2016 Shapes Up as Breakout Year For MSOs Pursuing Big Businesses

Bill Stemper, president, Comcast Business.

Bill Stemper, president, Comcast Business.

DOCSIS 3.1, Virtualization and Industry-Wide Wi-Fi Footprint Open Low-Cost Path to Competing with Telcos in Enterprise Market 

By Fred Dawson

March 9, 2016 – Cable MSOs, with a strong foundation in commercial services that now extends into mid-tier SMB markets, find themselves positioned to compete more broadly across all enterprise segments thanks to technical advances that enable a vastly expanded cloud-oriented service portfolio.

Developments at the physical networking and service management layers have come together to give operators the tools they need to respond to customer demand for higher bandwidth and more agile services at cost points well below those of competitors, resulting not only in opportunities to reach larger companies but also to deliver value-added services that might not otherwise be available to smaller businesses. From a networking perspective, with widespread deployments of DOCSIS 3.1 and PONs (passive optical networks) under consolidated control of  new back-office systems, operators are able to deliver high-speed services at speeds up to 1 gigabit-per-second to virtually any business or multi-tenant office building.

In fact, notes Ovum analyst Julie Kunstler, the commercial services expansion now underway in the cable sector is big enough to have a significant impact on the overall PON equipment market in North America. “The U.S. PON equipment market is facing a likely upside,” she says in a recent blog, citing as one example the implications of the consolidated commercial service operations of Charter Communications if its bid to acquire Bright House and Time Warner Cable is approved.

In Bright House’s case deployment of the 10G EPON (Ethernet PON) and DOCSIS Provisioning over EPON platform supplied by Nokia (formerly Alcatel-Lucent), has opened important high-end markets once held exclusively by telcos, such as mobile data backhaul. “Bright House’s successful use of PON is likely to permeate into Charter’s network, increasing sales for PON equipment vendors,” she says.

Such capabilities open virtually the entire U.S. managed services market to cable companies, which, according to IT analytics firm IDC, is expected to increase from $29 billion in 2014 to $52 billion in 2019. Last year, with little penetration in this market, the U.S. cable industry’s total take in commercial services jumped 20 percent to about $12 billion, with Comcast accounting for $4.7 billion and Time Warner Cable taking in $3.3 billion, according to estimates of Heavy Reading.

One of Charter’s chief justifications for acquiring Time Warner Cable and Bright House has been the commercial services potential that comes with being able to service business customers across a broader service footprint. “The economics are powerful,” Kunstler says. Contrasting this side of the business with the $170 or so operators attain in ARPU from triple-play residential services, she comments, “The leasing of 1G MBH services provides monthly revenues of around $2,500, with 10G providing twice that amount.”

Comcast is leveraging the arsenal of new networking and service platforms to farther expand its market base after having spent the last few years penetrating the mid-range SMB market with Metro Ethernet Services. The MSO’s new Enterprise Services unit is targeting Fortune 1000 companies, offering to serve multiple business locations with a portfolio of managed services that include broadband, Ethernet, voice, router, security, business continuity and Wi-Fi.

“We’re committed to expanding and enhancing our offerings for businesses of all sizes, and having the expertise, tools and portfolio in place to deliver customized service packages to nationwide enterprises is a key part of our growth strategy,” says Bill Stemper, president of Comcast Business.

“Large companies need a provider who can help them manage complex networks, develop business continuity plans and integrate cloud-based applications,” he adds. “Our entry into this segment of the market will introduce new innovation and choice.”

Comcast Business has already signed large customers from multiple industries, including financial services firms, banks, hospitality chains and retailers, notes Glenn Katz, who is leading the new group within Comcast Business. He says the MSO’s ability to expand beyond connectivity to a full slate of managed services is helped by its recent acquisition of Contingent Network Services; a national technology deployment and managed services company that helps enterprise customers outsource their day-to-day network operations.

“Contingent’s mission is to provide clients with high-quality, cost-effective network and deployment services wherever and whenever needed for reliable communications across an enterprise, and we couldn’t be more excited for them to join our team,” Katz says. “By joining forces with Comcast Business, Contingent can further expand their reach and take advantage of Comcast’s extensive fiber and hybrid fiber coax network to give enterprises the optimal network experience to meet their business and technology requirements.”

Inter-MSO cooperation across service boundaries is another enabler to cable’s expanding business agenda. Comcast Business has reached network agreements with leading cable operators making it easier to serve national clients with local offices and locations that span different geographies. Such cooperation dovetails with the alliance top MSOs are already engaged in to support Wi-Fi roaming across their networks.

Opening a Wi-Fi connection between companies and their employees will allow operators to extend one of the most important new commercial service capabilities, cloud-based VPNs (Virtual Private Networks), to employees on the go, making it much easier to provision connectivity to company files and apps on a protected, personalized basis than has been the case with traditional VPNs, where employees have to go through the cumbersome process of setting up VPN clients on their personal computers to gain remote access.

In general, with or without wireless components, the ability to offer software-defined VPNs provisioned from the MSO cloud as a service overlay on their networks greatly facilitates companies’ access to IT applications wherever they’re hosted, whether somewhere on a corporate campus or in SaaS (software-as-a-service) providers’ clouds. Moving on a similar track with Comcast, other MSOs are well down the road in preparing to roll out virtualized services if they haven’t already.

Bright House, for example, along with its lineup of phone, hosted voice and broadband connectivity services, is offering an array of advanced cloud and managed IT services. The MSO’s capabilities are a good illustration of what can be done with new virtualized systems, in this case running on a 1 terabit-per-second line card inserted in Cisco 6000 routers. The line card supports Cisco Network Convergence System (NCS), a network fabric family of scalable components enabling cloud-based managed services such as security, network transport, Wi-Fi and traditional voice and data services.

The movement to higher levels of service is underway among Tier 2 operators as well, one example of which is Midcontinent Communications. With a footprint extending across nearly 350 communities in Minnesota, North Dakota, South Dakota and Wisconsin interconnected by an 8,100-mile fiber backbone, MidCo, as it now brands itself, has undertaken deployment of DOCSIS 3.1 in conjunction with Cisco’s cBR-8 converged router to bring gigabit speeds to more of the 55,000 businesses in its domain, some of which already have access to 1-gig service over all-fiber access extensions.

The project, slated for completion in 2017, “will change the quality of life and spur business innovation in the communities we serve,” says Jon Pederson, vice president of technology at MidCo. “The unique DOCSIS and Remote PHY capabilities of the cBR-8 will help us meet our commitments for the Midcontinent Gigabit Initiative.”