* Comcast, Cablevision, Cox, Time Warner and others see multibillion-dollar opportunity.
For Comcast, it’s reportedly $3 billion to $5 billion in five to seven years. For Cablevision, it’s $1.5 billion in two years. And for Cox, it’s $1 billion in four years.
These are revenue targets cable companies say they can achieve from selling phone, data and other services to corporate customers, large and small. Indeed, cable multisystem operators (MSO) are increasingly investing in and targeting enterprise businesses to broaden their market and take competition with the phone companies beyond the residential market.
“It’s a quieter story, but the RBOCs certainly know we’re there taking business from them,” says Hyman Sukiennik, vice president and general manager of Cox Business Services in Omaha, NE.
Sukiennik says revenue from Cox Business Services is currently growing at 20% per year. That would put 2006 revenue at just under $500 million and 2010’s at just over $1 billion.
Cox Business Services has been in the enterprise market for eight years, but has predominantly targeted small and medium-sized businesses. Sukiennik says the company also has large enterprises in its sights and can offer them anything from a single POTS line to an OC-48.
“We have a customer purchasing 40Mbps Internet service that’s moving to 100Mbps in a couple of weeks,” he says. Another has a 300Mbps data connection for a data center, he says. “You have to show them, and show them convincingly, that you have a reliable platform,” Sukiennik says of the larger enterprise customer.
Time Warner Cable’s Business Services division last year was recognized by J.D. Power and Associates for having the top-ranked commercial broadband service in terms of customer satisfaction. That might be welcome news to the company’s 228,000 commercial users.
But larger companies demand more. SMBs will be the predominant business play for MSOs for the foreseeable future, due to the MSOs’ lack of national and international footprint, and the stringent requirements of enterprise telecommunications.
“All the operators have turned their sights to the SMB market since it is huge and not saturated,” says Maribel Lopez, vice president of Forrester Research. But larger companies require service level agreements (SLA), a broader array of services and a wider presence, she says.
“If they don’t have 80% of the footprint they can’t be cost competitive” due to multiple contractual arrangements with nationwide facilities providers, Lopez says. Stitching together that reach through multiple providers will also affect SLAs, she says, because of the individual arrangements that have to be hammered out with those providers.
“SLAs get back to the issue of how much of the network they own,” Lopez says. “It requires a lot of contractual engineering.”
As a result, Lopez believes the aforementioned revenue targets are “aggressive.”
Nonetheless, businesses are buying value-added services from their broadband providers. Worldwide sales of services such as security, application services, IP VPNs, VoIP, remote backup and videoconferencing to businesses grew 142% in 2005, from $3.7 billion to $9 billion, according to Point Topic Research.
Average broadband value-added service revenue per business user increased from $15 to $26 in 2005 as well, Point Topic says.
Market tracker Ovum/RHK estimates that North American service providers gained $16.6 billion in revenue from enterprises last year, of which MSOs had about $1.2 billion.
“They would have a lot to do to grow,” says Ovum/RHK Analyst Ken Twist.
In order to better address this opportunity, MSOs are increasingly hiring executives who they believe can take them to the promised enterprise land. Sukiennik came to Cox from AT&T, one of the two largest telecommunications service providers for large businesses.
Comcast recently recruited William Stemper away from Cox Business Services to guide its own enterprise business. Stemper, who in August was named president of Comcast’s business services unit, also logged 25 years at AT&T.
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