Business services have represented a key growth engine for US cable operators in recent years, but it's poised to drive even bigger bucks at Comcast as the operator continues its pursuit of larger, enterprise business customers.
A decade ago, when it was primarily focused smaller businesses, Comcast Business was pulling down about $500 million in revenues per year. That number pushed past $7.1 billion in 2018 as the MSO continued to move upmarket. Based on Q4 results, the business services piece of Comcast has achieved an annual run-rate of $7.36 billion. (See US Cable Set to Rake in $18B in Biz Services Revenues in 2018.)
Comcast now has "line of sight … to get to $10 billion" in annual business services revenues, Dave Watson, CEO of Comcast Cable, said Tuesday at the Deutsche Bank Media, Internet and Telecom Conference in Palm Beach, Fla. He estimates that business services represents a $40 billion opportunity in Comcast's footprint.
He said a portion of that growth opportunity will come by targeting commercial pockets in Comcast's geographical footprint where the company has yet to build. One recent example, Watson said, is a "River to River" project in Philadelphia whereby Comcast Business has built a network that passes some 3,000 businesses in Philly's Center City area, connecting to the Schuylkil and Delaware rivers.
Three years after the project was undertaken, Comcast now serves about 1,000 of those passings. "It's a great return," Watson said, noting that Comcast will be taking a similar, surgical approach in all its markets.
Comcast, he added, is also concentrating more heavily on enterprise customers, with a focus on multi-branch companies, large banks and retailers that are located in multiple locations. It's a segment, he says, that is about 5% penetrated by Comcast.
Of recent note, he said Comcast Business has signed up a retailer with 14,000 locations and has been partnering with other cable MSOs to deliver service in areas that are outside Comcast's footprint. In that example, Comcast is serving the retailer at its primary account in San Francisco, but has teamed with Charter Communications and Cox Communications to handle the company's locations in Los Angeles.
"It's early stages and it's primarily connectivity, but I think there's going to be an opportunity to do more in this segment," Watson said.
Handling the 5G threat
Watson, like other top US cable execs, also downplayed the threat posed to Comcast's broadband business by new 5G-powered fixed wireless options. (See T-Mobile Details Home Internet Service to Challenge 'Cableopoly' and 5G Fixin' to Become 'Largest Existential Threat' to Broadband Providers – Analysts.)
He noted that broadband competition is nothing new for Comcast, citing fiber-based rivals as well as other wireless providers that have targeted apartments and other types of multiple dwelling units. "We've been competing aggressively for a while," he said.
For fixed wireless broadband purposes, carriers will "need a significant amount of small cells to be able to pull it off at scale," Watson said. "I don't feel that, in any shape or form, [that 5G fixed wireless] is a near-term competitive threat to our broadband business … When you look at the ability, at scale, to replace broadband, especially where the market's going and do that effectively and efficiently, from our standpoint, we believe that our broadband business will compete very nicely."
At the same time, he sees "promise" for 5G in mobile. "We'll participate in that and the relationship that we have [with Verizon Wireless] on a wholesale basis," Watson said.
Regarding Comcast's mobile product, Xfinity Mobile, the strategy remains focused on using it as a companion to Comcast's broadband business and to take advantage of the improvements that mobile brings to churn and customer retention.
Watson said Xfinity Mobile also opens up more opportunities to expand the relationship with customers. Retail is one example. Marketing Xfinity Mobile in those channels boosts customer traffic and gives Comcast a better chance to sell broadband and other services. "Retail has been a win" with respect to Xfinity Mobile, he said.
He also stressed that the bigger goal remains to have Xfinity Mobile, which ended 2018 with about 1.2 million lines, achieve profitability at a certain scale point. In Q4 2018, Xfinity Mobile operated at an EBIDTA loss of $191 million. (See Comcast Pushes Past 1.2M Mobile Subscriber Lines.)
— Jeff Baumgartner, Senior Editor, Light Reading