Comcast Chases Big[ger] Business
Comcast Corp. (Nasdaq: CMCSA, CMCSK) is making a national push to be a major player in the enterprise and mobile backhaul markets using Carrier Ethernet, with Juniper Networks Inc. (NYSE: JNPR) and Ciena Corp. (NYSE: CIEN) among the vendors that stand to benefit the most initially.
Industry sources familiar with Comcast's strategy say the sales and tech components of the initiative are well underway, with a commitment to build fiber links to city and suburban buildings and offer point-to-point and point-to-multipoint Ethernet services.
That new strategy, initially referenced in Comcast's fourth quarter earnings call in February, targets businesses with from 20 to 250 employees. It complements an original small- and mid-sized business (SMB) strategy that relies on Comcast's existing hybrid fiber/coax (HFC) network and Docsis and PacketCable technologies.
In terms of technology partners, Juniper and Ciena appear to be well positioned to benefit the most from Comcast's new strategy. Avian Securities LLC senior research analyst Catharine Trebnick believes Comcast has already qualified Juniper's MX-series routers to support the enterprise and backhaul applications, and has given the OK to Ciena for the backhaul piece (based on the supply of World Wide Packets technology that's now part of Ciena's portfolio). (See Ciena Takes Out World Wide Packets.)
How much near-term upside Juniper will get from any deal is questionable, though. The router vendor scored a US$100 million deal with Comcast last year, and, Trebnick notes, part of that might already be in Comcast's hands and lined up for the new enterprise and backhaul push.
Organizing the enterprise
Comcast is also supporting its new enterprise commitment by ramping up an enterprise sales organization that's being led in Philadelphia by Dan Carr, a former Level 3 Communications Inc. (NYSE: LVLT) executive.
At the division level, enterprise services are being headed up by Stephen Walsh, late of Cox Communications Inc. , in the North Central; Doak Field, a former Time Warner Cable Inc. (NYSE: TWC) exec, in the South; and Martha Tate, another former Level 3 staffer, in the West. It was not immediately known who's handling enterprise services duties at Comcast's East division.
"This is not dabbling. They are making an investment in resources on the [enterprise] sales front," an industry source says.
Each division is running at its own pace, but it's believed that certain markets, including Connecticut and perhaps some in the MSO's southern region, are already far along on the enterprise services front. But in all areas Comcast is already knocking on doors, trying to line up potential customers, and negotiating the necessary right-of-entry agreements to help push the enterprise effort forward.
In addition to getting people on the ground, each market's operational readiness is also being determined by when it's hooked up to Comcast's national fiber backbone, sometimes referred to as the Converged Regional Area Network (CRAN).
But that process is underway, with expectations that all regions should be ready by the end of this year and prepared for scaled deployments by 2011, according to sources. During its first quarter call, Comcast identified 2010 as "an investment year" for mid-sized enterprise, since expenses are expected to outpace revenues in that particular segment.
Comcast has previously indicated an interest in chasing the small enterprise market. However, instead of going after it organically, it has been priming the pump through acquisitions. Comcast picked up Chicago-area CLEC Cimco Communications last fall, and followed in February with the purchase of hosted VOIP service provider New Global Telecom. (See Comcast Snares a CLEC and Comcast to Acquire New Global Telecom .)
Although later to the game than others, Comcast is now the fastest-growing MSO in the business services category, according to Heavy Reading senior analyst Alan Breznick.
He estimates that US cable is on track to generate $5 billion in commercial services revenue in 2010, up from $4 billion last year. If quarterly trends continue, Breznick says Comcast, TWC, and Cox are all poised to pass $1 billion in commercial service revenues by year-end. (See Cable MSOs Approach $1B Jackpot .)
Of that group, Comcast believes the SMB and the small enterprise markets are each $15 billion business opportunities, while it has identified mobile backhaul as a $1 billion-plus opportunity. So far, though, its business services efforts are nowhere near any of those potential targets, though they've been on a steep growth path. In the first quarter, Comcast's business unit generated revenues of $263 million in the first quarter, up 49.1 percent year-on-year.
Comcast has yet to publicly define a longer-term strategy for large enterprise, a market that Cablevision Systems Corp. (NYSE: CVC) targets through its Optimum Lightpath subsidiary. (See CENX Connects With Cable Player .)
— Jeff Baumgartner, Site Editor, Light Reading Cable