Does Cable Really Mean Business?

U.S. cable operators have long talked about making a big push into commercial telecom services. But something always seems to get in the way – like the rollout of residential VOIP service, the launch of "triple-play" bundles, the introduction of DVR service, and now the expansion of HD programming.

Now cable executives are again making noise about taking the huge business services market by storm. Recently at The Cable Show in New Orleans, MSO officials spoke about targeting the smallest firms first and then moving up to mid-sized and even larger enterprises over time. Their goal is to lure droves of "underserved" customers away from the telcos with price discounts, new features, multi-product bundles, and superior customer service.

This time, the stars may actually be aligning for MSOs to grab a decent chunk of the $130 billion commercial services market, thanks largely to the industry's embrace of VOIP technology. Consider these examples of MSO activity that I've found in researching an upcoming Heavy Reading report on cable's moves into the commercial services sector:

  • Time Warner Cable Inc. (NYSE: TWC) is rolling out VOIP service for firms with 20 employees or less in cable markets throughout the U.S. With more than two dozen of its markets already launched, the MSO plans to extend service to its last two major unserved regions – Los Angeles and Hawaii – by the fall.
  • Comcast Corp. (Nasdaq: CMCSA, CMCSK) has begun introducing VOIP services for smaller firms in its markets, starting in New England. Comcast has also staffed up for business services, hiring at least 1,250 technicians and 750 salespeople for the task.
  • Cox Communications Inc. , the cable leader in the commercial market, is now rolling out a more advanced SIP-based business voice service. The product has launched in three markets so far, and Cox plans to add another seven metro areas by the end of the year.

Voice service is the key to cable's success in the small-business sector. For every dollar that smaller firms spend on data and video services, they spend an estimated $3 to $4 on phone service. MSOs can give their ARPU a big boost if they can convince their current business customers to take a voice package as well.

But MSOs will have to offer more than lower prices to attract the demanding small-business crowd. MSOs also need to convince customers that they can match the performance and reliability offered by telcos. And they must back up their promises to take better care of smaller firms than the phone giants supposedly have. If cable really means business, MSOs need to make customer service a top priority.

— Alan Breznick, Senior Analyst, Heavy Reading

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