NEW YORK -- The Future of Cable Business Services -- Telcos such as Verizon Communications Inc. (NYSE: VZ) may be digging into cable's core residential video business, but some of the nation's largest MSOs hope to hit back -- and strike hard where it hurts -- with a new suite of services designed to attract business customers of all shapes and sizes.

That was the topic here Thursday at the latest Light Reading Live! event, titled "The Future of Cable Business Services".

Although several major MSOs have identified business services as a key growth engine for 2008 -- advanced advertising is the other, led by an industry-wide initiative code-named "Canoe" -- cable has only managed so far to grab a sliver of a market that's worth about $120 billion per year in the U.S. alone.

Cable, said Heavy Reading Senior Analyst Alan Breznick, has only been able to attract about $2 billion to $2.5 billion -- or about 2 percent -- of that total. But operators such as Time Warner Cable Inc. (NYSE: TWC), Cablevision Systems Corp. (NYSE: CVC), and Cox Communications Inc. are trying to carve out an even bigger slice.

"We are very well positioned to bring unique services to the marketplace," said the opening keynoter, Kenneth Fitzpatrick, SVP of business services at Time Warner Cable. "We own and operate our own network. We listen to what the needs are from the business customer."

Although cable operators are trying to win business with tariffs that undercut the competition, lower pricing is only third on customers' wish lists. The top two, according to Fitzpatrick, are reliability and responsiveness.

"We're not looking to get into a price war with the phone companies," he said, noting later that Time Warner Cable's pricing typically undercuts the incumbent telco's offer by more than than 10 percent.

Today, Time Warner Cable is complementing its business data offering with a new phone service that offers between one and 12 voice lines, along with unlimited local and long distance calling.

"One of the key areas is getting a phone product added to the bundle," Fitzpatrick noted.

Time Warner Cable offers business voice in the majority of its markets (now totaling 21, following a recent launch in Dallas), and is now rolling it out to systems acquired recently from Adelphia Communications and Comcast Corp. (Nasdaq: CMCSA, CMCSK). All of the MSO's properties should have business phone in place by the first quarter of 2008, Fitzpatrick said.

Time Warner Cable has "just shy" of 300,000 business customers, but has not yet said how many of those are taking phone service.

"2008 is the year to scale our phone business and drive the bundle," Fitzpatrick said.

The MSO is also exploring new features, including a toll-free phone service test in Green Bay, Wis. The company plans to move that into full launch mode in 2008, according to Kurt Fennell, VP of product management for Time Warner Cable Business Class. Other new products on the business services roadmap include distinctive ringing and verified account codes.

Cablevision Thinks Big
Optimum Lightpath , the commercial services arm of Cablevision (and a registered CLEC), has been serving business customers for 18 years, and is focused on serving larger enterprises with fiber.

The addressable market for Optimum Lightpath, which includes the New York area, is about 60,000 businesses and more than $2.2 billion in revenues, according to Troy Glick, the company's VP of product development, and a panelist at the LR Live! event.

But that doesn't mean the company isn't a proponent of using hybrid fiber/coax (HFC). "It [HFC] does a great job in the small and medium business space," said afternoon keynoter Dave Pistacchio, EVP and GM of Optimum Lightpath. "We haven't stressed the full capability of HFC."

But Optimum Lightpath has already done the number crunching on what it costs to pull fiber as far as 2,500 feet from its plant, and believes the potential gains outweigh the costs. "They [our sales team] don't worry about business cases. They just sell," Pistacchio said.

While Optimum Lightpath uses lower pricing to generate sales -- typically 35 percent to 50 percent lower than incumbent for similar bandwidth services -- it's also looking at new services such as managed storage and security, and offering larger service bundles, to help attract new business.

Execs from Time Warner Cable and Optimum Lightpath also talked up the importance of their support for the MEF , which certifies vendor equipment as well as the providers that offer carrier Ethernet services.

"Almost every MSO is active in MEF," Pistacchio said, noting that Optimum Lightpath's network has made a full migration to Ethernet, a system that has helped the company score big accounts such as Pepsi. "This thing virtually can't go down," he said of the network, rapping his knuckles on the lectern for good luck.

CableLabs , according to Fennell of Time Warner Cable, is also developing a way to deliver metro Ethernet services over Docsis, with the goal of developing T1-like products that can displace telco offerings.

Cablevision is also looking for mobile services to complement its business services offering. "We're looking at this as a business solution," Glick said, noting that Optimum Lightpath could develop its own fixed mobile convergence strategy or seek out partners.

As part of its move into mobile, Cablevision is planning to bid for valuable 700 MHz spectrum in the upcoming auction, according to a report from MultiChannel News Thursday.

Cox, another MSO that's planning to fly solo in its bid for that spectrum, is also making some headway with a backhaul strategy.

Breznick said that segment will generate $2.8 billion in revenue in the U.S. this year, and could grow to $15 billion by 2011, driven by new subscribers, multiplying cell sites, and new bandwidth-eating applications such as mobile video. (See Cable's Towering Opportunity.)

Cox, according to company Senior Network Engineer Andrew Redman, is offering such a service in New Orleans and parts of Oklahoma, with new opportunities cropping up in areas such as North Virginia, middle Georgia, San Diego, and Hampton Roads, Va.

Cox is also starting to respond to request for proposals (RFPs) for wireless backhaul systems. "We're still analyzing the business case there," he said.

— Jeff Baumgartner, Site Editor, Cable Digital News