Business Units Boost Cox, TW

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Cable operators continue to use their broadband pipes to hook lucrative contracts with small- and medium-sized businesses that fall into their territories.

Two in particular-Cox Communications Inc. and Time Warner Cable-have recently expanded their business footprints to siphon additional revenues.

Cox, which offers bundled voice, video and data through its Cox Business Services division, recently won a 10-year contract to provide a suite of telecommunications services to Arizona's state goverment. It was among nine companies to get such a contract. Deals were also awarded to large companies such as AT&T Corp., Sprint Corp. and incumbent telco Qwest Communications International Inc. Earlier this year, Cox Business also expanded into middle Georgia, offering services to businesses in Macon and surrounding cities.

Cox Business also offers commercial-class services in San Diego; Omaha, Neb.; Orange County, Calif.; Oklahoma City; New Orleans; Hampton Roads, Va.; the eastern half of Connecticut; and most of Rhode Island.

"We have about 20 additional locations currently generating commercial revenues that will also be pulled under the Cox Business services umbrella over the next 12 months or so," Cox Business vice president and general manager Chuck McElroy said. "We consider ourselves a CLEC (competitive local-exchange carrier), but we're a full-facilities CLEC, because we do not resell the local telephony company's loops."

Meanwhile, Time Warner Cable's Time Warner Communications unit launched commercial services such as remote Internet access, virtual private networks (VPNs) and security firewalls to its business customers in Tampa, Fla. using Cisco Systems Inc.'s Data Over Cable Service Interface Specification-based headend and routing equipment.

One business-service element that has blossomed for these operators is the availability of VPNs, now that security issues have been resolved. In Cisco's case, its equipment is Cable Television Laboratories Inc.-certified for DOCSIS 1.0, but supports a number of 1.1 features.

"Cable operators can offer business services without all of the 1.1 features," said Thomas Scheibe, product manager for Cisco's commercial-services division. "Although 1.1 offers guaranteed bandwidth, it doesn't mean cable operators can't offer VPNs and firewalls."

"Adding VPN capabilities was a natural next step," noted Robert Carter, vice president of Cox Business in Phoenix.

That next step in the evolution of business-class cable has allowed Time Warner and the city of Tampa to ink a deal linking 75 fire stations and tying them back to the Tampa city hall, Time Warner Communications vice president and general manager of online services Mark Bailey said. Time Warner Communications also has launched business services in Portland, Maine.

"On the data side, commercial customers want encrypted services and firewalls," said McElroy. "At the same time, they want to put in VPNs that allow employees to telecommute, and they don't want to be impacted by heavy (bandwidth) usage on the residential side."

Carter said Cox Business' high-speed fiber service, which originally targeted large companies, is also attracting smaller customers.

"We have companies in Phoenix that do production work for Hollywood and need to transfer large video files without overnighting disks," he said. "That saves them a lot of time.

"A state-of-the-art, powered two-way network at 750 megahertz puts us in a great position to be successful in the business-class telecommunications area," McElroy added.

From a bottom-line standpoint, one obvious benefit of businesses services is that they can typically generate much higher fees than the residential sector.

For access service alone, the difference is $200 or $250 per company per month, Bailey said.

Cox Business, which has seen its revenues basically double over the last three years, originally focused on large companies that required high-capacity fiber circuits.

Today, the unit is also giving more of that attention to the small- and mid-sized market.

While that means revenue per customer will likely drop a bit, the number of customers should grow dramatically, McElroy said.

Still, market growth and service footprint expansion will be the center of both companies' activities as next year approaches.

McElroy said it is Cox Business' "intention to leverage every place where Cox has cable facilities and to use those facilities to offer voice, video and data to commercial customers." The unit is also examining the possibility of expanding its footprint through partnerships, affiliations or even acquisitions, he added.

"What we find in the commercial space is that a number of our customers have locations outside of Cox's cable territories," McElroy said.

Said Bailey: "Broadband services is already a very hot sector, but 2001 will be a big year for commercial broadband services. Today, we can barely keep up with demand."

Bailey said Time Warner Communications has "several thousand" commercial customers, growing each month.

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