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Broadband Access
Commentary
Broadband hits the SMB spot
Cable, CLECs take advantage of the underserved country
by Sean Buckley
When it comes to broadband access, best-effort DSL and cable modem data service often comes to mind, while business-class services typically mean T1 and above.
Apart from the occasional hiccup (the power goes out or I forget my password), my new Comcast cable modem connection works fairly well for basic data access and the occasional YouTube view of concert clips.
Yet, the small-to-midsize business market, despite some efforts by large incumbents to throttle down their T1 services for SMBs, has remained the land of the underserved.
Part of the reason SMBs have been left behind—it’s been well told—is their sheer diversity. An SMB could range from someone with a one-line SOHO, to a legal office, to a larger 100-person site that can afford an IT staff but might need help with specific IT issues.
Arunas Chesonis, president and CEO of PAETEC, who bought up the assets of beleaguered McLeod Communications for its SMB and remote office service capabilities, admitted the market will always be somewhat of a challenge but also an opportunity.
"For smaller customers, it’s really tough to spend a lot of time consulting because they are smaller [and] don’t have the resources in place. So you [must] come up with certain packages for certain types of businesses,” he said.
But where incumbent carriers may have faltered delivering to SMBs, CLECs such as PAETEC and, increasingly, cable MSOs are happy to oblige with broadband services tailored to their needs.
Cable steps up
While residential video will remain the cable operator’s bread and butter, cable MSOs (e.g., Cablevision, Comcast, Cox, Charter and Time Warner Cable) are targeting both SMBs and larger businesses with increasing vigor.
Cablevision’s Optimum Lightpath division has found continued success serving New York medium and large businesses with Ethernet services. On the other hand, MSOs are targeting SMBs with broadband packages leveraging the same coax used for residential customers. What’s more, the DOCSIS protocol used for these services has built-in QoS and security hooks.
Leveraging existing coax is a compelling proposition for the MSO. A lot of coax going into neighborhoods for residential service often passes the main streets where SMBs reside.
To up the ante of their business offerings, some MSOs have layered enterprise-like applications such as e-mail and security into their respective bundles. Comcast, for example, partnered with Microsoft to provide e-mail and file sharing.
Competitive cable operators, while not on the same scale as an MSO, are also getting into the SMB act. Competitive cable overbuilder RCN introduced an enhanced care service where a representative can connect into a customer’s computer to resolve issues. The only catch is that the RCN service costs US$30 per hour and US$20 for each subsequent half hour.
SMB broadband-based services, however, are only one part of the overall MSO coax-based business play. Cox, for one, has deployed Vyyo gear to deliver T1-like business services over existing HFC plant in select markets.
Obviously, the next step for the MSO community will be to scale to medium and larger businesses outside their regional islands.
Competitors consolidate and expand
The competitive telecom or CLEC market, after suffering years of financial bloodshed due to unrealistic promises, continues to consolidate.
Over the last three to four years, surviving CLECs have gobbled up the assets of faltering players. In addition to PAETEC’s various acquisitions, Integra, NuVox and ONE Communications (formed out of the merger of Choice One and CTC and the acquisition of Conversent Communications) have also consolidated the market segment.
Like the cable companies, these competitors continue to carve out new SMB-based offerings. One offering that sticks out is New Edge Networks’ class of service-based DSL. (See:
Future-Net 2008: NewEdge closes the T1 gap)
For an SMB with limited options beyond a T1—a prospect not only too expensive but also probably unnecessary—a secure DSL connection with CoS could give the SMB peace of mind knowing its growing application sets will work without a quantum leap in bandwidth.
NewEdge’s service could even be palatable to a midsize business with headquarters and smaller satellite offices where a DSL connection with standard voice would be sufficient.
Beyond the capabilities for the end-user are the potential wholesale opportunities it could create. Brian Washburn, Principal Analyst for Business Networks Services at Current Analysis and a former Telecom Magazine alumn (Class of 1992), told me that a large service provider could potentially purchase the service to better compete with the likes of the cable companies.
But what if you’re an SMB and want more than a T1 and DSL is not enough? For those customers, Greenville, S.C.-based NuVox and other competitors (Integra Telecom, Time Warner Telecom and XO) are happy to oblige with mid-band Ethernet over copper services ranging from as low as 2Mbps to 20Mbps and beyond.
Despite the competitive plays, RBOCs continue to tout their support for SMBs. The City Business Journal Network poll recently crowned Verizon the No. 1 brand to beat out Bell brother AT&T at No. 4.
The RBOC’s SMB posturing should not be all that surprising. After all, people have a comfort level with the mothership and its heritage of reliability.
In another case of leveraging and extending its assets, Verizon earlier this year began offering 20Mbps symmetrical and asymmetric 50/20Mbps and 30/15Mbps service plans. Again, the catch here is the SMB has to reside in an area where FiOS is available.
Whether it’s the cable company, a CLEC or an ILEC, the SMB services market has become one of greater choice. And while broadband is hitting the SMB spot, market success will always come down to the more fundamental issue of good customer service.
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