AT&T & Verizon Empires Strike Back on SMBs

The cable industry has been feasting on small to mid-sized businesses, driving up business service revenue by touting multi-gigabit Ethernet speeds that leave DSL and traditional T-1 services in the dust. There are now signs AT&T and Verizon are fighting back, using their own fiber-based business services to retain and recapture key business revenues, even though neither is touting gigabit to the small biz just yet.

AT&T Inc. (NYSE: T) last week announced new high-speed service including asymmetric 25Mbit/s service as cheaply as $50 a month to businesses located in its expanding footprint of fiber-fed buildings. Yesterday, Verizon Communications Inc. (NYSE: VZ) rolled out SpeedMatch, an instant free upgrade to symmetric services for companies buying its FiOS Internet service, which is also fiber-based. (See AT&T Launches New Business Fiber Service and Verizon Boosts Upload Speeds for SMBs.)

Both companies say the services are designed for the changing needs of SMBs, but it seems clear they are also hoping to more effectively compete with cable, where companies such as Comcast Corp. (Nasdaq: CMCSA, CMCSK) are recording record revenues in the business space, largely targeting the SMBs who are within their regional footprint, and with competitive carriers. It's notable that the biggest gains in retail Ethernet port market share this year were recorded by Comcast and Level 3 Communications Inc. (NYSE: LVLT). (See Comcast, Level 3 Flex Ethernet Muscles.)

In an interview with Light Reading, Tom Hughes, AT&T VP-Small Business Product Management, insists AT&T isn't trying to catch up to cable but to compete more effectively in a space that has long been competitive, but is now changing.

"Our customers have said they need more bandwidth," Hughes says. "What we are finding in the SMB space is that they are more virtual now than they have been in the past. They want to be able to mobilize their business and when they are in the office, they want to connect to cloud services -- they go to the cloud rather than keeping things on their desktops."

Cloud services require more bandwidth and, in particular, more symmetrical bandwidth, an area in which DSL services are weak.

Hughes sees SMBs also trying to share more data within their companies and with their suppliers and customers, another thing which drives the need for better upload bandwidth. AT&T's new services, which today top out at 300 Mbit/s but will extend to 1 gigabit in the near future, include options for both asymmetric and symmetric services, as well as both best-effort and managed services, he notes.

One thing that hasn't changed about the smaller business market is sensitivity to price and a focus on value, Hughes says. But he does see SMBs looking for technology solutions partners and believes AT&T can step up to that job. That solutions partner space is also crowded, including value-added resellers in addition to competitive carriers and cable companies.

Where AT&T intends to differentiate itself, Hughes says, is in providing a solutions package that includes things such as videoconferencing and mobility services, along with its AT&T Tech Support 360, an IT service described here, that lets smaller businesses outsource their IT support.

"Many smaller businesses don't have or can't afford the level of IT expertise they need," Hughes says. "This is one of the ways we can be a solutions provider, and give them all this on one bill."

This is AT&T's first new business service announced as part of its Fiber-to-the-Building Program which in turn is part of Project Velocity (because everything at AT&T is part of one project or another). Right now, the services are only available in limited markets including Austin and San Antonio, Texas; Detroit; Indianapolis; Sacramento and Orlando, but new markets are being added as new buildings are lit with fiber.

Verizon is phasing in its SpeedMatch symmetric service over the next few weeks but all Verizon FiOS business customers will receive it, and have to do nothing to make that process happen, the company says.

— Carol Wilson, Editor-at-Large, Light Reading

Mitch Wagner 10/3/2014 | 5:17:10 PM
Re: Lets get ready to rumble... Suggests that carriers (and other companies doing business with SMBs)  should focus marketing and sales on vertical industries, with subsets in each vertical for the SMB segment of that vertical. 
Liz Greenberg 9/23/2014 | 6:36:24 PM
Re: Lets get ready to rumble... I'm with you Sam.  SMBs are both very cost sensitive and service driven.  They don't have large staffs to take care of IT or telecom issues, they may not have a staff at all.  This is where the smaller local folks can really shine.  Try getting a real human right away at AT&T, Verizon, Comcast or any of the large companies.  Then try calling a company like Sonic.net (local provider in California), you know your wait time and get a human immediately.  This is where AT&T and Verizon are going to really have to step up to capture SMB market share.
sam masud 9/23/2014 | 3:10:14 PM
Re: Lets get ready to rumble... Indeed they do and they are ahead in the game compared with telcos. But if I were an SBM, I don't think I'd get too excited about outsourcing tech support to either AT&T or VZ. When it comes to tech support, I would think I could get better service from my VAR. There are some things the small guys just do better than the big fellows--such as more personalized tech support.
thebulk 9/23/2014 | 12:45:08 PM
Re: Lets get ready to rumble... @Carol, 

I would absolutly agree, the whole reason that MSOs were able to get such a big chunk of the SMB market is because no one was servising them to begin with. Now its going to be a big fight and the SMBs will make out in the long run, assuming that the Telcos stay in the fight. 
cnwedit 9/23/2014 | 11:19:25 AM
Re: Lets get ready to rumble... That's one issue, Mitch. But many of those companies use the same services in the same ways and it's a marketing challenge to reach them in a way that resonates with their industry. There are actually quite a few CLECs right now tailoring services to retailers, insurance companies and other businesses with a lot of distributed smaller locations versus single larger locations because that is core to their business strategy in a way that SMBs haven't been core to AT&T and Verizon.

One of the bigger problems historically for large SPs has been creating services specifically designed for smaller companies and not just trying to scale down the enterprise stuff. Then they have to figure out how to cost-effectively market to small companies even though the per-customer marketing costs don't have the same payoff as they do at the larger company level. 

The cable companies and CLECs have done a better job of prioritizing SMBs as customers, let's see if AT&T and Verizon can respond. 
Mitch Wagner 9/23/2014 | 11:06:56 AM
Re: Lets get ready to rumble... A tricky part of marketing to SMBs is they don't see themselves as being SMBs.They see themselves as being part of whatever industry they're in. 

In other words, a small to midsized law office thinks of itself as a law office. A small to midsized retail store thinks of itself as a retailer. They don't think of themselves as having connections to each other. 
cnwedit 9/23/2014 | 10:50:16 AM
Re: Lets get ready to rumble... All of which is good news for SMBs, who haven't always gotten the attention they need.  The CLECs are also targeting that space in many areas and doing so in a hands-on way. I don't know that AT&T and Verizon are prepared to do the level of customer service that SMBs can require, but they at least seem to be acknowledging the need for new services. 
thebulk 9/23/2014 | 10:49:03 AM
Lets get ready to rumble... This fight could get dirty quick, the MSOs love ther SMB money. 
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