Although cable lines already pass up to three quarters of the small- and mid-sized businesses (SMBs) in the U.S., MSOs are only taking home about $4 billion of the $130 billion to $140 billion that domestic businesses spend on telecom services annually, Heavy Reading senior analyst Alan Breznick said during his opening comments this morning at Light Reading's third annual event dedicated to cable's foray into the commercial services market.
U.S. MSOs have just 3 percent of the haul, but they are making progress in what's still a relatively untapped market for the industry.
Cox Communications Inc. , an operator that was among the first to address this opportunity, reaped about $850 million in commercial services last year, and appears to be on track in 2010 to become the first cable MSO to eclipse the magical $1 billion mark in annual business services revenues, according to Breznick's estimates. (See Cox Biz: Cable's Next Billionaire? )
"I can already hear the champagne bottles popping in Atlanta," he said, referring to Cox's headquarter city.
Comcast Corp. (Nasdaq: CMCSA, CMCSK), despite entering the biz services game later, is also making waves with solid organic SMB service growth coupled with a budding CLEC acquisition strategy starting with Chicago-focused Cimco Communications Inc. Without the addition of Cimco (that deal hasn't closed yet, though Comcast is presently seeking the Federal Communications Commission (FCC) 's blessing), Comcast raked in $216 million in business services revenues in the third quarter, up 49 percent year-on-year. (See Comcast Snares a CLEC .)
As far as the SMB segment goes, Breznick estimates that the top five U.S. incumbent MSOs have a $42 billion-plus market opportunity to start carving into.
Table 1: Opportunity knocks
|MSO||Number of SMBs||Market Opportunity|
|Comcast||5 million+||$12 billion to $15 billion|
|Time Warner Cable||2.8 million||$13 billion|
|Cox||1.3 million*||$5.7 billion (all firms)|
|Charter Communications||1 million||$5.5 billion|
|Cablevision Systems||685,000||$3.5 billion|
|*Heavy Reading estimate. Source: Heavy Reading and the companies.|
— Jeff Baumgartner, Site Editor, Cable Digital News