Heavy Reading Research

Report: Enterprise Market Ripe for Cable

Instead of waging a costly war with the telcos over video subscribers, cable companies should go on the offensive in the $100 billion U.S. enterprise market. (See Telcos vs. Cable: The Wrong War?.)

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

Page 1 / 2   >   >>
Mark Sullivan 12/5/2012 | 4:05:43 AM
re: Report: Enterprise Market Ripe for Cable The point I was trying to make is that even in the SME market, cable will eventually need to deliver far more bandwidth. This is simply because business applications will very likely require more and more bandwidth in the future. Examples of such applications might include videoconferencing and IPTV for things like sales training and "tele-working."
roybean 12/5/2012 | 4:05:43 AM
re: Report: Enterprise Market Ripe for Cable Being "Comcastic ?"

Are the Bells already servicing enterprise with a Fiber Network ? I was under the impression that their current build out is more to the consumer oriented push. I was under the impression that once they won the ruling that their consumer fiber runs don't need to be shared like their current copper, they started to rapidly expanded fiber to the consumer.

Their fiber network runs to corporate was considered data / their network, so they continue to upgrade.
Mark Sullivan 12/5/2012 | 4:05:43 AM
re: Report: Enterprise Market Ripe for Cable The cable companies have a serious problem in wringing more bandwidth out of thier networks. And both the enterprise and consumer markets will demand more in the future. How will the cable guys do it using hybrid fiber/coax?
paolo.franzoi 12/5/2012 | 4:05:43 AM
re: Report: Enterprise Market Ripe for Cable
Most major enterprises are fiber served. They also represent the classic 80/20 rule with about 20% of businesses representing 80% of traffic.

paolo.franzoi 12/5/2012 | 4:05:42 AM
re: Report: Enterprise Market Ripe for Cable

I think the SME market is actually 3 markets:

1 - True small businesses
2 - Medium businesses
3 - Branches of Large Businesses

The upgrade you are talking about is most valuable in Medium Businesses. Everybody has their own definition, but mine is 25 - 100 employees. These are actually a vast minority of the total number of SME sites. Branch Office networks generally are organized by HQ. Cable would need to partner with a business parter (maybe Sprint) and be a replacement for local access for Sprint's business.

Small businesses don't have things like IT departments. Often times the business owner is the IT guy/gal and I think expecting that kind of business to in bulk do a lot more work in Tele-whatever is higly unlikely.

fiber_r_us 12/5/2012 | 4:05:42 AM
re: Report: Enterprise Market Ripe for Cable THe cable companies will need to run fiber to any major business. The coax plant doesn't provide enough "upstream" bandwidth to support anything close to the symmetrical connections that most corporate data networks require.

If the corporation just wants an asymmetrical connection to the Internet, then the cable coax might be fine. But, I wouldn't really call that "business data services".
pnni-1 12/5/2012 | 4:05:42 AM
re: Report: Enterprise Market Ripe for Cable http://www.xtendnetworks.com/i...
lite_network 12/5/2012 | 4:05:42 AM
re: Report: Enterprise Market Ripe for Cable Generally most Coax networks have fiber nodes which serve the last leg (which is coax based).

many new products in the Coax industry use an Ethernet switch at the fiber node.

The cable companies could expand the fiber from this point, or they could use BB wireless (like Wimax). These fiber nodes generally are not big though.
OldPOTS 12/5/2012 | 4:05:41 AM
re: Report: Enterprise Market Ripe for Cable Per the good discussion so far;
The Medium Business needs substantial BW, both at the access and throughout the core network to additional sites.

Most people assume the core network will be the Internet. While the Internet is used for some business purposes, why would I use a SP to just connect to the Internet? I would want a secure and reliable core for transport to my other sites. This means expanding substantially more BW between MSO sites, and the 'Ethernet switch at the fiber node' must be substantially upgraded for a core network.

Now the carriers and some others (like Wiltel) might be the source for this BW, as they exchange BW on their core networks. (Share BW from One's link DAL to NYC and Two's BW CHI to SF).

But that might make the MSO and carriers co=operative competitors. Think about that the next time legislation is re-written.


optiplayer 12/5/2012 | 4:05:41 AM
re: Report: Enterprise Market Ripe for Cable Another possibility is to extend the RF spectrum supported beyond 860Mhz to 1GHz and use the extra spectrum to offer data services to businesses. I believe this was the original Narad Networks proposition. One obvious issue is that all the RF actives (and perhaps some passives) have to be replaced which the MSOs are loathe to do.

Another issue I always heard was a huge impediment for the MSOs in addressing businesses is far more basic - they do not have drops into most businesses and business parks. When the coax infrastructure was built they targeted residences only. Building more plant is again not very desirable use of CapEx these days - the MSOs would rather invest in residential VoD and VoIP.
Page 1 / 2   >   >>
Sign In