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Comcast’s Expanding Mid-Section

Going up-market to deliver services to mid-sized businesses promises higher-value contracts, but the strategy is also paired with longer sales cycles.

Comcast’s decision in mid-2010 to complement its small-business strategy and go after larger businesses with a fiber-fed Metro  Ethernet platform continues to show signs of paying off. On Tuesday, Comcast Cable president and CEO Neil Smit said mid-sized businesses now represent about 20% of the business service revenues, a 5% jump from its latest high water mark in the category. Overall, Comcast business service revenues grew to $876 million in the fourth quarter, up from $699 million in the year-ago quarter, and $3.24 billion for all of 2013, compared to $2.56 billion in 2012.

The company estimates that it has been able to lock up between 10% to 15% of the market it’s targeting  -- small and mid-sized businesses.

MoffettNathanson Research analyst Craig Moffett wonders if Comcast should shoot higher and go after larger, enterprise-level customers. In a research note analyzing reports that Comcast might swing a deal with Charter Communications to acquire Time Warner Cable’s systems in New York, North Carolina and New England if Charter's bid for TWC is successful, Moffett suggested that an enhancement of Comcast's presence along the East coast would put it in prime position to attack the lucrative enterprise services market.

“Assuming a deal were to close successfully, Comcast would emerge with an uninterrupted presence along the Eastern Seaboard from Miami to Maine, with a dominant presence in virtually every other major business center in the U.S. save for Los Angeles and Dallas,” he wrote.

Naturally, Moffett asked on the Comcast earnings call if the operator was considering taking a run at the large, corporate, multi-national segment of the business services market.

Smit responded that Comcast’s aware of the enterprise market and the competition there, adding that there’s still plenty of growth potential for Comcast in the SMB market. “I think there will be network implication, there will be organizational implications. But right now we’re focused on small and mid for the time being,” he said.

So, for the time being, Comcast appears to be happy targeting a segment that puts the operator on pace for an annual run rate of $3.5 billion.