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Comcast chasing bigger biz clients

June 4, 2011

All those millions of dollars in fiber-optic lines Comcast Corp. installed so high-def viewers can see the stitches on a baseball might now help it steal bases from phone companies in the business data market.

Comcast is now pitching in Indianapolis suburbs its metro Ethernet product to businesses with 20 to 500 employees.

It’s the big leagues compared with the 20-employee-and-fewer market the cable operator traditionally has served with a hybrid fiber-coax service of up to 100 megabits per second.

With the new Ethernet service, Comcast is selling bandwidth in increments of up to 10 gigabits.

Such big chunks of bandwidth are hot in demand as businesses increasingly access software not on their own servers but virtually, via the Internet, from software-as-a-service vendors.

Comcast hopes to win over bigger businesses in data-intensive categories such as education, finance and health care.

“Right now, you pretty much have had just the phone companies” in that realm, said Jeff Freyer, vice president of business services for Comcast.

Much of Comcast’s expensive fiber investment in recent years has been used not only to deliver digital television but also to support cellular phone-site traffic.

“Comcast has had a lot of fiber in the ground for years. All we’re doing now is taking the fiber and using it to bring service directly to customers,” Freyer added.

U.S. business Ethernet connections have been growing by double-digit annual percentages in recent years. The growth was 34 percent in 2010 alone, according to Boston-based Vertical Systems Group. AT&T has the biggest share of the market, said the consulting firm. But other industry estimates suggest cable operators now have about 20 percent of the U.S. Ethernet services pie.

Comcast hopes to steal share from phone giants in part through pricing that is up to 33-percent lower than the going rate, Freyer said.

He did not elaborate on local pricing. However, CIO magazine reported last month that the cable giant was looking at selling 10 million bps for about $1,200 a month.

Comcast serves the metro area outside the city’s core, while cable operator Bright House has the downtown area and the rest of Center Township.

Bright House has provided so-called metro Ethernet service for more than five years, a natural given the heavy concentration of businesses in the city’s core. It has more than 100 Ethernet customers here, said spokeswoman Brooke Krodel.

Cable television operators have increasingly turned to commercial revenue opportunities, such as data needs for medium-size businesses, as phone companies have invaded their turf with video products delivered via phone lines.

Cable operators responded by upgrading video services and rolling out new high-speed data and voice services, driving cable revenue to $86 billion in 2008 from $51 billion in 2003, said a report last year by Maryland industry analysis firm Pike & Fischer.

The firm estimated that cable commercial services revenue would top $5 billion in 2010 and grow at a compound annual rate of 31 percent over the next five years.

But as far as offering big bandwidth, one challenge cable providers face is their reputation on the residential cable TV end of the business. Cable firms have not always ingratiated themselves with residential customers when it comes to signal quality, reliability or customer support.

Many cable firms have offered service-level agreements to their business contracts in an attempt to overcome such concerns, said Rosemary Cochran, a principal of Vertical Systems. “It’s a very different type of business.”

Telephone companies have always viewed such cable advances onto their turf as significant competition, said John Koppin, president of the Indiana Telecommunications Association.

“Our industry will respond to their offerings. The consumer will benefit,” Koppin said.

The Indiana General Assembly in 2006 deregulated the state’s telecommunications laws, which ultimately removed restrictions and allowed telephone and cable operators to play on each other’s turf. For example, the law made possible products such as AT&T’s U-verse, which delivers video service in direct competition to cable and satellite TV operators.

Comcast provides Metro Ethernet services in about 20 other markets, including Atlanta, Baltimore, Boston, Chicago, Denver, Detroit, Miami, Nashville, Philadelphia and Seattle.•

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