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Carrier Services
Metro Ethernet opening enterprise doors for cable operators
Extending IP use for business customers: a small step for MSOs
by Jim Barthold
If delivering video entertainment is a license to print money, then using
those same networks to serve commercial customers is a license to print
larger denominations.
Cable long ago figured that if it could charge exorbitant fees to
residential customers for high-speed data (HSD), it could make even
more money by offering a slightly different variation on the same theme
to small-medium businesses. Throughout this decade, as the telcos
slowly challenged cable’s core video business, cablecos have quietly
floated into the small-medium business (SMB) slipstream.
The phone companies have pretty much ignored cable’s move because
throughout their history carriers have had a license to print really, really
big denominations by providing voice and data services to large
companies. If an SMB slipped off here or there, it was like change falling
through a hole in a pocket.
Now, though, many in the cable industry are ready to chase after high-
roller enterprise customers. Vertical Systems Group, a consulting firm,
values the U.S. Business Data Services market at $32 billion in 2006 (see
Figure 1.).
To attract those customers, cablecos are adapting a traditional telco
technology, metro Ethernet, for their network designs and are pushing
industry standards bodies like the Metro Ethernet Forum (MEF) into a
direction they like (see Stay Tuned for Cable’s Commercial Moment).
Where standards are being written
“Cable operators are getting involved in the MEF because MEF is where
the standards are being written and the processes are being defined,”
says Louise Wasilewski, the organization’s vice president, director and
co-chair. “If you take part in that definition process when you’re ready
to go to market, your systems are in order, you’re speaking the right
language and you’re doing things well. Even if you don’t intend to launch
a service today, you do want to make sure when you launch a service it
conforms with the norm.”
Metro Ethernet services can be offered over a range of bit rates and
access technologies. Primarily, it’s used to convert customers using more
traditional—and expensive—access methods like T1s. While copper-
based Ethernet is evolving, the technology requires fiber to operate
efficiently.
The business opportunity with Ethernet is huge; it’s also laden with
danger because unlike residential consumers and even small businesses,
enterprises don’t tolerate counterfeits and cable has never been an
industry noted for high quality, reliable service.
“I don’t think you can underestimate that this really is a different
business,” says Rosemary Cochran who, as principal and co-founder of
Vertical Systems Group watches and rates telecommunications’ efforts in
the commercial space (see Vertical Systems Group sees growth in Ethernet services).
Enterprise customers who have cable television at home are naturally
wary when companies like Cox Communications and Time Warner Cable
come knocking on their doors. Both of those MSOs have taken steps to
separate their business units from their cable TV bloodlines, but the
names remain the same. Cablevision Systems has renamed its business
effort Optimum Lightpath. While none of the cablecos' business units
would admit it, there’s a good reason to distance themselves from the
residential players (see Cox Business gains acceptance for business Ethernet).
Rep’s an issue
“The reputation of your local cable company is an issue; there’s no
question about it,” Cochran says.
Cable’s push into commercial delivery was an offshoot of its residential
business: the wires went through the neighborhoods, why not charge
businesses more to attach and give them the same cable modem and
eventually phone service for a higher price?
“The cable companies that are offering (commercial services) as a side
business really aren’t serious about understanding what they’re selling
against,” Cochran said. “If you’re competing against Verizon or AT&T …
you have to understand the dynamics of migration from frame relay and
private line legacy services and LANs. Now we’re getting into VPLS and
other technologies and other types of service offerings … a much larger,
broader base of service offerings.”
Cox, Time Warner Cable and Optimum Lightpath committed personnel and
resources to commercial services. The biggest cable guy, Comcast,
remains a question mark. Comcast, which typically deigned not to be
interviewed for this story, seems to be lagging its MSO brethren when it
comes to attacking the enterprise space.
“They don’t have a brand; Comcast Business doesn’t really cover it,”
says Cochran. “They’re in business, but they’re not in Ethernet. It’s an
old infrastructure in most places and (Comcast is) just underestimating
what it takes to be serious about business.”
Comcast prides itself on being a “fast follower.”
A Comcast spokesperson, in e-mail, says that the company’s priority this
year is “to build the team and the infrastructure for the SMB business
(and Comcast is) very busy staffing in the divisions and regions and
building the dedicated sales and tech teams that are necessary to build
and support the business.”
Comcast will add 830 employees to its SMB staff this year and launch
commercial voice as “an important part of our bundle strategy for this
business” that “runs on the same network as our residential services,”
the spokesperson says. “With regard to Ethernet, it’s something we’re
looking at but haven’t put a lot of resources on to date.”
Country club parking lot
Others within cable take a different approach. Some have jeeringly
likened cable’s entry into the MEF like pulling into a Mercedes-jammed
country club parking lot in a Kia, but the industry has made surprising
headway to the point where it is even setting some policy among its
more entrenched peers.
“We may be driving the adoption a little sooner than they (telcos) would
like,” says Kurt Fennell, vice president of product management for Time
Warner Cable Business Class.
