Cable’s share of the business-to-business broadband market is estimated at about $1 billion. But in the view of some, that’s just the tip of the iceberg.
Operators that have launched commercial-services divisions are pushing the envelope for their new clients with a variety of strategic, technological and operational initiatives they hope will continue to generate double-digit revenue growth.
Cox Business Services vice president Bill Stemper said his division generated $275 million in revenue in 2003.
“We see, inside Cox [Communications Inc.] territory, $10 billion in business spending on telecom as the potential for us, with the serviceable opportunity at $2.5 billion,” he told an audience at the recent National Show. “There is nothing but opportunity inside the franchise areas where we operate today.”
Stemper said his division has enjoyed high 30% growth rates over the past few years. The keys to growth are localism and adding feature sets.
“The value proposition is to leverage the local presence,” he said. Because Cox is ingrained in the community, it is able to fix problems locally for large Fortune 500 companies by day — and then to present the same face that night in the community at local school or sporting events, he said.
Cox has been able to generate revenue from three key sectors: health care, education and government, including several Department of Defense contracts.
Its centerpiece account: Centara Health in Hampton Roads, Va. What began as several thousand dollars a year of business in 1998 has grown into a several-thousand-dollars-per month client. Cox presently links eight hospitals and 100 support facilities in a broadband network that includes high-speed video, data and voice communications.
A second example is the New Orleans school system, which pays Cox more than $100,000 a month for broadband interconnections.
Cable operators stress that landing such new business means being creative. Cox is launching VoIP for business customers in markets where it hasn’t launched circuit-switched telephony, in order to serve client needs.
Wireless connectivity also is a growing trend. Ted Carrier, vice president of Charter Business Networks for the MSO’s Western region, said the company used a wireless solution to connect a speedway and a small office park to its broadband plant for a fraction of the cost of a wired solution.
“We went to wireless because the cost of a traditional wired solution [can be] too expensive and we had lost some customer opportunities,” he said.
The Irwindale, Calif., speedway, which wanted a broadband connection, is located three miles from Charter’s nearest drop site.
It would have cost $200,000 to wire those three miles, Carrier said.
There also was a small office park adjacent to the speedway, which Charter wanted to serve. The MSO hooked up with a wireless provider for a transmission link to the speedway and the office park next to it. Total cost: $8,000.
“And the customers are very, very happy with the solutions we are providing,” he said.
Time Warner Cable’s business division will benefit from the company’s VoIP rollout, giving senior vice president, business and commercial services Ken Fitzpatrick another product to package in the B2B bundle. The unit saw its revenues jump to $60 million last year. It now has 130,000 total customers.
“We’re looking at VoIP trials,” he said, adding that video has also been a surprising growth component this year.
“We’ve seen a huge increase in commercial customers wanting cable TV,” he said, noting their interest is primarily in news content.
In addition to bolstering their service offerings, Fitzpatrick believes MSOs can drive revenue from becoming more efficient in-house.
“We have a national sales organization,” which helps bridge the gap between divisions, he said. Many large companies want to connect offices across the country or reach out to teleworkers in another state.
Training also is important. “We have a robust training program,” Fitzpatrick said. “It’s all done at the local level.”
It’s important to give B2B sales employees the tools to help them be successful, he said, which includes competitive sales strategies, understanding which unique services Time Warner can offer and how to overlay the business opportunities where the MSO has completed broadband plant construction.
Charter has found success in less competitive tier two and three markets, Carrier said. That may bode well for small MSOs, which could, for instance, leverage their high-speed platforms to extend voice and data services to businesses with marginal new investments.
Carrier cited an example at the University of California at San Bernardino, which had a new, 150-room student housing complex it wanted to wire for video and data services.
Charter built a 10 Mb connection to the site.
“We were local, able to be responsive and get them a solution in a timely manner,” he said.