Cable has done well scooping up the minnows in the $66 billion business services
market — the doctors’ offices and pizza parlors that are
well-served with bulked-up versions of residential broadband and
voice.
Now, MSOs increasingly are trying to lure bigger fish.
For cable operators, midsize and large business customers
represent a tantalizing, multibillion-dollar opportunity — a largely
untapped reservoir that stands to boost their growth into the next
decade as their traditional consumer services plateau.
Cable is well-positioned to take share from telcos, according
to IBB Consulting Group partner Afzaal Akhtar. So far, MSOs have
captured no more than 12% of the total business-services market,
he estimated. “Given where they are in the overall market,
there’s a runway for a couple of more years where they can continue
to be competitive on price and agile on services,” he said.
Of course, telcos won’t take the stepped-up cable foray lying
down, and they have made moves to adjust to the changing landscape.
Verizon Communications, for example, has repositioned its
Enterprise Solutions group to focus on advanced communications
services, such as cloud computing, instead of leading with traditional
voice and data and competing
with MSOs on price.
And, as the cable guys have
found, it’s heavy lifting to cater
to this crowd: Cable modems
on steroids won’t necessarily
cut it. Operators must build
up their fiber-optic network infrastructure,
as well as customerservice
and support capabilities,
to meet the strict uptime
and advanced-services requirements
of larger organizations.
To find out why some bigger
businesses are dropping
their telco services for cable,
Multichannel News interviewed
a range of customers across
health care, hospitality, finance
and government sectors.
Comcast, for one, is on the front end of more aggressively targeting
the midsize business market.
In 2006, when the MSO entered the business-services segment,
it deliberately started by going after smaller customers with 20 or
fewer employees as an extension of its existing residential voice
and broadband offerings. “There was a strategic intent that said,
‘Let’s leverage the DNA that 100,000 people at Comcast could understand,’”
Comcast Business Services president Bill Stemper said.
Last year, Comcast generated $1.8 billion in business services
revenue, and is on pace to top $2 billion this year, Stemper said.
The bulk of that is from smaller business customers.
Comcast is now ready to take a bigger cut of the midmarket, which
Stemper defines
as companies with
roughly 20 to 500
employees.
In the past
year, the MSO has
hired sales reps
skilled in dealing
with CIOs at larger
companies and
recently launched
a marketing
campaign with the
tagline, “Business
Can’t Wait.”
“If small business
was a $12 billion to $15 billion opportunity, the midmarket is
another $10 billion opportunity for us,” Stemper said.
But there’s no such thing as an overnight success in the commercialservices
segment. Operators including Cox Communications and
Cablevision Systems have been serving midsize and large customers
for years — and still have to win their trust one engagement at
a time.
“The way we go after those companies is giving them the level
of service they need,” Dave Pistacchio, president of Cablevision’s
Optimum Lightpath division, said. “It’s not about treating them like
numbers.”
In the New York metro area, Optimum Lightpath is focused on
about 50,000 midsize and large enterprises and has landed less
than 20% of that addressable market. “We had roughly $300 million
in revenue last year,” Pistacchio said. “We have a lot of room to
grow.”
Here are stories from six customers who are running their businesses
on cable today.
Courtyard by Marriott, Lima, Ohio
Description: 99-room hotel in northwest Ohio with heavy businesstraveler
clientele.
Provider: Time Warner Cable
Project: Six months after opening in December 2008, the hotel moved
from telco T-1 lines to higher-capacity fiber connections from TWC
for faster Internet and HD video. A year later, it switched to the cable
operator’s phone service.
Lima sits between Toledo and Dayton, right off Interstate 75 — a
corridor frequented by veteran road warriors who demand very fast,
reliable Internet service, according to Dan Peterson, general manager
of the Courtyard by Marriott in Lima.
During the construction phase, the hotel felt the upfront cost “was
a little prohibitive to go into fiber-optic technologies” with Time Warner
Cable, Peterson said. When the property first opened, it had two
T-1 lines from the local telephone company.
It quickly became evident that wasn’t enough to serve the guests at
the hotel, which has 12 Wi-Fi access points across 56,000 square feet of indoor space. “You would be
amazed,” Peterson said. “We
have customers doing huge [information-
technology] projects
for the medical centers and defense
contractors in town.”
Time Warner Cable upgraded
the hotel to 10 Megabits per
second, more than three times
the speed of the T-1 links.
“There was definitely not a
price reduction” compared
with the T-1 lines, Peterson
noted.
