Cable MSOs (multi service operators) in the U.S. have plenty of reason to smile. According to a recent research report 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.
As per TNS's survey of 6,500 businesses, voice and data service spending from cable MSOs grew over 38% in two years, mounting from 12.2% in 2013 to 16.9% in 2015.
Moreover, over the two-year period, cable MSOs have fared the best in moving single product customers to bundled voice and data services. Percentage of customers using a single provider for wired voice and data products rose from 38.6% to 54.1%, reflecting an increase of more than 40%. Over the same period, incumbent local exchange companies (ILECs) witnessed a slim decline while competitive local exchange companies (CLECs) saw an increase of 9%.
Also, cable MSOs have stepped up the penetration of business locations they serve by over 50%, over the same phase. On the other hand, CLEC share remained somewhat unchanged while ILEC penetration plunged around 14%.
Notably, TNS anticipates penetration among cable MSOs providing telecommunication services to large businesses to continue in the short term, thereby putting incumbent providers at greater risk.
Notably, Comcast Corp. CMCSA is the leading player in the space and has been firing all cylinders lately to garner more traction in this segment. Recently, the company 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 for 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, Inc. CHTR is set to become a formidable player in the large business segment post its pending acquisition of Time Warner Cable Inc. TWC . Notably, Time Warner Cable boasts a huge base of large enterprise customers.
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 two areas where the larger cable MSOs stand out.
Evidently, a recent report by Leichtman Research Group Inc. (LRG) revealed that cable MSOs have productively retained their supremacy in the high-speed broadband (Internet) market, outpacing peers in the telecom industry.
With the deployment of next-generation DOCSIS 3.0 technology, cable TV operators are penetrating extensively into the high-speed Internet space. This is because over the past 3-4 years, internal 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 thus bodes well for cable MSOs as it would further help them to expand in the large business segment.
Gearing Up for the Battle
Notably, cable MSOs have already established themselves in the Small and Medium Business (SMB) segment. By foraying into the Large Business Segment, these companies are likely to face direct competition from established telecom players like Verizon Communications Inc. VZ and AT&T, Inc. T .
Being primarily a cable company, this marks their entry into a different sphere by offering data services to big enterprises that usually opt for the services of AT&T and Verizon.
Large companies require a provider to manage complex networks, develop business continuity plans and integrate cloud-based applications with business operations.
Naturally, cable MSOs have been continually in search for more firepower to challenge the likes of Verizon and AT&T.
Thus, to maintain their financial position amid mounting video subscriber churn and competitive threat from online video streaming providers, cable MSOs are focusing on the business services division, which is one of their fastest growing segments.
Consequently, after tasting considerable success at the SMB segment, they are now looking to cater to large enterprises with the aim to set up a new revenue stream and also establish themselves in this lucrative segment.
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