Report: Enterprise Market Ripe for Cable
So says a new report from Heavy Reading titled "Cable vs. Telcos: The Battle for the Enterprise Market." (See Cable Crowd Seeks VOIP Peers.)
Heavy Reading analysts conducted surveys with 112 people responsible for purchasing telecom services for U.S. enterprises. The results showed that many U.S. businesses, especially small- and medium-sized ones, are comfortable with the idea of buying their telecom services from the cable guys.
The telcos have traditionally won the lion's share of the enterprise business in the U.S. while the MSOs have failed to make meaningful inroads, says Sterling Perrin, the Heavy Reading analyst who penned the report. Cox Communications Inc. , for example, is regarded as the most aggressive MSO in the space yet makes only 6 percent of its revenue there. (See Cox to Get Clipped?.)
Heavy Reading's research shows that the cable guys are too preoccupied with rolling out consumer VOIP and defending their customer bases against telco IPTV to make a serious run at the enterprise market. (See Will IPTV Bloom in 2006?.)
And the market potential is sizable -- enterprises in the U.S. spend $100 billion on telecom services each year. Perrin says MSOs might do well to accept a certain amount of customer attrition to telco IPTV, and redirect some of their efforts toward winning in the enterprise space. (See Verizon Gives Update.)
To help sum up its findings, the report makes good use of a salty little quip from Cox's ex-CEO Jim Robbins:
"If telcos go after our video business, then we should go after their medium and smaller businesses," Robbins said last July. "They don't pay any attention to those guys, and they're crying out for a soft touch from a good cable company." (See Cox's Robbins Ruffles Feathers.)
Judging buy the results of Heavy Reading's research, Robbins may have been right. Perrin argues that a single-front war against telco TV might be a losing proposition for the MSOs anyway.
"At best, they hold on to the customers they already have but are required to cut pricing due to the intense competition -- meaning revenues go down," Perrin writes. "Most likely, they will fight to hold on to existing video customers but lose some market share in the process –- meaning declining revenue due to both lower pricing and lost customers."
By instead attacking the enterprise market, MSOs could both "make up for lost revenue on the consumer side," and "put the telcos back on the defensive by distracting them from their video forays," Perrin writes. (See Source: SBC Plans IPTV for Businesses.)
But such a shift in strategy wouldn't come without cost. The MSOs would need to pump up their bandwidth offerings substantially to win enterprise business away from the telcos. (See Vyyo Bets Big on Cable Overlay.)
"As one industry executive told Heavy Reading, the dirty little secret of the cable industry is that there is far too little bandwidth," the report says. "The available spectrum in the cable MSO network (up to 860 MHz) is being used to deliver their bread-and-butter broadcast video services."
The Heavy Reading report analyzes the progress of each North American MSO in penetrating the enterprise market. The report also provides an analysis of the equipment makers that supply the MSOs.
For more information on this report, please click here.
— Mark Sullivan, Reporter, Light Reading