The rapidly developing business services division is a major boon for cable MSOs (multi-service operators) in the U.S.
As per the latest figures compiled by Heavy Reading, cable MSOs are set to achieve over $12 billion in annual business service revenues this year, up 20% from their milestone total of $10 billion last year.
Top Players
Comcast Corp. CMCSA, the leading player in this space, has been of late firing on all cylinders to garner more traction. Notably, the company is on track to record $4.7 billion of commercial revenues this year, up a substantial 20% from $3.9 billion in 2014.
Similarly, Time Warner Cable Inc. TWC is set to garner $3.3 billion in 2015, strikingly up from around $2.8 billion last year.
Meanwhile, the high commercial revenue prospects have been the rationale behind Charter Communications, Inc.’s CHTR plans to acquire both Time Warner Cable and Bright House Networks.
SMB to Large Enterprises
For quite some time now, cable MSOs have been aggressively targeting the small and medium-sized business (SMB) segment, which is the core area of operation for telecom operators. Various industry researches estimate that the SMB segment is expected to offer a $20 billion to $30 billion market opportunity, going ahead.
Meanwhile, as per a research report published this September by analyst firm TNS, over the past two years, cable MSOs have been increasingly providing wired voice and data services to companies in the large (over 100 employees) business segment, beating established telecom players like Verizon Communications Inc. VZ and AT&T, Inc. T.
Hence, after tasting considerable success at the SMB segment, cable MSOs are now looking to cater to large enterprises with the aim to set up a new revenue stream and also establish a strong foothold in this lucrative segment.
In this regard, Comcast recently acquired Contingent Network Services, a Cincinnati-based technology deployment and managed services company, for an undisclosed amount. Also, Comcast announced the creation of a new ‘Enterprise Service’ division with an aim to provide managed business services that include broadband, ethernet, voice, router, security, business continuity and Wi-Fi to Fortune 1000 companies.
Moreover, Comcast has reportedly begun trial runs for its fiber-based 2 gigabits per second (2 Gbps) residential broadband Internet service – Gigabit Pro. This service will be mainly targeting the large enterprise customer base.
Meanwhile, Charter Communications is set to become a formidable player in the large business segment post its pending acquisition of Time Warner Cable. Notably, Time Warner Cable boasts a huge base of large enterprise customers. The combined entity is likely to achieve the necessary economies of scale to serve large business enterprises.
Broadband Boost for Cable MSOs
Interestingly, substantial dependence on Internet service and the demand for greater bandwidth have been cited as the key drivers for cable MSOs in the large business segment. Incidentally, these are the areas of expertise for the larger cable MSOs.
Evidently, a recent report by Leichtman Research Group Inc. (LRG) revealed that cable MSOs have successfully maintained their lead over telecom operators in the high-speed broadband (Internet) market.
With the deployment of next-generation DOCSIS 3.0 technology, cable TV operators are extensively penetrating into the high-speed Internet space. This is because over the past 3–4 years, the dynamics within the U.S. pay-TV industry have been gradually shifting from cable TV offerings toward fiber-based video services of large telecom operators.
Moreover, the strong presence of online video streaming providers has been posing significant threat to the existing pay-TV business model. What would traditionally be the core business strength of cable-TV operators now seems to be slipping out of their hands. With video services no longer a profitable deal, strong momentum in the high-speed data market bodes well for cable MSOs as it would help them to further expand in the large business segment.
The Bottom Line
Thus, digging deeper into their vertical markets and growing beyond the smallest firms has helped cable MSOs maintain their financial position amid mounting video subscriber churn and competitive threat from online video streaming providers.
Going forward, we believe, cable MSOs have plenty of untapped opportunities in the business services market, particularly in the mid and large-sized business segment.
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