CABLE S ENTERPRISING NEW DIRECTION

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1 Business Services Report Series CABLE S ENTERPRISING NEW DIRECTION WHITE PAPER Produced by Stewart Schley, Founder and Principal of Stewart Schley Content, LLC, a Denver-based research and writing firm specializing in business and technology subjects.

2 Business Services Reports are designed to demonstrate how technologies help business owners and managers address key challenges, solve problems and achieve mission critical objectives.

3 Cable s Enterprising New Direction The SMB market was first. Now, U.S. cable companies are making inroads in the larger enterprise business market. By Stewart Schley, Founder, Stewart Schley Content, LLC Around 2001, a newcomer began to creep onto the North American business communications scene: the local cable TV company or, more accurately, the local cable telecommunications company. Transformed by a storm of coalescing technologies digital signal encoding, fiber optics, two-way networking, high-speed Internet modems the cable industry vaulted beyond its TV heritage with broadband data networks that offered business owners a powerful pairing of technical capability and affordability. Across the nation, business owners began to replace expensive T1 lines or slow dial-up Internet connections with fast, reliable and scalable data pipes powered by a cable industry specification known as DOCSIS, which is the same technology that supports the majority of U.S. residential Internet connections today. Soon after, cable companies added affordable digital voice service for businesses over the same networks. Within just a few years, cable had redefined and re-energized the marketplace for small and medium-sized business telecommunications. Now, the cable industry is setting its sights on a new market segment: big business. Recently, cable companies have started to make meaningful inroads into the enterprise business marketplace, thanks to a new set of highbandwidth offerings and the dedicated service and infrastructure units that support them. It s a big market and cable is going to keep growing, said Dr. Judy Reed Smith, the founder of business telecommunications research firm Atlantic-ACM, at a recent cable industry conference. Others agree. In May 2012, the investment rating firm Moody s Investors Service said it expected the cable industry s share of the U.S. business telecommunications market to rise to 13% by 2014 from 8% in It s fun to challenge the status quo, said cable industry executive Steve Miron, CEO of the Syracuse, N.Y.-based cable company Bright House Networks. And in business services, we re definitely shaking things up. Cable s move into the next level of business telecom is giving enterprises and institutional IT managers a fresh new choice in telecommunications providers.

4 The 4,000-student Farmington, Conn. public school district is one of them. In March 2012, the district selected the local cable company Comcast to supply a new Metro Ethernet service that connects all of the district s buildings, enabling 24/7 access to web-based services by parents and students. Comcast received high marks for its work. We were able to switch to the new network without a single moment of downtime, said the district s Director of Technology Ted Lindquist in announcing the move. That s just one example among many that illustrates how cable companies are changing the competitive marketplace for mission-critical business and institutional telecommunications services. What s propelling the growth? According to Moody s, it is cable s greater scale, better demographics and financial flexibility. But that s not all. Cable also has the advantage of a broadening product portfolio. This menu of business communications services appeals to an increasing appetite not just for bandwidth, but for flexible and customized solutions to data-intensive IT and management needs. On the menu Although the specific product mix varies by provider, most large cable companies now offer a common class of enterprise-directed services including: Metro Ethernet. With custom configurations, cable Metro Ethernet connections can accommodate a range of business needs, including private office-to-office data networks, scalable connections to the Internet cloud or point-to-multipoint topologies that ride over high-bandwidth fiber optic networks. The cable industry s collaboration with the Metro Ethernet Forum has helped assure interoperability with off-the-shelf equipment that keeps costs affordable. Also of note is an emerging provisioning approach known as DPoE (DOCSIS Provisioning of EPON) that produces significant economies of scale, by leveraging cable s existing back-office support systems to accommodate newer Ethernet services. Optical transport. For a growing number of business and office locations, a direct connection to a cable fiber optic network is easily accessed. Having spent billions in capital to lace metropolitan and suburban areas with redundant, high-capacity fiber networks, cable companies are now competing with telephone incumbents and recent fiber network entrants to supply the mainstay conduit for bandwidth-intensive data communications, using Ethernet and other technologies.

