You Snooze, You Lose
Cable takes business from sleeping telcos.
MSOs have been hearing it for years, that providing business services is like printing money. It turns out the enterprise market is fruit that isn’t hanging all that low, but small- and medium-size businesses (SMBs) represent a clearly lucrative market that even the smallest operators can justify targeting.
Enterprise customers have strict, extremely rigorous requirements, and it’s neither cheap nor easy to build the physical plant necessary to serve them. And that’s not to mention the sophisticated back office infrastructure that’s required.
Figure 1: NPG Cable’s Heartland Hospital network plan,
with provisions to expand services as Heartland grows.
Nonetheless, there are rewards for serving the enterprise market. Single-digit revenue growth is the norm, but revenue at Cablevision Systems’ Optimum Lightpath has been growing in the low double digits. Cox no longer provides financials, but a clear measure of success is that Cox Business Services is one of the top-four Ethernet providers in the country.
But SMBs, a category that can include such non-commercial operations as municipal buildings, schools and universities, can be less rigid about what will satisfy their requirements. Ethernet at 100 Mbps or, increasingly, 1 Gbps can often provide enough flexibility for an SMB to be less persnickety about service-level agreements (SLAs).
NPG Cable, a smaller operator with systems clustered in Arizona and Missouri, has had Heartland Hospital in St. Joseph, Mo., as a customer for more than 12 years, but NPG recently installed a passive optical network (PON) to serve the facility.
In the summer of 2008, NPG extended fiber to the hospital, and using equipment from Alloptic, installed a PON node supporting up to 32 drops. Alloptic provides compact transceivers it calls MicroNodes that allow signal distribution through coaxial to standard set-tops and cable modems.
The hospital wanted little more than to improve the TV signal in its obstetrical unit.
“We got the OB up and running first,” said NPG Technical Manager Steve Ward. “They came back and asked for more, and we’ve deployed five more micronodes. They expect to use all thirty-two.”
Ward described the cost of the installation as minimal. The upgrade to RF over Glass (RFoG) and a PON helped minimize upstream noise.
And there’s potential for more business. “We don’t have the hospital’s phone business. Maybe not today, but tomorrow maybe, we might get some of their T1 business,” Ward said.
Also, the company’s success at the hospital led to a contract to connect Missouri Western State College, also in St. Joseph. “So now I’ve got a hospital and a college, delivering to dorms and classrooms,” Ward said.
An interesting aspect of NPG’s story is that it is really the only game in the town of St. Joseph. “We don’t have a viable competitor,” Ward said, “but in my mind, this move guards against the competitor of tomorrow. It’s proactive, or defensive, whatever you want to call it.”
While going after business customers is a growing trend, it’s still not an overwhelming trend.
“We’ve been frustrated by the cable industry for a number of years,” said Aurora Networks Vice President of Marketing John Dahlquist, who said that for all of the talk about the desirability of the market for business services, relatively few operators have been aggressive in pursuing those opportunities.
Businesses in strip malls can typically be handled with DOCSIS modems.
“School districts and municipalities – that’s pretty much the sweet spot,” Dahlquist said. “It seemed like there was all this low-hanging fruit, especially with the cost. With the business subscriber, the monthly fees go up. And with business subscribers, if you provide the services they need, they never churn.”
Aurora can put in an end-to-end system, or it can put one of its Media Converter units at a site to be serviced, string fiber to provide 100 megabits of bandwidth and connect at a node.
NPG Cable uses Alloptic MicroNodes (bottom) paired
with a Blonder Tongue amplifier (top) to provide
video service to Heartland Hospital.
“You just need wavelengths available for the upstream and the downstream,” Dahlquist said. “You utilize filters to splice into a fiber, or just use dark fiber.”
The costs to connect a business using Aurora technology can be fairly modest, he explained. Filters are only hundreds of dollars. Add the cost of fiber, and then it costs about $2,000 for Media Converters at each end, “so about $2,500 or so. The real cost is the labor cost; then the issue is how far the customer is from the node.”
“We’re seeing a lot more interesting business solutions,” Dahlquist said. “We’re selling a lot more gigabit equipment – versus 100 megabit – than we used to, and it’s going to people on a higher tier, a higher level of service.”
Dahlquist said Aurora Networks is also conducting field trials of a PON module. “We moved the PON module out to the node so the reach is beyond the typical twenty kilometers” – which is the maximum distance from a headend that a PON network can otherwise be extended.
Once an operator has begun to provide fiber extensions, the vistas open. “You have your nodes out there anyway, why not do cellular backhaul?” Dahlquist said.
Ciena is another company focused on helping service providers offer business services, bringing to the party expertise in Ethernet and in optical technology. Similar to Aurora, it’s experiencing less activity in the cable market than it might have anticipated.
Ciena’s argument for becoming more aggressive in targeting business services is a variation of the low-hanging fruit pitch. Right now, revenue for everyone is growing in single digits, noted Ciena Vice President of Strategic Planning Tom Mock. The path to greater revenue is more services – differentiated services.
“Telcos may rollout five to ten services a year, at least they have traditionally,” Mock said. With configurable infrastructure, an MSO could rollout a hundred or more and just swamp its slower-moving competitors.
“The speed of evolution varies from provider to provider,” Mock said, “even within one provider’s markets.”
Mock used the phrase “programmable service delivery,” but the concept in its essence is similar to notions of intelligent, or adaptable, or configurable networks propounded by Juniper, Cisco, Alcatel-Lucent, Siemens and others.
NPG Cable was able to justify installing an RFoG PON in order to serve one of its customers,
Heartland Hospital in St. Joseph, Mo.
The cable industry as a whole is coming to grips with the notion, Mock said, as evidenced by some of the things that MSOs are asking about as they plan the ongoing convergence of their networks.
“If you’re going to offer four or five services, there can’t be a different network for each one,” Mock said. “So basically we’re seeing operators looking for multi-service support. They’re looking for programmable ports on our optical equipment. We’ve installed that in about thirty networks in the last two or three years.
“Most of what we’ve done in the cable space is to help operators deliver a business service or services. For example, we’ve been helping to build Ethernet services with varying levels of quality of service, all under software control.”
Cable can’t assume that its competitive advantage will persist, Mock warned. “They’re beginning to do similar things on the telco side of the business,” he said.
“What cable’s done a good job of so far, though, is that they’re not just going for programmability, they’re putting in ways to automate the process,” Mock observed.
For everyone exasperated with cable ops for not jumping on the opportunity, there’s a recognition that installing hardware might be the easy part. There is no small amount of back office infrastructure that needs to be in place to provide, bill for and manage all of these services.
“I can build the network, but I need to bill for it and get my people to understand it,” Mock said.