CTAM Live: Cox Business Services To Become $1 Billion Unit In 2010

Author:
Updated:
Original:

BOSTON--Cox Communications Inc.’s business services division is on track to become a $1 billion part of the company by 2010, based on growth of telephone and data sales to small and medium-sized firms and other activities such as capacity wholesaling, according to its vice president, Phil Meeks.

The division, which sells advanced phone and data services to businesses, as well as marketing fiber capacity to such competitors at Verizon Communications Inc. and AT&T Corp., has grown in revenues by 18% during each of the last three years, Meeks said during an interview here during CTAM Summit ’08. Growth is projected in the 16% range during each of the next three years, he added. The business division will generate 27% of the company’s overall growth during the next three years, the executive said.

The growth projections come even as America’s small- and medium-sized businesses have been hardest hit by the recession and credit crunch. Such businesses do not operate with cash on hand, but through the kinds of lines of credit that were frozen in the meltdown of the financial services industry.

Meeks said those lines of credit have begun flowing again in the last three weeks, so Cox has seen little churn among current business customers. Customers have been most heavily impacted in the MSO’s Southern California market, hard-hit in the mortgage crisis; and in Rhode Island, which has the dubious distinction of having the highest unemployment rate in the nation.

“We’re certainly keeping an eye on [the economy],” he said.

But the division is not solely reliant on sales of services to small businesses. Cox also sells wholesale services to Verizon, AT&T, T-Mobile and Sprint. The business services division is also helping those vendors build fiber rings to connect their towers and expand the cellular topology in order to deliver 4G services.

“That’s a good healthy business for us,” he said

As Cox conducts that business line, it is examining redundancies in the plant of competitors, compared with the planned facilities-based cellular business Cox intends to launch. In some markets, as much as 65 to 70% of the competitor’s plant is where Cox plans to place its own cellular infrastructure. So, as Cox is building the rings, it is also prepping its own future cellular plant.

The division has also expanded via a non-capital-intensive way of growing business sales. Since July, Cox has been in a partnership with Nortel for outsourced telesales in two markets. Cox provided the vendor with a list of high speed data-only customers, which Nortel reps contacted in an effort to upsell them into full business services suites. The upside for Nortel: the vendor also sells the customer on its handsets and other equipment.

Meeks said the telemarketing partnership will soon be expanded to all 18 of Cox’s markets.

The company is also extending its advanced services further down its hybrid fiber coax plant, in order to reach more potential business customers. This effort is targeting the company’s San Diego, Las Vegas and Phoenix markets. Those have been strong residential markets for the company and the division is examining “clusters of opportunities” for business service expansion.

Meeks said the division is also strategically launching a hosted VOIP product called Voice Manager, the first application it has marketed. The product offers advanced services such as the ability to route calls anywhere the businessman goes to a variety of devices. Because it is a hosted service, small businesses can receive specialized telephone services without having to pay for equipment on their own premises; or paying an expert to come in every time they need to upgrade equipment.

Meeks said the division is also considering Internet protocol security and network-attached storage applications, products for which clients would pay only as they needed them.

The business services division has achieved its growth even though its products -- though comparably priced -- are not necessarily the cheapest option for business users. Meeks said he believes customers select his company offers “the right products, positioned the right way … we don’t lead with price.”

Cox, by virtue of the fact it started as a locally franchised business, has local business relationships and representatives that remain in the community after the sale, while other competitors may offer help via a call to another state or country, he noted.

The division has gotten the most traction in industries such as health care and high-end hospitality (think the high-roller hotels on the Las Vegas Strip). Executives are now mulling how to sell their products down those same verticals, such as selling into smaller healthcare complexes or mid-level hotel properties, he said.

Click here for more CTAM Summit '08 coverage.

Related