The cable industry is expanding its high-speed-data agenda
into the business-to-business market, with early successes signaling that revenue
potential from that market could easily rival that of the residential side.
And that's a switch, considering that at the beginning of
the year, instances of business connections to cable data were few and far between.
But today, large and small MSOs alike -- usually working
with third-party providers -- are moving aggressively into the business market, having
found that existing technology is more than adequate for serving many needs.
"There's a ton of pent-up demand for higher-speed
access in the business market, and we can meet that demand today," said Tracy Wyatt,
director of commercial service for MediaOne Express.
Just how pent-up the demand is became clear recently, when
the company, while preparing for an alpha-test of business services in its Northeast
market, posted a query looking for possible participants on an obscure, hard-to-find Web
"They found the site, and we were swamped with
responses, which have given us thousands and thousands of leads for our marketing
effort," Wyatt said.
In Jacksonville, Fla., where MediaOne has been quietly
testing the business waters with its branded "Business Internet Service" for the
past year, the company scored a first in the industry last month, with its connection of a
37-story downtown office building to its hybrid fiber-coaxial network.
This enabled all tenants to access high-speed data, as well
as audio and TV services. The fiber node of the HFC architecture is located in the
basement of the building, with coax extending to all floors of the "vertical
neighborhood," allowing customers to connect to the Internet or to create virtual
private networks at T-1 (1.5-megabit-per-second) speeds. And the cost is well below telco
T-1 or frame-relay costs, Wyatt noted.
Generally speaking, cable operators see three categories of
business customers as prime targets for their services: small, professional offices, where
a handful of people are served through a single, special multiport-modem connection; small
businesses, which typically have local-area networks, but which are linked to the Internet
and other data connections at sub-T-1 rates, such as ISDN (integrated services digital
network), or even dial-up POTS (plain old telephone service); and large corporations that
want high-speed connections to employee households for telecommuting.
Time Warner Cable's Road Runner Group launched a package of
business services targeting these three sectors six months ago, and it is now offering
them in all of its markets, said William Nazarep, vice president of internetworking
products at Road Runner. Sales to small businesses "have really taken off over the
last three months," he said.
"These people have been living with slow connections
-- dedicated lines operating at 56 kilobits per second that cost them $595 to $695 per
month -- and if they want T-1 rates, they have to pay $1,600 or more," Nazarep said.
Road Runner offers its high-speed connection to LANs with
up to 32 users at $699 per month if the customer uses a Road Runner-compliant gateway.
This means that Road Runner can comanage the connection all the way to the LAN. The
connection costs $999 per month if the customer uses a different gateway server.
The @Work unit of @Home Network has also moved onto the
cable platform as a means of distributing its services, after more than a year of
operating over local-exchange-carrier and competitive-LEC lines to businesses -- most
commonly via links supplied by Teleport Communications Group.
"Over the past 14 months, cable's involvement has gone
from interest at the planning level to serious engagement at the field level," said
Don Hutchison, senior vice president and general manager of @Work.
In February, Cox Communications Inc., an equity stakeholder
in @Home, launched the @Work service to small businesses in Orange County, Calif., with
plans to expand to other territories as the year progresses.
And this quarter, @Work will begin offering telecommuting
services over cable networks, following the completion of a beta trial in the San
Francisco Bay area with Cox and its other major MSO partners, Tele-Communications Inc. and
So far, corporate telecommuting accounts have been slower
to take off than the small-business segment, though such accounts are typically much more
lucrative than any single small-business connection.
Road Runner's Binghamton, N.Y., unit recently signed a
major telecommuting contract with IBM Corp., and MediaOne has been supplying Digital
Equipment Corp. with such services around Boston since October.
But Hutchison is optimistic that this segment will take
off, as well. "We are very pleased with the results of our beta-trial, which is why
we're moving to commercial release of the product," he said.
With only limited involvement by its cable partners, @Work
saw unit sales on the cable side jump from zero in the last quarter of 1997 to 20 percent
of its total unit sales in the first quarter of 1998, Hutchison said.
Overall, @Work accounted for 45 percent of @Home's
first-quarter revenues, or $2.7 million, versus $15,000 in the first quarter a year ago,
"And, unlike the ILECs [incumbent LECs], it's a green
field, where cable doesn't have to worry about cannibalizing T-1 revenues with
lower-priced ADSL [asymmetrical digital subscriber line] services," Hutchison added.
Over cable, @Work's service costs range from $200 to $250
per month at the low end to between $900 and $1,000 "at the very high end,"
compared with ranges of $800 to $2,200 for comparable services over LEC or CLEC links,
He noted that with the value proposition for connectivity
so strong in cable's favor, cable promises to create a much larger market for @Work's
value-added services, such as outsourced e-mail, which is now offered over the Cox system;
as outsourced Web hosting, which is coming this quarter; and dedicated site mirroring.
@Home is supplying that service to the business market
through an affiliation with Exodus Communications Inc., a leader in the server-colocation
market. And @Home has taken an equity stake in Exodus.
While much has been made of cable's need to support
advanced-service capabilities through the introduction of quality-of-service monitoring
and other functionality features in cable modems, purveyors of business services over
cable said what cable has right now is more than adequate to meet the needs of the
telecommuting, small-business and small-office sectors.
"The distributed-hub architecture that we're using in
all of our divisions allows us to meet our commitments to business customers," said
Bob Rusak, senior vice president of business development at Road Runner. "If
business-traffic volume begins to get heavy at any one hub location, we can reroute and
manage that traffic to maintain acceptable data rates."
Hutchison agreed that while QOS features will expand the
range of service options over time, cable networks that are optimized to offer
high-speed-data services to the residential community are well-suited to meeting demand
from the targeted segments of the business sector.
Moreover, he added, @Home and Cisco Systems Inc. have made
considerable progress in addressing "systemic QOS issues with software refinements
and other enhancements at the network level," which will soon be applied in the @Home
The gating factor to more wide-scale rollouts of business
service isn't technology -- it's the sales and customer-care infrastructure that are
required to make commercial services a success, Wyatt said.
MediaOne is intent on expanding its business service to all
of its markets, with the Northeast division its "No. 1 priority," she said,
adding that the region won't move to commercial rollout for several months.
"We don't want to swamp the Northeast division with
demand until we have the service infrastructure in place," she said.