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NGN Magazine Magazine logo
Sept/Oct 2009 | Volume 1/Number 5
Feature Story

Business of Cable Telephony Looks Like a Winner

By Paula Bernier

It's no secret that small and medium businesses are getting more attention these days as a variety of carriers attempt to appeal to these customers. While the SMB set has long been a sweet spot for many CLECs, large cable companies have expanded beyond their traditional residential customer set to address smaller businesses just in the past couple of years.

Many problems can be linked to how bandwidth is handled by network operators and businesses. Enterprises want more bandwidth but at an increasingly lower cost per bit. Smaller businesses want more bandwidth because they're beginning to adopt hosted applications. Such applications will drive the need for more bandwidth worldwide since applications are no longer on the customer premise, and there's an offset caused by lower application licensing fees (Web 2.0, SaaS and Cloud-based computing). These applications/services will create demand for not just higher bandwidth but better QoS and QoE. There's also a feedback loop: if QoE is good, hosted applications will flourish and in turn drive more QoS, QoE and even more bandwidth demands. The network core is still pretty solid and robust, so the area where improvements in bandwidth efficiency and QoS will have the greatest impact on QoE and margins will occur in metro aggregation and transport networks, and at the very edge of the network itself, where bottlenecks can easily occur as IP-based devices proliferate.





According to most accounts, the cablecos are making good headway in appealing to low-end business customers and are now headed up market. In fact, some argue that the cablecos have been so successful with their SMB strategies that large incumbent telcos like Verizon are sitting up and taking notice.

Business is clearly a growth area among the cablecos, says Chris Carabello, director of marketing at voice gear supplier MetaSwitch. He says the initial target of MSOs has been the very small business customer with maybe one to eight lines and some basic residential-type calling features. But now, he says, the cablecos are looking to expand beyond that segment to also reach customers with 20 to 100 employees with more sophisticated services.

For example, he explains Bresnan Communications, a MetaSwitch customer, started with a facilities-based play to reach very small businesses with basic phone services. Now the company, which is the nation's thirteenth largest MSO, is moving up the value chain with services such as PRI and hosted PBX. "So that is the model that I think a lot of the operators are trying to emulate," Carabello says. Despite a short history in business telephony, Carabello adds, cablecos have strong brands and good reputations for the voice services they've delivered to date, so their efforts in the business space are getting a warm reception, which may be fueled in part by the fact that small businesses are particularly price sensitive and not particularly brand loyal at this point in time.

Indeed. In July Cablevision Systems Corp.'s Optimum Voice received top honors from J.D. Power for customer satisfaction in the "2009 Major Provider Business Telecommunications Voice Services Study" for SOHO and SMBs. Optimum Voice scored 701 for SMB customer satisfaction, 61 points higher than the major provider segment average, and performed particularly well across all six factors driving satisfaction which include performance and reliability; sales representatives/account executives; billing; cost of service; offerings and promotions; and customer service.

Optimum Business offers small and medium-sized businesses the option to select up to 24 lines of Optimum Voice. Each Optimum Voice line features low flat-rate pricing, unlimited local and long-distance calling within the U.S., Puerto Rico and Canada with no hidden fees or taxes, and 14 business calling features such as enhanced voice mail, find me, rollover hunting and three-way calling.

But perhaps the most aggressive MSO in terms of advancing telephony services has been Cox Communications Inc. The company was the first MSO to deliver circuit-switched telephone services to its residential customers – an effort it began years ago when the telephone companies launched their move into the video services arena. Today both the residential and business sides of Cox sell a variety of telephone services. Cox Business does business in 18 U.S. markets in the states of Arizona, California, Connecticut, Florida, Idaho, Kansas, Lousiana, Nebraska, Nevada, Oklahoma, Rhode Island and Virginia – all of which are in the traditional Cox service region. The effort started with POTS and a package of popular Class 5 features. Today it also sells PRIs, long-distance and toll-free calling plans, as well as more advanced services, either as standalone items or as part of a bundle of services.

The most advanced of those telephony services is the Cox Business VoiceManager. According to Cox Business, the introduction of this service made it the first cable provider in North America to deploy a fully hosted and managed IP telephony service. Cox Business VoiceManager employs an application server in the Cox network to enable businesses to extend their in-house telephone systems and features to employees' cellular phones. It also includes features such as find me/follow me and simultaneous ring, and has a business continuity feature that allows a customer's telephone administrator to redirect calls to remote locations in the event of a natural disaster or other problem, explains Bill White, director of voice product management at Cox Business.

The service, which typically costs $1 or $2 a line in addition to the Cox POTS service, is available in several markets including Connecticut and Rhode Island, where it went live in November of 2007;

A Competitive Response?
By Paula Bernier (News - Alert)

The large incumbent telcos have been outfitting small and medium businesses with telecommunications services for many moons, but some say it wasn't until the rise of the MSOs in this space that the big ILECs gave this customer set any tender loving care. Whether it was motivated by MSO success in the SMB space won't be debated here, but Verizon (News - Alert) last month reportedly introduced new price offerings for the voice, Internet and TV services it offers small businesses. According to the company, this effort could save small businesses up to 25 percent off their a la carte, month-to-month service pricing if they are willing to sign the three-year agreements.

