From SoHo companies to supercomputers: Cable s astonishing rise on the business telecom scene By Stewart Schley The undisputed king of today s data processing environment is the supercomputer a machine with computational muscle so superior to general-purpose computers that it has a measurement vocabulary all its own. Instead of tracking millions of instructions per second (MIPS), supercomputers traffic in a more expansive metric: floating point operations per second. The most powerful supercomputers perform so-called FLOPS in the quadrillions as they crunch through vast computations around categories like quantum mechanics and molecular modeling. It was illuminating, then, when the Pittsburgh Supercomputing Center a joint effort of Carnegie Mellon University and the University of Pittsburgh upgraded its regional data network in mid-2015 with help from a new telecommunications partner: Comcast Business. For a company that grew up in cable television, it was a symbolic moment. Comcast s selection by the Pittsburgh Supercomputing Center delivered a ringing endorsement of the company s fast-rising role as a business and institutional telecommunications provider. By extension, its selection over rival bidders makes a point about big changes that are at work in the business telecom marketplace at large. The institutions we work with rely on us for three very important things: access to our state-of-the-art offsite data storage facility; use of our supercomputers for advanced mathematical computations, scientific modeling and large-scale data analysis; and high-speed, high-quality connectivity to the Internet, said Ken Goodwin, the center s director of advanced networking. Comcast is giving us a way to provide these schools with the same caliber of connectivity that you would expect of a major research institution at a price that can fit within a smaller institution's budget. This same sort of recognition is being repeated from coast-to-coast as cable companies rise in prominence on the national business communications scene. After investing hundreds of billions of dollars to build state-of-the-art data networks and the capability offshoots that flow from them, companies like Comcast, Charter Communications, Time Warner Cable, Cox 1
Communications and others have stormed the business telecom gates, providing serious competition to incumbents that once enjoyed near-monopoly positions. Running the numbers The numbers help to tell the story. In 2014, the top three publicly held U.S. cable companies recorded nearly $8 billion in revenues from their business services units. Just four years prior, the total was less than $4 billion. Cable Business Services Revenue Growth ($ in mil.) Company 2011 2014 % Change Comcast $1,791 $3,951 121% Time Warner Cable $1,469 $2,838 93% Charter Comms. $584 $993 70% Total $3,844 $7,782 102% Source: Company reports As a result, the business services category has become a vital growth source for individual cable companies. For Comcast, the nation s largest cable provider, business services had been the second-largest revenue growth contributor for 17 of 18 preceding quarters through September 2015. Newcomers don t achieve a 19 percent compound annual growth rate without making a serious dent in the marketplace. And the cable industry certainly has. In the business Ethernet sector alone, cable companies now occupy three spots on the list of top eight U.S. providers, according to the semi-annual rankings published by industry researcher Vertical Systems Group. Another three cable companies Bright House Networks, Charter Communications and Cablevision Systems Corp. s Lightwave are among the top 14 providers. 2
U.S. Carrier Ethernet Services (providers ranked by retail port share) 1 AT&T 2 Level 3 3 Verizon 4 CenturyLink 5 Time Warner Cable 6 Comcast 7 XO 8 Cox Business Source: Vertical Systems Group, August 2015 A perfect storm Cable is achieving strong business category momentum because of a confluence of factors. At the center, of course, are the networks themselves. Cable companies own and maintain their own high-capacity, fully redundant fiber optic networks, delivering connectivity that can be equal or superior to that of traditional telecommunications providers. One telling example comes from the Ethernet category, where almost daily cable companies supplant aging T1 connections that lumber forth at data rates of just 1.44 megabits per second. With far superior symmetrical speeds typically 10 Mbps or faster, rising to 10 Gbps or higher plus greater provisioning flexibility and lower costs, cable-powered Ethernet links have rapidly transformed the business telecom landscape by leveraging the underlying investments cable has made. Beyond the home Although these network investments originally sprang from cable s residential services heritage the provision of video, broadband Internet and voice services to households increasingly 3