5 DOCSIS. It s known mainly for its role in the residential and small business sectors, but the underlying technology for high-speed Internet connectivity over cable HFC (hybrid fiber-coax) networks is increasingly attractive to enterprise business IT managers who like its multi-megabit-per-second data rates and affordability. Today, cable companies are investing R&D dollars in a new class of DOCSIS data connectivity that s optimized for business needs (low latency, low jitter, constant uptime). For a costeffective, high-speed replacement for T1 or MPLS lines, business-class DOCSIS is hard to beat. SIP (Session Initiation Protocol) services: New possibilities in office voice services, including video-enabled chat, are part of the appeal of new cable-delivered SIP networking solutions that connect high-speed data lines to office PBX equipment. But an even bigger driver comes from cost reductions compared to legacy trunks. Cloud services: The latest trend in the cable business telecom world is the addition of software-as-a-service, remote data storage/access and other cloud-based services that allow IT managers to move servers, software and storage away from their own buildings and into secured, 24/7 computing environments connected by secure cable broadband networks while saving on hardware and maintenance costs. PRI (Primary Rate Interface): The telephone company is no longer the only source in town for business phone lines that handle significant traffic. Cable companies are carving out a bigger share of the enterprise business voice market by offering competitive pricing on digital trunk capacity. Internal changes Beyond products, improvements in internal organizations also are making cable a strong player in the enterprise space. Today it s common for cable companies to have dedicated sales, service and product teams that specialize in the enterprise market. Highly knowledgeable about enterprise and industry-specific IT requirements and service-level agreements (SLAs), sales and service specialists within these internal organizations often work independently from teams that focus on the SMB segment. That means enterprise clients have dedicated, 24/7 support from specialized teams that understand the importance of network uptime and adherence to SLA specifications.

6 As a result of the more sophisticated product mix and dedicated internal support units, cable s business customer mix is changing. Mid-market and larger enterprises that require substantial bandwidth, variable speeds, secure data transmission and performance guarantees are increasingly turning to the cable industry for network connectivity and data services that once were the exclusive purview of large regional telcos. Corporate headquarters, financial services firms, universities, manufacturing and technology companies are among categories in which IT executives are choosing cable providers to supply critical, SLA-backed telecommunications services. These businesses vary greatly, but they share a common need for reliable, high-bandwidth IT infrastructures that support intensive data center environments, Internet access for large numbers of users, secure transmission of large and confidential file sets, and other applications. Cable also is super-serving verticals like the healthcare category, where a rise in digital records delivery has prompted a new appetite for reliable, secure bandwidth. In Las Vegas, for example, the cable company Cox Communications provides two 1-Gigabit-per-second connections between the hospital s data center and a collocation provider, plus 100-Mbps connections to 11 quick-care facilities and offsite clinics, according to the trade publication Multichannel News. High marks Within this broadening customer base, IT buyers apparently like what they re seeing from cable satisfaction ratings compiled by Atlantic-ACM, the Boston-based research firm that specializes in business telecommunications, show that cable companies outranked other provider categories for overall satisfaction. Atlantic-ACM s 2011 survey of 1,000 companies found that the cable ratings are significantly higher than the ILECs, the CLECs and the fiber guys, said Atlantic-ACM s Reed Smith. Similarly, a 2012 survey of U.S. business data customers by J.D. Power and Associates found cable providers ranked higher in overall satisfaction than traditional telecommunications providers. Cable companies had significantly higher satisfaction scores in fairness of contract terms and ease of understanding pricing options, the research company said. One explanation for the high marks lies in the fact that cable companies are facilities-based carriers they own and operate their own physical networks. That gives cable companies the ability to create market and maintain end-toend services to exacting performance standards, and to make them easier for customers to understand. It also makes cable attractive to institutions

7 and enterprises that demand, or are required by regulations to have, separate networks for disaster recovery and business continuity assurance. Whereas telecom resellers commonly move traffic over the same fiber lines and facilities that incumbents maintain, cable offers a separate, independent physical network path that provides a needed alternative in the event of a network failure. Lastly, there s the human factor. Industry executives believe another reason for cable s rising enterprise profile has to do with the fact that local cable company service agents are in-market to support enterprise customers. That s not always the case with facilities resellers or national fiber optic companies. Localism matters, said References and links: J.D. Power and Associates 2012 Business Telecommunications Study, Multichannel News, Business Class Upgrade, May 2012, John Schanz, Executive Vice President and Chief Network Officer for Comcast. Feet on the street are particularly important in the business space. Our customers expect us to be there to support them every day and every hour. References and links: J.D. Power and Associates 2012 Business Telecommunications Study, Multichannel News, Business Class Upgrade, May 2012,

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