Verizon's new Single Line Business PAK and Freedom for Business Expansion PAK triple-play options for voice, Internet and TV begin at $119.98 per month with a three-year agreement. Bundles including both voice and Internet services begin at $84.99 per month for those with a three-year agreement in most areas. In commentary published online in May, Current Analysis (News - Alert) talks about the Verizon VoIP offer that bundles Internet Dedicated Access with the carrier's Hosted IP Centrex or IP Integrated Access, and a PRI bundle including IDA (News - Alert) with ISDN and local/long-distance calling plans. The analyst firm says "the product line reflects a fundamental change in the carrier's go-to-market strategy toward SMBs.

According to the Current Analysis piece "Verizon previously held lower-end SMB accounts under Verizon Telecom, which focused on its own set of services to target mainly in-footprint opportunities. Verizon Business is now pushing its advanced products into lower-end SMBs, and the carrier has a national marketing and sales strategy for this segment." And the firm suggests that AT&T, Qwest (News - Alert) and large CLECs like PAETEC would do well to take note of this strategy.

In addition to its PAK bundled service strategy targeting SMBs, Verizon is targeting this segment with a new website called the Small Business Center, which it launched this spring. The site allows users to set up profiles, get access to their Verizon products, find discounts on business products and services, participate in a Verizon rewards program akin to a credit card rewards program, and read business news aggregated from The New York Times and other sources.

as well as Kansas, Las Vegas; Oklahoma; Omaha, Neb.; Phoenix, Ariz.; Orange County, Calif.; San Diego, Calif.; and Hampton Roads, Va. – where it launched this summer.

The non-profit behavioral health care organization Gateway Health is among the customers of this service. "Cox (News - Alert) Business accurately assessed our communications challenges and designed a solution that met our needs. As a result, we've gained additional capabilities and reduced our operational costs by 15 percent," says Scott DiChristofero, chief financial officer of Gateway (News - Alert) Healthcare. "Cox Business has relieved us of the responsibility of being telecommunications experts, allowing us to focus on our primary mission of assisting people in their recovery from mental health, substance abuse and behavioral and emotional disorders."

As part of this Cox Business solution, Gateway can now send bulk voicemail and e-mail messages to large groups of employees, a critical tool during patient emergencies, winter storms or other natural disasters. Gateway employees also can make internal calls using four-digit dialing. And the company can easily track phone usage data, such as long-distance calling from its facilities. "Our Business VoiceManager is really the direction we're heading," says White, adding that Cox Business expects to introduce a SIP trunking service toward the middle of next year, and IP Centrex and hosted PBX offers late in 2010.

Of course, that's the direction most folks believe the market is going. According to a Forrester (News - Alert) Research Inc. survey released in August, nearly 20 percent of IT professionals are buying more managed services as a result of current economic conditions. "While the down environment is making most technology areas suffer, managed services is getting a boost as firms look for more flexible payment models that limit capital expenditure but also can keep them current with technology changes that help their firm," says Ellen Daley, vice president and research director at Forrester. "This further accelerates an industry move to a more flexible services model for fulfillment of telecom, network, and IT technology changes."

According to survey results, 47 percent of enterprise respondents and 37 percent of SMB respondents have already purchased managed or outsourced telecommunication services, primarily as a result of their desire to focus on their core business competencies rather than on peripheral tasks such as networking and telecom services.

How Wireless Fits In
By Paula Bernier

Wireless is increasingly being bundled and integrated into a variety of business and residential packages and services. But while the large incumbent telcos like AT&T and Verizon are among the largest players in a sea of wireless providers, the cablecos are just getting their feet wet. As noted in NGN's 4G story on page 28, cable companies Bright House Networks, Comcast (News - Alert) Corp. and Time Warner Cable Inc. have partnered with Google, Intel and Sprint to provide funding for WiMAX operator Clearwire, whose network they will leverage to offer data-only wireless services.

Meanwhile, Cox Communications expects to get into mobile voice services this year through an MVNO agreement with Sprint (News - Alert). At the same time, Cox plans to build its own 3G wireless network based on the spectrum on which it has spent $550 million in FCC auctions over the years. Cox, which is also testing 4G LTE (News - Alert) technology, expects to launch 3G wireless service this year.

"Wireless service will be a key driver to Cox's future growth," says Pat Esser, president of Cox Communications. "As wireless communications enters the new generation, we are uniquely positioned to deliver the entertainment and communications services our customers want, whenever, however and wherever they want them. Our bundled customers will become even 'stickier' as we offer them the best customer experience. To deliver the best customer experience, we will manage every aspect of the service, from product development to marketing and sales to back-office operations and customer support and billing."

Bill White, director of voice product management at Cox Business – whose VoiceManager service, as noted in the main story here, already has a mobile component – says the residential side of Cox will lead the business side in the introduction of these new wireless services.

NGN Magazine Table of Contents









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