Biz Services Offer Big Upside for MSOs

NEW YORK -- The Future of Cable Business Services -- Providing voice, video, and Internet services to business customers represents a big revenue growth opportunity for U.S. cable operators, but the collective efforts of MSOs so far have managed to merely skim a massive pile of potential loot.

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

cmarcus 12/5/2012 | 3:51:44 PM
re: Biz Services Offer Big Upside for MSOs

To realize the broader market potential associated with business services, MSOs have a powerful new weapon in their arsenal-- Household Addressable TV Ads. Currently, most MSOs target business prospects via direct marketing or sales efforts. And when it comes to TV advertising, simply allocate a small portion of their cross-channel marketing inventory to promote business services. However, Household Addressable TV Advertising (in conjunction with 3rd party data already used for direct marketing) makes it possible to target TV ads to homes of business owners or senior executives of small-and-medium sized enterprises. Doing so will enable MSOs to raise greater awareness among business prospects and make it easy to promote targeted offers to this valuable market segment.

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