NEW YORK CITY -- Future of Cable Business Services -- The US cable industry is on track to break through the $10 billion mark in business services revenue this year, reaching a milestone that was unthinkable just a couple of years ago.
In addition, the US cable operators not only continue to grab market share in the small-business sector from their telco competitors, but are also moving up the value chain, noted Light Reading's Cable/Video Practice Leader Alan Breznick as he prepared to open the eighth annual conference on cable business services here in New York City.
Cable got its footing in the business services market by targeting and signing up small business customers, stealing them almost at will from the relatively apathetic telecom operators, says Breznick. But now, he says, operators are moving up the ladder into the midsized business space with some success, particularly in the Ethernet services realm.
"Cable companies have had the benefit of some good timing, as they've been able to take advantage of the move to Ethernet and IP faster than telcos. That's because they didn't have the legacy services and equipment so they could make the leap quicker and easier," notes Breznick. "When they were just attacking the small business space, the telcos seemed to shrug their shoulders -- they didn't make that much revenue or profit from these companies anyway. But now cable is moving up the value chain to larger companies," he adds.
Breznick predicted the $10 billion breakthrough a year ago and continues to see growth predictions play out as expected, even though some big telecom players -- notably AT&T Inc. (NYSE: T) and Verizon Enterprise Solutions -- are starting to fight back. (See Heavy Reading: Cable Biz Sales to Hit $8.5B.)
"Cable operators are beating the telcos on price, because they can," Breznick says. "But both AT&T and Verizon are now working harder, moving business customers to their fiber platforms -- U-verse and FiOS."
That pushback from the telcos won't stop Comcast Corp. (Nasdaq: CMCSA, CMCSK) from brushing up against the $4 billion mark in annual commercial revenues this year, Breznick predicted. Time Warner Cable Inc. (NYSE: TWC) is approaching the $3 billion plateau, while Cox Communications Inc. is closing in on $2 billion. Charter Communications Inc. -- once a laggard, in Breznick's view -- is now nearing the $1 billion mark.
Much of the cable operators' growth is coming in market segments where they have already been successful -- healthcare, education, government and financial services. The cable operators are focused on strategic growth opportunities with midsized business customers, offering a menu of Ethernet, IT, managed and cloud services, says Breznick.
The cable players still face significant challenges, notably the lack of a national footprint and ongoing questions about their customer service. In June, the JD Power & Associates annual study showed the first significant drop in business customer satisfaction ratings for cable companies versus their telco rivals in several years. But whether that is an anomaly or an emerging trend is not yet clear: "We'll have to wait and see on that," says Breznick.
— Carol Wilson, Editor-at-Large, Light Reading