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Cable Telephony in Small Businesses: The Competitive Threat to ILECs
2004-2009
a market research report
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In the never-ending
quest to squeeze additional revenues from their infrastructure, cable
companies have been upgrading their networks over the past decade to
provide integrated video, high-speed data and voice services.
In a new research study, Insight examines a highly accessible
(and lucrative) market for cable’s value-added services—small to
medium business enterprises (SMEs).
Insight's analysis reveals that more than three million small and
medium businesses are geographically located within two-way capable
cable systems, a veritable gold mine of captive customers for cable
MSOs. By factoring in
home-based businesses as well, the near-term opportunity created by this
market is well in excess of 20 million lines.
In
this report, Insight Research analyzes the enhanced services that are
made possible by today’s technology—cable telephony, data and video
services, unified messaging—coupled with the unique business
requirements of SMEs. Based
on this examination, Insight quantifies the SME business-line
addressable market opportunity for cable companies with two-way capable
cable markets, and measures the competitive risk they pose to the
incumbent telephone carriers located within the cable systems’ service
areas.
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Report Excerpt
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As the attention of the telecommunication industry focuses upon the looming
battle between incumbent local exchange carries (ILECs) and the cable
television (CATV) multiple system operators (MSOs) for residential telephone
service, an even more lucrative per-customer opportunity awaits cable
operators targeting telephone services to small businesses. On a
per-customer basis revenue associated with providing a small to medium
enterprise (SME) with data and voice services can generate three to four
times the revenue of the residential customer buying a bundle of voice,
data, and basic CATV.
SMEs are those businesses with fewer than 500 employees. Of the more than
64 million business lines currently in operation in the US, it is estimated
that the SMEs account for more than 53 million business telephone lines.
More than 6.27 million of the 6.98 million SMEs are located within the
operating areas of all cable operators, and just over six million in the top
30 MSOs.
Providing telephone services—especially a voice over the Internet
(VoIP)-capability—is the next logical step for cable MSO after having
successfully created a mass market for their residential cable modem
services. Residential cable modem subscriptions have surpassed the
subscription rate of digital subscriber line (DSL) by about a two-to-one
margin in the US—though most recent data shows that DSL take rates are now
growing faster than cable modem services. Across the board, however, the
overall broadband adoption growth rate has slowed recently, according to FCC
data. INSIGHT’s analysis of the trends reported by the FCC suggest that...
Click here for the
complete Executive Summary.
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Market Segmentation
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-Total Number of SMEs by Cable Operator
-Total Number of SME Business Lines by Cable
Operator
-Total Number of SMEs within Two-Way Markets by
Cable Operator
-Potential SME Business Lines within Two-Way
Markets
-Annual Revenue Potential of Data and Voice Bundle
in Two-Way Capable Markets by Cable Operator
-Cable Telephony Service Delivery Model:
Fiber/Copper
-Cable Telephony Service Delivery Model:
Channelized HFC
