Cables stretch their connections

Judy Reed Smith sees an increasing threat to telcos as US cable companies plot their moves into the business market.

By the time this column is in your hands, the 17th edition of our Stateside market sizing and share study will be released. This year’s study, which pulls from our databases of financial tracking of those offering voice and data services, wired or wireless, including IXC, CLEC, ILEC, wireless or VoIP, includes insight into a dynamic that we have covered over time in this column – cableco movement in the telecoms space. Cablecos came to our space to compete head-to-head with telcos for high-speed internet customers on the consumer side of the business. Next, they moved to small business services with aggressive pricing, provisioning and marketing. Today, they are moving upmarket with business users, targeting the growing wireless backhaul wholesale market and gaining traction in both.

In the small and medium business space, cablecos are leveraging the cable modem to garner new business. From 2009 to 2015, business cable modem revenues will grow at a compound annual growth rate (CAGR) of 10.1%. As cablecos continue to broaden their scope to address larger players, IP access, IP VPN and transport (local and long-haul) products also will serve as growth vehicles. In our business connectivity research, customers rated the cable companies with fibre divisions, Cablevision’s Optimum Lightpath, and RCN’s RCN Metro above the average of business service providers in brand, sales reps, provisioning, network, billing and customer service.

Cablevision recently expanded its reach via Optimum Lightpath’s move to join CENX’s Ethernet Exchange. Comcast is expanding its product suite to include point-to-point and point-to-multipoint Ethernet service, and Time Warner Business Services has a full grid of products for all size companies. All are working hard to sell to and serve customers to ensure growth through larger brands.

Calbecos are also emerging as players in cellular backhaul. Comcast and Time Warner have identified mobile backhaul as areas of focus. Time Warner Business Class serves 6,000 towers as a fibre provider with growth ahead. As mobile data usage continues to skyrocket, we expect wireless providers to increasingly look to cablecos and their Ethernet-over-fibre alternatives rather than a traditional DSn or OCx transport solution. This equates to significant growth in this space for cablecos, with our latest forecasts projecting that local wholesale transport revenues will grow at a CAGR of 18.4% from 2009 through 2015, compared with 2.8% for the industry as a whole. As wireless data offers strong growth in telecoms, cable provides wireless backhaul to gain a link to that opportunity.

The bottom line is that cablecos are making headway outside the consumer market that previously dominated their revenue streams. Their product lines, strategic marketing and new sales forces all add to their shifting approach to telecoms. Overall, cable service revenues will grow at a compound annual growth rate of 5.1% from 2009 to 2015, driven by double-digit growth rates in their targeted business and wholesale services.

Judy Reed Smith is CEO of Atlantic-ACM. She can be contacted at: judyrsmith@atalntic-acm.com