they ve been driven by business marketplace considerations. Cable companies now routinely extend the geographic footprints of their data networks to reach non-residential business centers, corporate campuses and enterprise locations, matching incumbents for physical reach. For example, in Carbondale, Ill., Mediacom Communications was able to provide a dedicated fiber link to a regional healthcare provider simply by adding a line extension to its existing infrastructure. The advantage we had with Mediacom was that a lot of the technology was already there, explained an infrastructure systems manager for Southern Illinois Healthcare Manager. Being the cable provider of the area they had fiber in the ground. All that was required was to go that last mile to make that final connection to our facilities. Another recent example: In Denver, Comcast Business recently invested $10 million to expand its fiber network across several business corridors, bringing commercial Wi-Fi and Ethernet connectivity of up to 10 Gbps to hundreds of more businesses in the area. Apart from these sorts of intra-market expansions, cable providers have begun collaborating across boundaries to yield interstate peering and connectivity arrangements that make it possible to create seamless solutions for businesses with a national or large regional presence. One recent example: In September 2015 Comcast announced the formation of a new Enterprise Service unit dedicated to Fortune 1000 companies and others with multiple locations nationwide. The new unit will leverage networking agreements with other leading cable companies that make it easier to serve locations spanning varying geographies. These examples illustrate how the business services category is increasingly driving the technology agenda for the cable industry. Local orientation Beyond the network infrastructure is an equally powerful attribute: localism. One of the cable industry s differentiating attributes is its large, entrenched stable of sales and service representatives who work in local markets and can respond quickly often in person to customer demands. Comcast Business alone employs more than 1,700 full-time business services specialists who assess business needs, process orders, dispatch technicians and follow up with customers in local markets. It s this type of feet-on-the-street presence that has helped cable win increased market share from highly selective mid- to enterprise-level businesses that demand stringent service level agreements and resources to support them. 4
Along with this large volume of dedicated agents is an increasingly large cadre of subject-matter experts who advise clients in critical fields such as healthcare, education, hospitality and financial services. The reason customers stay is because of the support localism is key having local engineers, local sales folks that have been there five years, the leader of Cox Business, Steve Rowley, told the business publication Light Reading. This combination of powerful networking capabilities, extended network reach, highly localized support and business-category expertise has propelled mainstay product categories that span nearly the full range of modern-day business telecom and IT ambitions. Among areas of cable s focus are: Connectivity. Metro Ethernet, dedicated Internet Access and Ethernet Private Line are among core offerings for a cable industry that has invested mightily in underlying transmission networks. Connectivity products that have attained strong presence in the business community include variations of metro Ethernet services like those used by the San Antonio Kidney Disease Center, which connects 13 remote clinics to the organization s headquarters at symmetrical data rates of up to 100 Mbps. The dedicated Ethernet connection provided by Time Warner Cable Business Class delivers a level of security the 30-physician nephrology practice demands. Nobody else s data touches our network; our data doesn t touch anybody else s network, said the group s IT Director. Ethernet everywhere Cable s rising presence in the business Ethernet segment is powered by a wide variety of solutions designed to align with varying business demands. Among them: Ethernet network services that seamlessly connect multiple business locations with customizable speeds Dedicated Internet that delivers faster performance and more affordability than T1 lines Ethernet private line that provides dedicated connectivity between locations with physical layer data segregation New creative implementations like Comcast s Ethernet at Home, providing industrialstrength data connectivity for power users like at-home medical technicians and others 5
Voice products. State-of-the-art trunking technologies like Primary Rate Interface and Session Initiation Protocol are now staple parts of cable s product offering. One reason: collaboration with the SIP Forum in the creation of interoperable interfaces that have created a flourishing equipment marketplace. But cable s going much further, with creative interplays of mobile and fixed-location phones and a variety of messaging and presence services that accompany them. Comcast s Business VoiceEdge application, for instance, lets users make calls from mobile phones using the number associated with their normal business line, in addition to forwarding voice mails messages via email. Video. It s the product line that s entrenched in the industry s DNA. Now it s an integral part of business services offerings. Applications range from waiting-room television services to specialized video services available in hospital rooms, hotels and beyond. Time Warner Cable has introduced a customized in-room video-on-demand system for hospitals that gives patients and families access to vast libraries of movies and TV shows. Internet. In the residential marketplace, cable is king, accounting for an 61 percent of the nation s 88 million wireline high-speed Internet connections, according to Q2 2015 estimates published by Leichtman Research Group. Now, cable s making deep inroads into the business marketplace too, with Internet packages that routinely outperform DSL connections and expensive T1 lines. Suddenlink, for example, offers business Internet services delivering downstream speeds ranging from 50 Mbps to 1 gigabit per second, giving customers the ability to align performance with their budgets and their business needs. Cable has become a mainstay provider of Internet connectivity for small and large businesses alike thanks in part to a technology known as DOCSIS 3.0. It s an industrycreated specification that bonds multiple frequency channels together to achieve speeds of up to 1 Gbps. An even faster version, DOCSIS 3.1, rolls out in 2016 to deliver business customers speeds of up to 10 Gbps. Also helping cable achieve deeper business-category penetration are low-cost, simplified offerings that do away with long-term contracts often applied by competitors. 6
