VOIP services

Cable Giants Taking VOIP to SMBs

The nation's two largest cable operators are launching comprehensive voice services for the small-to-medium-sized business (SMB) market this year.

Both Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC) plan to introduce customized VOIP offerings for SMBs over the coming months, following in the recent footsteps of Cox Communications Inc. , Cablevision Systems Corp. (NYSE: CVC), Charter Communications Inc. , and Vidéotron Telecom Ltd.

Both Comcast and Time Warner are already solidly in the residential VOIP market. Comcast just signed up its 2 millionth IP phone subscriber while Time Warner closed out 2006 with almost 1.9 million VOIP customers. Both companies, too, said they'd expand into commercial VOIP once their residential phone businesses proved successful. That would be now.

"Now it's finally coming toward fruition," said Rafael Fonseca, VP of systems engineering and product evolution for Cedar Point Communications Inc. , a leading cable VOIP equipment supplier. "We probably are at that early level of the avalanche."

Comcast said it intends to spend $250 million upgrading its plant and installing equipment for commercial services in 2007. The sum is part of the $5.7 billion that the MSO has earmarked for capital spending this year, up from $4.6 billion last year.

Comcast said it will focus on firms with fewer than 20 employees throughout the country. Company executives estimate that there are 3 million to 5 million such firms throughout the Comcast footprint, representing a revenue opportunity of $12 billion to $15 billion a year.

Note to telcos: Brian Roberts, chairman and CEO of Comcast, says his company can capture 20 percent of the SMB market over the next five years. He's aiming to produce operating cashflow margins of at least 50 percent, enough to generate an extra $1.25 billion in operating cashflow per year by 2012.

"Just as we believe we can do so in residential, we can do it in small and medium-sized businesses," Roberts told analysts during the company's earnings call. "The capital to drive that opportunity we believe can have a 25 percent or better internal rate of return and continue to position the company to grow not just in 2007 but for years to come."

Over the five-year period, Comcast plans to spend a total of about $3 billion pursuing the small business sector. But company officials stressed to analysts that much of that money will only be spent after commercial customers actually place orders for service.

"As we get into later years, we fully expect that mix of fixed and variable to swing around in much the same way as it has in the rest of our businesses," said John Alchin, the outgoing CFO of Comcast. "So we will go from 75-25 fixed-to-variable upfront, but that will change to a lot more variable capital as we get out into later years and the business continues to grow."

Similarly, Time Warner executives outlined plans to launch their new "Business Class Phone" service this year. Officials said they will make this offering, also targeted towards SMBs, available through most of their "legacy footprint" by January 2008.

"Our management team believes the timing is right for this initiative," Time Warner Inc. chairman and CEO Dick Parsons told analysts during his company's earnings call last week. He and other Time Warner officials didn't offer details.

Thanks to such plans, cable tech vendors expect to see numerous rollouts of rudimentary business VOIP service this year. They then expect the MSOs to get both more aggressive and sophisticated with their commercial phone offerings next year.

"I see this year as being a trickle," Fonseca said. "Then it will be full-blown in 2008."

— Alan Breznick, Site Editor, Cable Digital News

materialgirl 12/5/2012 | 3:15:14 PM
re: Cable Giants Taking VOIP to SMBs I see two hurdles with cable SMB voip: location and product bundling. Do they already pass these businesses, or must they dig new trenches? Secondly, what is their bundle? They are growing in the consumer market via a bundle. Will they sell to SMBs just on price?
alchemy 12/5/2012 | 3:15:11 PM
re: Cable Giants Taking VOIP to SMBs SMB VoIP is initially targeting the neighborhood pizza parlor and dentist office kind of enterprise. Those kinds of businesses need a small number of loop start lines and require a fairly minimal feature set. Simple features like basic hunting and maybe call transfer rather than the full centrex feature set. Most can be served by today's mass produced 2-line MTAs or a 4-line MTA. Arris has a unit that will support up to 12 loop start interfaces. These kinds of businesses pay a fortune for their phone service and the MSOs can compete on price at a price point that is somwhat higher than their residential price due to the higher erlang number.

They can also bundle their residential data product and even video in the places it makes sense like the doctor's waiting room or the bar.

It's pretty clear that larger businesses are going to have a dark fiber run directly to the enterprise and run GigE.
Michael Harris 12/5/2012 | 3:15:08 PM
re: Cable Giants Taking VOIP to SMBs Construction is often required for the initial connection, say into a strip mall or a medical office complex. But once in, the remaining businesses can be easy pickings, and accelerate the ROI.
Sign In