With all the end-of-year financial results now reported by all the publicly traded top-tier U.S. service providers, we thought we take some time today to look how the telcos and cable companies fared competitively with their business services in general and their VoIP/UC portfolios in particular.
Cable companies Cablevision and Cox have been nibbling away at the telco SMB market share for years, but in 2011 Time Warner Cable and Comcast both reported they have grown their business services into multibillion-dollar revenue streams. Comcast and Time Warner Cable have used product bundling to gain market share with package deals that included voice services bundled with broadband offers such as Metro Ethernet or dedicated Internet access, also growing their respective sales forces to more effectively compete against incumbent telcos.
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According to Michael J. Angelakis, chief financial officer at Comcast, most of Comcast’s 2011 business market growth “came from the small end of the SMB market, with strong momentum showing among small businesses having less than 20 employees.” Comcast estimates that a $20 billion to $30 billion opportunity remains for business services within its markets, and it has gained about 10% of its potential market share.
Similarly Time Warner Cable showed growth with most of its business revenues coming from small businesses. The company’s focus on bundling has paid off: In the fourth quarter it reported that virtually all of its new customers added in Q4 2011 had subscribed to two or more services.
Comcast, Time Warner Cable, and Charter all saw their VoIP customer base grow in 2011, including both consumers and business voice customers. However, last year’s growth slowed to low single digit market share gains, as cable companies are also seeing the effect of wireless substitution. Still, these three cable companies all continued to grow their VoIP base in 2011 with SIP-trunking services.
Not unexpectedly, the telcos still continue to see declines in their legacy voice services, with some relief from these losses coming from VoIP, IP, cloud and other “strategic services.” For the second quarter in a row, AT&T made slight sequential revenue gains to its wireline business services segment overall, bit its small business continued a slight downward revenue trend. Meanwhile, Verizon’s 2011 small business revenues were down about 3.7% compared to FY 2010.
Noteworthy in 2011, Comcast and Time Warner Cable both agreed to resell Verizon Wireless services, and both cable operators continue to expand their Wi-Fi hotspot networks. Although this new wireless strategy is largely targeting consumers in the near term, SMB market conditions suggest that cable operators will also soon use the Verizon agreement and their expanding Wi-Fi networks to pursue business customers with bundled mobile services.
Of course, telcos have the network advantage since virtually all business customers in the local footprint across large geographies are “on-net” while cable operators have “network islands.” Still, despite network-reach limitations and more limited business services portfolios, cable operators are showing double digit growth as they capture business services market share from the incumbent local carriers.