Information technology services. One interesting offshoot of cable s growing business services role is a move into IT, encompassing products and services that help small, midsized and enterprise businesses manage tasks ranging from desktop PC support to web hosting to large-scale cloud storage and connectivity. One example: Bright House Networks recently introduced a broad suite of managed services including managed Internet security, managed routers and managed networking. The aim: to provide enterprises new resources powered by a secure and private fiber network. These types of services, which commonly have been provided in the past by independent or specialized providers, dovetail well with cable s ability to manage and optimize performance over its owned-and-operated networks Managed services. Pro-active management of customers essential telecom services managed router and managed security, for example are rising in importance both for customers and for the cable industry. One especially promising growth area is managed Wi- Fi, which is growing rapidly across the business category as retailers, health care providers and just about any business that serves customers or shares data among employees aims to ensure secure, reliable Wi-Fi availability. Wide spectrum Varying blends of these services have caught on big with a wide spectrum of U.S. businesses. Small office/home office entrepreneurs use cable Internet and phone services to keep in touch with customers and vendors. Mid-sized businesses have discarded older, circuit-based phone lines in favor of cable-powered IP phone alternatives that make it easier to add or reconfigure phone capacity on the fly. Larger enterprises have turned to cable for city- or region-wide fiber and Ethernet connectivity that supplies dedicated bandwidth for high-performance applications like transferring large volumes of records and, in the case of the health sector, large medical imaging files securely. Cable s even making a big push into the live entertainment realm, as companies like Comcast, Time Warner Cable and others win contracts to provide large-scale Wi-Fi connectivity and inter-building connections for major sports venues and their operators. The rise of digital education also is a driver for cable companies like Cox Business, which serves more than 7,500 schools and more than 3 million students within the company s footprint. 7
For cable, the business telecommunications marketplace has the look of an enduring opportunity. In July 2015, Comcast senior executive vice president and chief financial officer Michael Cavanagh pointed out the company s share of the small business market is roughly 25 percent, and its share of the larger, mid-sized category only 10 percent. There is a tremendous opportunity for growth in this segment, Cavanagh said. One significant growth driver is coming from an intentional move up-market, as cable companies that began their business services programs more than 10 years ago in the sole proprietor marketplace now pursue opportunities to provide long-term solutions for business with hundreds of employees and multiple locations. Leading with products like Metro Ethernet that meet the data transfer and security needs of large enterprises, cable s making strong inroads into categories that once were largely relegated to legacy telecommunications providers AT&T and Verizon among the dominant examples and their resale agents. Vertical specialization Part of this up-market migration is a new way of looking at and organizing for the marketplace. Most cable companies now have dedicated teams devoted to important vertical categories such as healthcare, education, financial services, hospitality and government. It s common for cable companies to staff their organizations with individuals who have deep experience in these vertical segments, understand their regulatory and operating requirements, and can speak the particular languages of the category. A final growth contributor is cable s embrace of third-party partners that have deep expertise both in the cable product portfolio and the needs of large business IT departments. Cable companies work with a variety of prominent resellers that have opened doors to new relationships, especially among large companies. Cable may be pushing up-market, but it s also making significant investments to extend and improve services for the SMB market, where even the smallest of businesses increasingly depend on technology and telecommunications to compete. Cox Business, for example, spent $50 million in 2014 to upgrade its operations and billing support systems to help standardize processes for sales, installation and territory management, with an eye to improving service agility for SMBs. 8
Cable s not stopping there. New investments that integrate advanced-technology concepts like software-defined networking and network function virtualization will enable cable companies to provide even more flexibility in service provisioning while delivering advanced business services more quickly than ever. Continuing its progression from a newcomer to a mainstay player in business telecommunications, the industry that grew up in cable television is determined to be an industrial-strength force for a long time ahead in the world of business. Not to mention the world of supercomputing. Stewart Schley writes about media, business and technology from Denver, Colorado. 9