Thanks to revelations by Comcast VP & GM of Enterprise Solutions Glenn Katz at the Light Reading Future of Cable Business Services event, the public now knows that Comcast is leading a "cable first" effort to pursue new enterprise customers. The idea is to combine cable forces to create a more compelling business services offering; one that cable operators hope will eventually bring them a sizeable share of the estimated $15 billion large enterprise market. (See Top MSOs Team for National Enterprise Push.)
There are reasons the cable industry is hot on commercial services. Growth rates are steady and margins are attractive. However, in order to graduate from the SMB market to the large enterprise, cable companies have to overcome some significant challenges.
Here are a few of the big ones.
Barriers to sale Without a national footprint, cable providers have to rely on partners to connect enterprise locations scattered across the country. But where a cable company might team up with a telco for wholesale network access outside the cable provider's regional base, that telco is less likely to return the favor. As Katz explained it, AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) would rather not resell cable network access when the telcos can bundle in more of their own network services. Sometimes that means relying on lower-performance DSL connections, but financially it's a better option than helping out a cable competitor.
There are also financial disincentives for non-telco service providers when it comes to doing business with cable companies. On the one hand, noted Katz, a cable operator might offer the best connectivity option overall. On the other hand, if that MSO doesn't have network lines already built out to all of a customer's sites, there are construction costs for the managed service provider to consider. Again, DSL may not be the best-performing network solution, but it's often the cheapest from a third-party service provider point of view.
Operational standardization In order to reach a national customer base, the logical move for cable companies is to team up with each other, and while that's starting to happen, there's still a lot of work to be done.
"From the operational side as an industry, we have to do much better," said Katz at the Future of Cable Business Services conference. "We all have different SLAs. We have different ways in which we do serviceability. The reliability of those serviceability results are questionable many times. And it's very, very, very frustrating to a large enterprise CIO which is sitting there saying I want cable first. Your sales guy told me you can get to 80% of my locations. Then you go run a serviceability [check] and you really can only get to 60%. That's not good."
The idea of joining cable companies together to create a unified business services offering makes sense, but just because the umbrella technology is the same doesn't mean implementation across different cable footprints is easy. It's not, thanks to differences in the back office, customer support policies, contract terms and more.
Connectivity to the cloud At the most basic level, cloud service is a data center business. And whether it's about access to the public cloud or a private cloud, delivering telecommunications services to enterprise customers means providing connectivity to the data centers that host cloud-based information and applications. Unfortunately, most cable operators traditionally haven't been involved in the data center market.
Time Warner Cable Inc. (NYSE: TWC) is the one cable company with a track record in data centers thanks to its 2011 acquisition of cloud services company NaviSite, but until recently, NaviSite remained operationally separate from its parent company. It wasn't until two months ago that TWC started bundling cloud services from NaviSite with its own network connectivity offerings.
Referring to Time Warner Cable's pending merger with Charter Communications Inc. , TWC EVP Phil Meeks at the Light Reading event highlighted the importance of NaviSite as part of TWC's overall business services strategy.
"With greater reach [through Charter's footprint], with the power that we have with NaviSite … we've got a great future in front us," said Meeks. "We're only limited by our ability to execute. And I like those odds."
It's important to remember, however, that Time Warner Cable is the most advanced of the cable operators in relation to the data center business, and it still has a lot work to do. It also has a major integration challenge ahead assuming the deal with to merge with Charter is approved, and that's sure to divert focus.
Comcast Business , meanwhile, has taken a different approach.
"We've chosen to be very data center agnostic," said Comcast VP John Guillaume in an interview. "Our strategy is make sure we have the right connectivity into the right data centers."
At the moment, Comcast isn't offering specifics on how that strategy is working, but Guillaume did say that the company measured significant growth in data center connectivity in 2015, and that momentum looks like it will continue in 2016.
Like Time Warner Cable, Comcast is aware of the strategic importance of data centers to the enterprise telecommunications services business, and it's investing significant resources to gain a foothold in the sector. But these are early days in that effort, and Comcast still has a lot to prove on the execution side.
That theme -- that the proof is in the pudding -- is a recurring one. The cable industry has a huge opportunity in enterprise services ahead of it, and the potential for vast revenue growth. But the challenges are daunting, and the industry still has to show evidence that it can overcome them.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading