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Cable Companies Connect with Small and Midsize Businesses

Cable companies cite convenience, efficiency among the reasons why small and midsize businesses should consider handing over their telecom business to them. But can they deliver business-grade service?
Another problem is the requirements of enterprise telecommunications are more stringent than those for consumers. Companies require service-level agreements (SLA), which outline items, such as network availability and include penalty clauses when carriers do not meet them. The telcos have invested millions -- in some cases, billions -- of dollars in their network equipment and management systems in order to try and ensure that there are no service interruptions with their enterprise customers. The cable companies lack many of those features.

In addition, the telcos have developed very extensive customer care systems. "The cable companies have been largely dealing with relatively simple issues, such as cable modem service and do not have the breadth of functionality found in telco customer service systems, which are among the best of any industry," said Robert Rosenberg, president of Insight Research.

These systems consist of a number of components that are often large and complex. Telecommunication service providers have spent billions on their billing systems, so they work with corporate customers that have multiple sites and different types of accounts with their carriers. The cable companies' systems have centered mainly on dealing with consumers.

While there has been a great deal of hoopla about cable companies getting into the voice market, currently, they are still dwarfs in this market segment. They have garnered about 9 million voice customers, which in many markets would be a significant base, but it is only a smidgen of the 115 million telecommunications users in the United States.

The telcos are revamping their operations and zeroing in on the cable companies' bread and butter: cable TV services. Verizon plans to spend $22.9 billion in five years to rewire its network with fiber-optic cable capable of supporting cable TV and high-speed Internet connections. The company expects to attract up to 4 million TV customers and 7 million Internet subscribers with its FiOS service by the end of 2010.

As they move into voice communications, the cable companies do have some positives to draw upon. The telcos have been hamstrung by equal access regulations that force them to open up their networks to competitors. This requirement has driven up their operating costs and made it more difficult for them to differentiate their services. The telcos have been trying to put similar mandates in place for the cable companies but to date have been unsuccessful in their quest. Consequently, cable company services tend to be lower than those from a telco.

In certain cases, the cable companies can leverage their position as a client's video TV supplier to entice the organization to purchase their voice and data services. "Now our customers can watch cable TV services as they have their cars serviced," noted John Steffy, IT director at Findlay Automotive Group, which signed up for services from Cox in the spring of 2006.

More of these cases could emerge in the coming months. Insight Research expects incumbent phone companies to lose more than 1.5 million small business phone lines by the end of 2007 and nearly 10 million small business phone lines over the next five years. The companies fit a variety of profiles: "Real estate offices, retail stores, professional service businesses and healthcare centers represent some of our top vertical markets," noted James F. McGann Jr. vice president and general manager of Charter Business.

The end result is that the battle lines and the contestants in the telecommunication market continue to change. With the cable companies moving into voice, and the telcos moving into television, it seems quite likely that in a few years, more companies will find themselves, like Carson Tahoe Regional Hospital, weighing what the local cable company can offer against what the local telco provides.

Paul Korzeniowski is a freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investors Business Daily, Newsweek, and InformationWeek. He is based in Sudbury, Mass.

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