But he said the results
were obvious “literally overnight.” Prior to the TWC upgrade,
the Cour tyard by Marriott Lima had customersatisfaction
ratings for technology in the 70-to-75-point range
on a 100-point scale — about average versus its peers. After the
speed boost, the ratings went up 15 points and the hotel is now
approaching an average of 90, Peterson said.
Time Warner Cable’s fiber connection also allowed Courtyard to
upgrade its HD selection; it now offers 65 HD channels to 32-inch
LG HDTVs in each room. That has contributed to the higher customer
ratings as well, Peterson said: “We have people staying here who
get HD channels they don’t get at home or any of the other hotels.”
In 2009, the hotel had wanted to move to phone service, too, but
its contract with the local phone company did not expire until the
following year. “TWC gave us an 11-month grace period before they
switched us over” to a primary rate interface (PRI) connection for
phone service. “The transition [to TWC’s phone service] was totally
seamless. Our guests never knew.”
When the hotel was re-evaluating its Internet and phone services,
the local phone company also submitted a bid. “The technology was
not there,” though, Peterson said. “And frankly, they just weren’t very
aggressive in making us believe they wanted the business.”
Bottom Line: Faster broadband, more HD channels, plus phone service
from one provider.
University Medical Center of Southern Nevada
Description: The largest hospital in the state operates a 586-bed facility
that is just under 900,000 square feet in Las Vegas.
Provider: Cox Communications
Project: UMC upgraded and expanded its connections through Cox
to provide faster speeds and better fault tolerance among multiple
sites. The MSO’s proposal provided better redundancy than the bid
from incumbent phone company CenturyLink.
The hospital already was using
Cox’s fiber-based network for
some services, working through
a local reseller. In December
2010, the hospital signed a direct
contract with the MSO for
better support and monitoring
of its critical network links.
“We had a very clear decision
about what we needed — there
were a lot of single points of failure
we had identified over the
years,” UMC chief information
officer Ernie McKinley said.
Cox now provides two 1-Gigabit-per-second connections between
the hospital’s primary data center and its collocation provider,
Switch Communications, located 13 miles away. In addition, the
cable company provides 100-Mbps connections (with backup T-1s)
to 11 quick-care facilities and off site clinics, plus two 100-Mbps links
to an off site business office. The MSO also provides UMC a separate
50-Mbps Internet connection for guest Wi-Fi access.
CenturyLink threw its hat into the ring in responding to UMC’s request
for proposals. But Cox’s RFP stood out because of the extensive
fault-tolerance features in its network design, including a proposal to
build two separate network-access conduits more than 25 feet apart
coming into each of the facilities.
“It was above and beyond what we were looking for,” UMC director
of information technology Maria Gudewicz said. “We felt that with
Cox, we were really moving up in terms of our maturity.”
Several years ago, McKinley acknowledged: “I was very wary about
Cox, because at that time they were just the cable company. I was
nervous they didn’t have the technical expertise and couldn’t support
the level of service we needed.”
Now, the MSO is one of Las Vegas’s top business-services providers,
he said: “They’ve grown up. They are not just the cable TV provider
anymore.”
Bottom Line: Faster connections with comprehensive network redundancy
features; direct relationship with Cox.
Eastern Bank, Boston
Description: Largest independent bank in New England, with
$7.6 billion in assets and 119 branches and insurance offices mostly
in Massachusetts.
Provider: Comcast
Project: The Boston-based bank wanted a higher-capacity backbone
network than Verizon Communications’ synchronous optical networking
(SONET) platform could economically provide to connect
its core data centers.
After an evaluation in mid-
2010, Eastern Bank upgraded
to Comcast Business’ Ethernet
service to connect its core
data centers — co-located within
facilities in both the North
Shore and southeastern Massachusetts
— as well as two
other main hub locations via a
1 Gbps link.
The bank still uses Verizon,
having upgraded from the telco’s
OC-48 SONET service
(about 300 Mbps) to a 1 Gbps
link, which, along with Comcast’s
service, provides dualcarrier
redundancy. The combined
2 Gbps of bandwidth is nine times the bandwidth of the previous
SONET solution — for about $75,000 less per year, according to director
of network engineering Bob Primavera.
“With the additional speed, we’ve seen an improvement in replication
of our core banking systems,” Primavera said. “Comcast
has passed the test, from a network, systems and security standpoint
that ensures it integrates with our data, security, voice and
video services.”
Eastern Bank saves another $40,000 per year using Comcast’s Business Class Ethernet Dedicated Internet. “The price was half the other bids, and Comcast has by far the lowest latency and the highest uptimes,”
Primavera said.
In addition, it is using Comcast Business to connect about 25
branches and office locations, replacing T-1 lines.
“They were able to not only deliver facilities that were independent
of the [local-exchange carrier], but could offer up to 20 Megs of service
where we typically had 1 Mbps, while pretty much keeping our
pricing in the same range,” Primavera said.
Comcast has provided top-notch customer service and support,
but what has impressed Primavera even more is the MSO’s consistently
high quality of service. “Comcast is by far the most stable” of
the network providers the bank uses, he said.
Eastern Bank has since exclusively selected Comcast to launch a
“virtual video expert project,” which will enable streaming HD video
between remote banking business representatives and customers.
“We specifically chose the Comcast locations because of optimal
and stable class of service they provide,” Primavera said.
Bottom Line: Faster backbone connectivity for lower cost; cheaper
Internet service; stable network.
City of Kingsport, Tenn.
Description: Municipal government in northeastern Tennessee serving
50,000 residents.
Provider: Charter Communications
Project: Kingsport needed network
connections to its eight
emergency-services stations
that were faster and more reliable
than the phone company’s
digital subscriber lines could
provide, and wanted cheaper
phone service.
Before moving to Charter,
the DSL links connecting
remote fire and police stations
were “constantly up and
down,” Terry Wexler, information-
technology manager
for Kingsport, said. “Our experience was not good … Those they
can never be down. If they are down, somebody’s life is in danger.”
Charter Business submit ted a bid to provide cable-modem
service with 10 Mbps downstream and 2 Mbps upstream
connections, connected back to city hall via a virtual private
network. Kingsport moved to the cable setup to connect
the fire and police stations, which are five to eight miles
from the city’s main administration building, with only one
minor technical glitch (a misconfigured switch at one locat
ion that Charter identified and fixed). Since then, the
MSO upgraded the connection to 20 Mbps downstream and
4 Mbpstream up at no extra charge.
“Since we’ve made the move, it has been close to 100% uptime,”
Wexler said.
In addition, Kingsport last year provisioned three primary rate
interfaces (PRIs) from Charter to support its IP-based telephone
system for one-third the incumbent telco’s asking price.
“We’re so pleased with the way thing have gone so far, naturally
— hindsight is always 20/20 — I wish we’d gone with Charter a little
bit earlier,” Wexler said.
Bottom Line: Faster and more reliable remote connections; less expensive
phone service.
Montvale, N.J., Public Schools
Description: K-8 school district in northern New Jersey
Provider: Cablevision Systems’ Optimum Lightpath
Project: Montvale Public Schools needed substantially more Internet
bandwidth, especially as
it was planning to distribute
300 iPads to teachers and
students for classroom use.
The two-school district had
been using a bonded pair of
T-1s from One Communications
(now EarthLink Business),
providing less than 3 Mbps
to the town’s elementary and
middle schools, which serve
more than 1,200 students. “I
knew we needed to make a
change,” technology coordinator
Pete Valois said. “There
were many complaints about
the speed.”
Last summer, the schools switched to Optimum Lightpath, which
provides a symmetrical 50 Mbps Internet connection at the middle
school and a 1-Gbps fiber link connecting both schools. Montvale
Public Schools is paying about twice as much as before — but is
getting more than 20 times the speed.
“In the end, what sold us was the sales rep from Optimum Lightpath
was very knowledgeable and answered many questions we
had, and made it very clear that they knew what they were doing,”
Valois said.
Bottom Line: Faster broadband connectivity.
Pilgrim Bank, Mount Pleasant, Texas
Description: Bank in eastern Texas with $380 million in assets and
seven locations.
Provider: Suddenlink Communications
Project: The MSO provided
more bandwidth to branches
than AT&T’s T-1 lines, while
costing 30% less.
Don Reed, Pilgrim Bank’s
vice president and senior information
systems officer, initially
was skeptical that Suddenlink
could deliver the reliability
and performance his company
needed. “I didn’t know a cable
company even had that kind
of service,” he said. “But the
more we learned about their
fiber network, especially in this
area, the better it looked.”
In August 2010, the 70-employee
bank dropped AT&T for Suddenlink, which now provides 60 Mbps
via fi ber to its main facility in Mount Pleasant, Texas, and 10 Mbps
to most other locations.
“The response time in our remote branches is very close to local
response time,” Reed said. Suddenlink “made a big investment in
fiber, and they really did it right.”
Bottom Line: More bandwidth and better response time from branch
locations for less cost.