-Cable Telephony Service Delivery Model: Dedicated
Cable Modem
-Cable Telephony Service Delivery Model: Shared with
Cable Modem Service
-ADSL and Cable High-Speed Lines
-Bundle Pricing-DSL versus Cable
-ILEC Business Line Erosion (Thousands of Business
Lines)
-Number of SMEs Exposed to Cable Competition
-SME Business Lines Exposed to Cable Competition
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Table of Contents
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Chapter I
EXECUTIVE SUMMARY
1.1 Cable Telephones for Small Businesses
1.2 The Market for Small Business Cable Voice Services
Chapter II
CABLE TELEPHONY AND THE SME MARKET
2.1 The Cable Telephony Market
2.2 SME Market Size and Number of Establishments
2.2.1 Size of Establishments
2.3 SME Market Demographics
2.4 Business Line Market Analysis Methodology and Size
2.4.1 Business Line Demand of All Establishment Sizes
2.4.2 Business Line Demand of SME Establishments
2.4.3 Top 30 Incumbent Carrier SME Market
2.4.4 All Cable Markets
2.4.5 Two-Way Capable Cable Markets
2.5 Small Businesses as an Opportunity Space
Chapter III
SME MARKET DRIVERS FOR CABLE COMPANIES
3.1 Cable Telephony for the SME
3.2 Bundles for SMEs
3.2.1 Voice Services
3.2.2 Enhanced Services
3.2.3 Data and Internet Access
3.3 What the Telcos Could Offer
3.4 Comparing Basic Bundle Pricing: Telco vs. MSO
3.5 Higher Revenue per Subscriber
Chapter IV
TECHNOLOGY IMPLEMENTATION
4.1 Development of the CATV Network
4.1.1 Traditional Coax Network
4.1.2 HFC
4.1.2.1 HFC Components
4.1.2.2 HFC Topology
4.2 Circuit Switched Cable Telephony
4.3 Circuit Switched With Hybrid IP Networks
4.4 IP Cable Telephony
4.4.1 Data over Cable Service Interface Specification (DOCSIS)
4.4.1.1 DOCSIS 1.1 & 2.0
4.4.2 PacketCable
4.4.2.1 Packet Cable 1.1 & 1.2
4.5 Cable IP Telephony Implementation Issues
4.5.1 Primary Line Service/E911
4.5.2 Communications Assistance for Law Enforcement Act (CALEA)
Chapter V
MARKET STRATEGY FOR SMES
5.1 MSO Market Strategy for SMEs
5.2 Cox Communications
5.3 LightPath
5.3.1 LightPath`s Large Business Strategy
5.3.2 LightPath`s Small and Medium Business Strategy
5.4 Charter Communications
5.5 Insight Communications Company, Inc.
Chapter VI
MARKET FORECAST:
CABLE TELEPHONY PENETRATION OF SMES
6.1 Cable Telephony SME Market Analysis Methodology
6.2 Cable Companies Addressable SME Telecom Services Market
6.3 Cable Companies Potential Revenue for Bundled Services
6.4 Model of Acceptance of Telephony Services from Cable TV Companies
6.4.1 Cable Telephony Forecast Model Methodology
6.5 The Market Exposure of ILECs to Cable Telephony
Appendix
GLOSSARY
TABLE OF FIGURES
Chapter I
I-1 Cable Service Provider Telephone Service Delivery Model: Total Potential for Small Businesses,
2003 and 2009 ($Millions)
Chapter II
II-1 Total US Business Establishments, 1992-2005 (Millions)
II-2 Distribution of SMEs by Number of Employees, 2004
II-3 Distribution of Business Lines by SME Company Size, 2004
II-4 Distribution of SMEs by Company Size within ILEC Areas, 2004
II-5 Distribution of ILEC SME Business Lines by Company Size, 2004
II-6 Distribution of SMEs by Company Size within Cable Footprint, 2004
II-7 Distribution of SME Voice-Equivalent Business Lines by Company Size within MSOs, 2004
II-8 SMEs by Company Size Within two-way Cable Systems, 2004
II-9 Distribution of Cable Voice-Equivalent Business Lines by SME Company Size, 2004
Chapter III
III-1 Online Computers: Residences vs. SMEs, 2004-2008 (Thousands)
III-2 Online Residences, Broadband vs. Narrowband Connections, 2004-2008 (Thousands)
III-3 Voice over DSL Generic Architecture
Chapter IV
IV-1 Traditional Tree-and-Branch Coax Architecture
IV-2 Coax Distribution to Customer Premises
IV-3 HFC Architecture Providing Voice and Video Services
