Amdocs’s Fantuzzi said. The need for backhaul services connecting small cells to fiber networks is increasing at breakneck speeds. A Real Wireless survey conducted in January found that 70% of mobile network operators are willing to use small-cell networks rolled out or owned by a third-party partner, such as a cable company.
Cox is deploying a new business-services platform — Atlas — to accommodate its growing commercial services business. Atlas has its own separate billing, installation and support staff as well as separate customer relationship management, order-entry and support staff, plus sales and tech support, Rowley said.
Two years in the making, Atlas has involved more than 100 people across every division.
“We are constantly trying to further automate our processes so we can fulfill orders more quickly,” Rowley said. “We have installed a new, scalable system that allows us to be more efficient on the front end and back end by standardizing processes and centralizing operational functions. And we have installed more diagnostics so we are smarter and proactive. It’s been a huge undertaking.”