Telecommunications Americas: Cable gets down to building busine$$: MSOs pump up promotion, technolog

Cable isn't just about residential video, data and voice service anymore. Seeing the potential for a big score, large cable MSOs are beefing up their efforts to land a variety of business customers by attacking the market with a range of technology platforms. MSOs are sharpening their technological tools and pumping up promotional efforts to capture more of the huge commercial telecom market, estimated to be more than $120 billion per year in the U.S. alone.

In particular, Time Warner Cable, Cox Communications, Charter Communications, Cablevision Systems and Adelphia Communications are seeking to make their mark in the business space. With high-speed data, digital video and now VoIP service in their product portfolios, they're hankering to steal business away from traditional service providers and expand the overall commercial market.

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Cable's initial efforts are paying off. Time Warner reported a $60 million gain in business sector revenue in 2003, boosting its overall commercial take by 70 percent. The MSO now boasts more than 170,000 commercial accounts for its Road Runner Business Class line of data services. Cablevision generated close to $200 million in 2004 with more than 1,600 buildings on net and 150,000 access lines through its Lightpath business services arm. Even more impressively, Cox Business Services racked up an estimated $350 million in commercial revenue.

Overall, industry officials figure cable's fledgling commercial sector efforts quietly brought in more than $1 billion for the first time last year. Cox officials believe the commercial sector in their territories alone represents an $8 billion to $10 billion opportunity. Narrowing it down to firms within 100 feet of Cox's cable plant, they see a $3 billion market.

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Of course, cable operators face hurdles in expanding their commercial business. For one thing, companies tend to be far more demanding and discriminating than consumers. Paying much more for business-class broadband services, they expect much more in return.

And service providers are fighting back. BellSouth, SBC Communications and Verizon Communications have crafted their own business-oriented bundles of local, long-distance and DSL services to draw and retain small and midsize firms.

Nevertheless, sensing the possibilities beyond their traditional residential markets, cable operators are rolling out new offerings for small, midsize and even large companies. In the latest example, Cox Business Services turned up the speed for all commercial broadband data package clients late last summer.

Cox, which offers six levels of high-speed data service to commercial subscribers, generally raised its top speeds as high as 6 Mbps downstream and 1.5 Mbps upstream without raising prices. The MSO's business unit also launched a fresh marketing campaign to attract new customers and entice existing customers to rev up their speeds.

Last May, Time Warner introduced two broadband networking solutions for businesses. Designed specifically for large commercial customers with 1,000 or more employees, the new solutions--dedicated access and teleworker/branch office connectivity--offer fiber and broadband communications tools for seamless linking of remote workers and branch offices to their main facilities. Time Warner's commercial offering, dubbed Road Runner Business Class, also includes applications such as managed storage and security, as well as Web and e-mail hosting.

Thanks to such efforts, Time Warner now has about 500 large enterprise firms in its commercial customer base. Even though cable operators have focused generally on smaller firms that can be served with cable modem connections, executives at Time Warner, Cox and other big MSOs say they actively are recruiting more large companies with fiber-based services.

In most cases, cable operators are focusing on industries strong in their regions. For instance, Time Warner is devoting plenty of attention to the financial sector in New York City. The MSO is also concentrating on the medical and retail industries and began courting the hospitality business a year ago.

Time Warner is also pursuing the education sector. In both the Raleigh, N.C., and Kansas City metro areas, it has linked grade schools with all-fiber connections, generating more than $4 million in revenue in Kansas City alone. Similarly, Cox is placing its bets on the casino and hotel industries in Las Vegas, having successfully wired more than 120 casino hotels for data, cable and VOD services.

Time Warner, Cox and other MSOs have succeeded in the commercial sector by catering largely to firms' high-speed data needs, often by beating service providers to the punch. But now cable operators are seeking to grab more commercial business by expanding into other product lines, such as VoIP service.

At Time Warner, officials are itching to offer VoIP to commercial customers. The MSO, which is deploying residential VoIP service ambitiously in all its markets, sees commercial IP as a huge growth opportunity.

Cable operators also see wireless service as a promising commercial product. At Cox, executives are studying how they can use wireless links to reach businesses without costly plant extensions.

Cable operators are delivering commercial services using a range of technologies, including optical Ethernet and TDM links, DOCSIS cable modem connections, Ethernet over coax and last-mile wireless solutions. In a little-noticed move in the commercial services arena, CableLabs issued a formal request for information in November for IDAD (integrated DOCSIS access device) equipment. The idea is to create devices that could leverage DOCSIS cable modem links to provide standard client interfaces to commercial customers, ranging from traditional DS-0 level FXS (foreign exchange station) services to fully functional DS-1, as well as 100-Mbps Ethernet.

The IDAD effort is aimed ultimately at offering cable operators a cheaper way to deliver T-1 services to businesses. Additionally, support for T-1 emulation would enable DOCSIS cable modem links to backhaul mobile voice and data traffic from cell towers and base stations. This could be critical as MSOs contemplate building their own mobile wireless networks or teaming up with existing wireless carriers. CableLabs hopes the IDADs will be ready for deployment within 18 months.

Building Busine$$

Company                Money                 More Money

Time Warner            $60 million gain in   50 large enterprise firms
                       business sector       in commercial customer base
                       revenue in 2003

Cablevision            $200 million          1,600+ buildings on net;
                       generated in 2004     150,000 access lines

Cox Business Services  $350 million in       $3 billion market wi/in 100
                       commercial revenue    feet of Cox cable plant

Michael Harris is founder and publisher of Cable Digital News and president of Kinetic Strategies. (michael@kinetic.com)

Alan Breznick is a broadband analyst for Kinetic Strategies and editor of Cable Digital News.