IV-4 Circuit Switched Cable Telephony
IV-5 Typical Cable Frequency Spectrum Allocation
IV-6 Circuit Switched with Hybrid IP Network Architecture
IV-7 Cable IP Telephony
IV-8 Basic DOCSIS
IV-9 Basic PacketCable Architecture
Chapter V
V-1 Cox Revenue Mix: All Customers 2002-2003
V-2 Cox Business Customer Mix: By Number of Employees
V-3 Distribution of Cox Business Customer Revenue by Enterprise Size
V-4 Cox Business Customers Served: Customer Base by Numbers of Employees
TABLE OF TABLES
Chapter I
I-1 Top 30 Cable Service Providers: SME Businesses in All Markets
I-2 Four MSO Voice Delivery Options
Chapter II
II-1 Americast Availability by Geographic Area
II-2 Business Establishments by Industry Sector and Business Size (SMEs vs. Large Business Enterprises)
II-3 Percentage Distribution of SMEs by Industry Sector
II-4 Business Line Demand Distribution by Industry Segment
II-5 Business Line Demand Distribution by Industry: SMEs vs. Large Business Enterprises
II-6 Business Line Demand Distribution: SME Lines by Industry Sector
Chapter III
III-1 Slowing Growth in High Speed Access Services, 1999-2003
III-2 North American Broadband Connections, Residences vs. SMEs, 2004-2008 (Thousands)
III-3 NA Residential Broadband Connections by Service Type, 2004-2008 (Thousands)
III-4 NA SME Broadband Connections by Service Type, 2004-2008 (Thousands)
III-5 Enhanced Services
III-6 The Versions and Features of xDSL
III-7 Wireline Basic Communications Pricing
III-8 Wireline Data Access Pricing (256Kbit/s)
III-9 Wireline Data Access Pricing (1 Mbit/s)
III-10 Cable Telephony Basic Communications Pricing
III-11 Cable Telephony Data Access Pricing (256 Kbit/s)
III-12 Cable Telephony Data Access Pricing (1 Mbit/s)
III-13 Comparison of Monthly Pricing for an SME with Five Employees
III-14 Line Features Pricing Comparison: Qwest vs. Cox Cable
Chapter V
V-1 Cox Communications Residential Revenue Mix, 2000-2003 ($Thousands)
V-2 Cox Business Services: Location Growth, Revenue Growth 2002-2003
V-3 Cox Digital Telephone Service: Equipment and Network Costs
V-4 VoIP Softswitch Network-Powered Service: Equipment and Network Costs
V-5 VoIP Softswitch Premise-Powered Service: Equipment and Network Costs
V-6 LightPath Telecommunications Services Suite
V-7 LightPath Revenue Growth, 1999-2002
V-8 LightPath Operating Metrics, 1999-2002
V-9 Charter Communications: Revenue Generating Unit Statistics
V-10 Insight Communications: Telephone Service Performance
Chapter VI
VI-1 Total Number of SMEs by Cable Operator
VI-2 Total Number of SME Business Lines by Cable Operator
VI-3 Total Number of SMEs within Two-Way Markets by Cable Operator
VI-4 Potential SME Business Lines within Two-Way Markets
VI-5 Annual Revenue Potential of Data and Voice Bundle in Two-Way Capable Markets by
Cable Operator
VI-6 Four Cable Telephony Delivery Options
VI-7 Cable Telephony Service Delivery Model: Fiber/Copper, 2003-2009
VI-8 Cable Telephony Service Delivery Model: Channelized HFC, 2003-2009
VI-9 Cable Telephony Service Delivery Model: Dedicated Cable Modem, 2003-2009
VI-10 Cable Telephony Service Delivery Model: Shared with Cable Modem Service, 2003-2009
VI-11 Cable Telephony Service Delivery Model: Total Potential for Small Businesses, 2003-2009
VI-12 ADSL and Cable High-Speed Lines, 1999-2003
VI-13 Bundle Pricing-DSL versus Cable, Year End 2003
VI-14 Cox versus Verizon DSL Performance, Year End 2003
VI-15 ILEC Business Line Erosion (Thousands of Business Lines)
VI-16 Top-30 Telephone Companies: Number of SMEs Exposed to Cable Competition
VI-17 Top-30 Telephone Companies: SME Business Lines Exposed to Cable Competition
VI-18 Top-30 Telephone Companies: Number of SMEs Vulnerable to Cable Operator Competition
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