Broadband, bundles lure SMBs

THE CABLE FACTOR

While companies such as Cox Communications have targeted businesses for a while, most of the major cable players and certainly the largest, Comcast, are discovering this market for the first time — and eyeing it hungrily. Having cut their teeth on delivering voice over IP (VoIP) to consumers, the cable industry is now poised to bundle services for small businesses, as well, from their existing hybrid fiber/coax (HFC) networks.

Both CLECs and incumbents are characterizing cable's effort thus far as primarily focused at the very low end of the market, including the small office/home office (SOHO) segment. Because they are limited to serving their franchise territories, it can be more challenging for them to serve businesses with far-flung locations.

Cox's Faulkner admits that segment is the company's primary focus.

“We have a fair degree of our embedded base that is the sub-20 employee market,” she said. “Over 70% of our embedded customers are sized 20 employees and below.”

What Cox can provide them over its HFC network is high-speed data via cable modem with voice and, if they want it, video at a very competitive price, Faulkner said.

“If I have a customer sitting on my coax network, I can deliver up to a 15 [Mb/s] by 2 [Mb/s] data Internet experience and as many voice lines as they need,” she said. “And I can do that at a price point that is on par with, and even less than, what a converged access T-1 [1.5 Mb/s] is.”

Comcast, which declined to be interviewed, offers its Business Class services — voice, Internet and video — as part of a special promotion for $99 per month. The cable giant announced in March that it is targeting SMBs in its Northeast footprint with the service, which includes unlimited local and long-distance voice plus extensive advanced calling features; high-speed Internet at speeds of up to 16 Mb/s; complimentary software packages including Microsoft corporate class e-mail, calendaring and document sharing; data protection from McAfee; and free Web hosting and IT support for Web-based software solutions.

Even though most of the cable activity to date is aimed at the lower end of the SMB space, including the SOHO segment, there are clear signs that cable is expanding its reach. In March, Time Warner Cable announced that Time Warner Cable Business Class was launching its Partner Program, designed to let national and regional telecom agents and value-added resellers push its services.

“The more cable companies expand their channel and move to indirect channels, the more scared incumbents should be,” Hilton said. “There's good margin upmarket, and upmarket is where the indirect market is. Time Warner Cable has made a big bet on indirect channels.”

At about the same time, Charter Communications and Cox said they were linking their California and Nevada properties with fiber optic cable to enable them to serve customers outside their own franchise footprints.

Faulkner said Cox will look to do similar agreements with other cable operators, but that it is not changing its focus.

“Don't take our recent announcement as meaning we feel we've done our course in the small business case and we are turning to national as our next tier of opportunity,” she said. “We are still focused on capitalizing on an ignored segment over the years.”

Cooperation among cable operators breaks down one of the last barriers to their success in selling to businesses: the regional limitation of their networks. Cox is already finding opportunities selling within the region to school districts, governments, and hospitals and medical groups, Faulkner said, and the expansion beyond the region will help those groups further.

“We will retain our focus regionally, but as we look to further opportunities with the customers we have — health care networks looking to expand statewide, for instance — we have the natural ability to talk with other cable operators,” she said. “We are seeing momentum of all the [multiple systems operators] on this.”

And cable will continue to stress its advantages of operating its own facilities and maintaining a local presence, she added.

“They are just starting,” Hilton said. “It will take years to get there, but they know they want to get there. And we will see them serve more upmarket as well.”

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