Cable aims to pull ahead of its competition by using network elements
that are already in place delivering video.
“I don’t have to cannibalize my existing infrastructure as I move forward
with my new Ethernet strategy,” Fennell says.
TWC, in its annual report, estimated commercial customers would spend
$12 to $15 billion for telephone service in its footprint. This figure was
mostly based on SMB customers and the figures for enterprise would
undoubtedly be larger.
Cable has also learned from its proprietary past and is working within
standards efforts.
“They are in the mainstream of the MEF. Kevin Curran (senior vice
president of marketing) from Optimum Lightpath was elected to the
board,” says Wasilewski. “CableLabs is becoming a valuable contributor
to MEF and the MSOs’ goal is clearly to be able to use their DOCSIS
infrastructure to offer services.”
Curran, who says his election happened “more on the strength of my
personality than I’d be representing the MSOs,” has been preaching
cable commercial services for so long he’s hoarse. Now he’s adding
verses about the value of Ethernet.
Rich fiber diet
“When (Optimum Lightpath) was started (by Cablevision) the one thing
they did was put fiber-to-the-premise” even though using fiber as a
transmission medium for what were then TDM services was “a little like
using a Maserati to go to church on Sunday,” he says. “As carrier
Ethernet got better we elected in 2005 … to end the TDM service.”
Cablevision, Curran points out, has been using Ethernet for 10 years to
carry video around metro serving areas (MSAs) so “the parent company
was anxious to know when we were going to get off this old telco stuff.
We made a conscious decision we didn’t want to grow up to be Verizon;
we had a newer network, so don’t mimic what they do.”
Optimum Lightpath stopped installing SONET and started offering an IP-
based service for big customers in a big regional market—the New York
metro (see Optimum Lightpath: A New York Metro Story).
Cox Business Services (CBS) was not quite as quick as Optimum
Lightpath to embrace Ethernet. It also wasn’t as quick to chase into the
enterprise space, preferring to use its hybrid fiber/coax (HFC) plant for
both residential and business customers. CBS, an MEF member, will drop
fiber to the right enterprise customer, however, and Ethernet is
becoming a more important part of its mix.
“Our roots began in transport services and we’ve been growing Ethernet
for over 10 years,” says Kristine Faulkner, vice president of product
development and management of Cox Business Services. “It’s become
stronger and it plays to a mix of segments that we are after. It plays to
the larger sector … all of which is oriented towards providing
connectivity amongst multiple locations in a market all the way down to
small and retail establishments who are looking for frame relay
alternatives.”
Sticking with traditional
Still, Cox for the most part has stuck to a combination of traditional ATM
and SONET infrastructure following on a trend it began in 2000 with
circuit switched telephony.
Cox gets high marks for its business services from Cochran who singled
out the MSO for its business and Ethernet service as it competes with
larger, more traditional telcos.
“They have separate resources and service plants for business and
they’re treating it as a separate business, not just a side business
of ‘here’s a cable modem and we’ll look at you just like a residential
customer with a little more bandwidth and maybe we’ll charge you a little
more because you’re a business.’”
Another commercial player, Time Warner Cable, has a name problem;
there’s a Time Warner Telecom successfully serving the enterprise
space. Created in the mid-‘90s with support from Time Warner Cable,
TWT spun out as an independent company operating focusing on the
enterprise or “tall shiny buildings,” as Fennell puts it. Now TWC wants to
extract its own gold from those buildings.
“We’ve grown from the small business (customer) up to the mid-segment
with a metro Ethernet focus,” says Fennell. “It’s an emerging market for
us, the commercial space, but I think that our core infrastructure,
processes and people play really well, especially as you start to see
more demand for IP-based services that can be carried over in Ethernet
infrastructure.”
Like its cable brethren, TWC continues to milk its residential cash cow
while shifting focus and resources to SMBs and enterprises. The biggest
thing that might hinder every MSO’s move into the enterprise space—
even with metro Ethernet—is the basic makeup of cable as a noncompetitive, monopolistic service operating in distinct regional areas.
Fennell sees that as a “big strength that we can rely on in the future;
our local presence, our quality of care, our staff in the market of the
customer that we serve.”
Cochran sees it as a place where cable may
be underestimating competition that stood by idly as it encroached on
SMBs but won’t tolerate incursion into the enterprise space.
“If you want to compete against AT&T and Verizon then you’re in a
different game than if you want to compete against a regional provider,”
she says. “There are a lot of autonomous regions where the cable
companies have pockets of business that really aren’t tied together.
That’s an issue. It works if you’re selling cable TV service; it doesn’t
work if you’re trying to position yourself as a service provider.”
Still, she said, she gives the cable industry high marks as a whole for its
effort to use Ethernet to move into a bigger commercial play.
“It’s clearly nascent. Cox has done well; Optimum Lightpath is doing well
on Long Island (N.Y.),” she says. “If you’re in a particular area and can
service that business case then you can make a business out of it. How
profitable are you going to be? That’s the big issue … but the business
class services are a different animal and they’re not all prepared to do
that.”
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