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Finding Cable's Commercial Voice

Alan Breznick
7/31/2008

Cable operators across North America are now plunging headlong into the commercial phone market. Led by Time Warner Cable Inc. (NYSE: TWC) and Comcast Corp. (Nasdaq: CMCSA, CMCSK), MSOs are rolling out voice services for business customers in their prime franchise areas, particularly for SMBs with 20 employees or fewer.

As spelled out in my new Heavy Reading report, "Cable vs. Telcos: The Battle Over Business Voice Services," most U.S. and Canadian cable providers are counting on lower phone rates and VOIP technology to lure smaller firms away from the large phone companies. They're also counting on greater personal service and bundled packages of data, voice, and even video services to snatch SMBs away.

But one major North American MSO, Rogers Communications Inc. (NYSE: RG; Toronto: RCI), is going very much against the grain. Instead of targeting small or midsized firms like most of its cable counterparts, Rogers is now pursuing larger enterprises with at least 500 employees more aggressively than ever.

How come? Rogers officials cite a couple of key reasons that might provide valuable lessons for their fellow MSO executives and other service providers.

For one thing, Rogers, which entered the commercial telephony market four years ago through its purchase of Sprint Canada's circuit-switched business, has found that larger companies grasp and adopt new technologies more easily than small or midsized firms. Larger companies also tend to know better what kinds of technological systems and products they want to buy in advance. So the sales cycle for larger firms can actually go more quickly than it does for smaller firms.

To its surprise, Rogers has also found that most small businesses really aren't all that small, at least not in Canada. In fact, only about one in ten small firms in its territories are "actually decision makers," notes Terry Canning, VP of Rogers Business Network. The rest of the supposed small fry, he says, are really part of bigger companies or institutions.

Of course, it doesn't hurt that large companies spend disproportionately more on telecom services than smaller firms. In particular, big banks, manufacturers, and retail chains spend heavily on voice and data services.

As a result, Rogers has shifted its emphasis over the last couple of years from smaller firms to larger ones. The MSO, which boasts a total of 20,000 commercial voice customers across Canada, now has 1,700 enterprise clients on that list. It aims to sign up as many as 4,500 large firms, or 30 percent of the 15,000 or so enterprises in the country.

Will other North American cable providers, which still seem convinced that smaller is better, discover the same things over the next couple of years? Could be. Just in case, maybe a few should take a page out of Rogers's book and make the shift to larger enterprises now.

— Alan Breznick, Senior Analyst, Heavy Reading

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