Sometime next year, a new inflection point will get marked down in cable’s books: A cable company will top the $1 billion mark for business services revenue.
The company is Cox Communications, which expects to surpass $1 billion in sales from a growing roster of small-, medium- and enterprise-size businesses that Cox has won over since trailblazing the business services space 15 years ago.
Within the cable industry, Cox will achieve the significant economic milestone first, but it’s certainly not alone in generating strong numbers from the non-residential side of cable’s ledger. Business services operations are generating double-digit percentage growth as they defy a recession that has stifled some other aspects of the telecommunications sector.
Comcast, for example, reported that revenue from business services rose 41 percent in 2008. Bresnan Communications’ business services revenue rose 24.8 percent last year and is expected to climb by 33 percent in 2009, fueled in part by a near doubling of business phone lines. Time Warner Cable reported 283,000 high-speed Internet business customers at the end of last year, versus 245,000 two years before, and counted 30,000 business phone customers at the end of 2008 after launching the product in 2007.
Momentum is building on two levels. First, cable companies continue to gain market share within the SoHo and SMB segments that cable originally targeted with broadband IP connectivity and, later, small office phone services. Second, cable is experiencing good traction with a new cadre of services that appeal to large enterprises, including scalable phone services, fiber-to-the-enterprise connections, hosted phone and data services, and Ethernet connectivity.
Ethernet, in particular, offers an excellent growth opportunity for cable business services, driving strategies to move up-market and putting cable on a level playing field with incumbents. According to industry research from Vertical Systems Group that was shared during a CTAM-produced panel at The Cable Show, Cox and Time Warner Cable together account for about 16 percent of the total business carrier Ethernet market in the U.S. No other single MSO registers a meaningful share yet. But that’s apt to change as Comcast, Cablevision and others bring certified Ethernet capability to their business offerings.
One reason: Cable companies are beginning to reap rewards as they couple Ethernet services with underlying fiber-optic and HFC networks that enjoy broad reach beyond the downtown business sectors, where incumbents’ networks generally are concentrated. The ability to provide Ethernet over HFC architecture, in particular, is driving cable’s product footprint further into business markets.
Cable’s embrace of Ethernet is helping to propel new capabilities that appeal to medium and large commercial enterprises. Also, operators across the U.S. are adding hosted services such as offsite security, storage, monitoring and Web site hosting. For many businesses, those are welcome alternatives to buying and maintaining equipment internally.
Beyond technology adoption, the cable industry is also demonstrating newfound prowess in another important aspect of business services: marketing.
In the same way that a young cable industry gained confidence in branding and marketing its residential video and telecom services decades ago, cable is now becoming more facile in communicating and promoting to business owners and IT decision-makers. Figuring out what resonates in the marketplace is important, because as Comcast
Business regional vice president Jason Welz observed at another CTAM Cable Show panel, recognition of cable’s growing role in business telecommunications is sometimes limited. “There’s a huge lack of awareness,” he said.
Partly, that’s because cable companies have been reserved about staging wide-ranging marketing campaigns around business services operations, for fear of inciting demand among businesses they weren’t ready to serve. That’s no longer the case in many markets, and cable operators are no longer so hesitant to proclaim their arrival. “We’ve learned to communicate early and often,” said Denisse Goldbarg, vice president of marketing and training for Time Warner Cable Business Class.
By developing awareness of their rising business services capabilities, cable companies have racked up impressive wins within key commercial sectors – including health care, education and government – alongside private businesses. In turn, business services operations are emerging as one of the hotspots for employment growth in cable for the next several years. And inside the industry, business services are no longer considered a stepchild of the bigger residential business.
That’s a point that Cox, poised to become cable’s first billion-dollar business services provider, makes frequently at internal meetings, said CTAM panel contributor Janet Barnard, senior vice president and general manager of Cox Northern Virginia. “We talk a lot in every all-employee meeting and every leadership meeting that Cox Business is the growth engine of the industry,” she said, “and that Cox Business’ success defines our success.”
Next month, BigBand Networks’co-founder,
executive vice president and CTO Ran Oz will write about virtual zoning.
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