Cable Targets Small Businesses in Nation's Capital
Comcast & Cox Score in DC Area with Targeted Commercial Services
March 1, 2005
by Martin Weiss
Comcast Corp. and Cox Communications are turning up the heat in the Washington, DC market, competing for small and medium-sized businesses against incumbent provider Verizon Communications and other telcos. With proper execution, the two cable operators could deliver a knockout punch to weaker competitors and carve out a profitable niche in serving the small business market. Indeed, with their brand recognition, triple-play offerings, end-to-end facilities and armies of field service and sales teams cross-subsidized by the residential cable business, they may be hard to stop.
Bill Revell, regional vice president of business services for Comcast, is championing the MSO's effort to expand its business market in the metro Washington market. With Comcast aiming to offer voice over IP (VoIP) service to business customers by the end of the year, Revell said the company hopes to achieve a 15% share of the commercial market. Revell said Comcast's most popular workplace product is a high-speed data service that offers 6 Megabits per second (Mbps) downstream and 768 kilobits per second (kbps) upstream, moving to 7 Mbps down in the next month, for $160 per month in a one-year contract. On the entry level, Comcast offers a 5 Mbps downstream and 512 kbps upstream product for $95 a month.
In serving medium and larger firms, Revell views business continuity/disaster recovery as a key differentiator for Comcast because it offers separate entrance facilities from Verizon and most other telcos. Comcast is also enjoying success with telecommuters, thanks to its high residential penetration. Revell noted that "65% of the businesses in our footprint are small businesses, which gives us a major focus on delivering products and services into that segment." Of the 125,000 small businesses in the DC region, he said, 15-18% are already in on-net buildings today.
"To expand beyond that, we are geocoding our on-net business customers with a GPS indicator, and are identifying the addresses in close proximity (within 50 feet) to existing on-net buildings," he said. At the same time, Revell's team assesses prospect bandwidth usage, telecom spending, industry fit and other data, in order to rank businesses for revenue potential and product positioning and to prioritize capital spending for line extensions.
Revell said a 200-foot radius is Comcast's maximum cost effective distance for building laterals and line extensions He said the MSO has established metrics for capital outlays on the residential side that apply to commercial capital outlays too. Comcast pre-markets its services to businesses that are within close proximity to the network and can be provisioned within 10 days. The MSO is also field-testing certified wireless virtual drops until permanent line extensions can be built.
"We can go out and site survey on one day and be out there the next turning it up, versus a month or more to do construction, pull permits, etc.," said Scott Schramm, regional engineering project manager for Comcast. "We wire a building as if the building is going to be hard wired to the street. We wire down to an equipment closet and then we run a drop to the rooftop location."
The line-of-sight rooftop antenna then establishes a wireless link over unlicensed 5.2 GHZ spectrum to another antenna connected to a cable node. "The advantage of using a DOCSIS extension product like this is in the provisioning support and the eventual conversion of this customer," Schramm said. "When we finally do build out the hard line, that customer doesn't see any change. Quality-of-service, speed, service and support are all going to remain the same, and that's what makes this a very attractive product."
A typical new customer that fits the sweet spot for Comcast is The White Glove Omega, a four-employee commercial cleaning company located in a three-story building in Alexandria, VA. The owner, Youssef Aitsaid, said he recently moved his business from a home office to a commercial space and had already been a satisfied cable modem customer. After first calling Verizon to order DSL service, Aitsaid grew frustrated by its lack of responsiveness. He then called Comcast to ask about service availability in his new location. Within a week, Comcast installed his service and Comcast sales representatives visited him to make sure everything worked. "They did a great job and we are happy with their service, and they were very reliable and helpful and we would recommend it to anyone," he said.
Revell said Comcast uses a mix of direct sales and inbound and outbound telemarketing for lead qualification and closing. "For some small businesses, we send out a sales person, and that's a different experience from what they've experienced with other providers," he said. "We look at how many other businesses are clustered around this one company that has an interest. We've found that once we connect one person on the service, word of mouth has been very good for us." Comcast is also selling the product through sales agents that offer IT services for small business customers. Plus, the MSO is looking for additional complementary partners and is exploring other managed service offerings.
To differentiate itself further, Revell said Comcast is thinking about offering hot spot Internet service as a value-added service for businesses. "We have deployed some of those in our hotel properties with our Hospitality One platform for the lodging industry, where we have set up hot spots in lobbies and in business centers for use by hotel guests," he said. "In some cases, it's an amenity as part of the overall package, and in other cases it's an a la carte service."
Cox Stresses Timing, Nimbleness, Local Focus
Turning to Cox, it bought its Northern Virginia cable systems (Fairfax County and Fredericksburg) in October 1999 from Media General. Today, Cox serves about 260,000 customers in Fairfax County and three other counties. It has 40,000 businesses in its coverage area, including many small firms and government and high tech firms in Tysons Corner and the Dulles Airport corridor. Cox completed a network upgrade of the system in October 2003 and launched commercial service in early 2004. Currently, it offers high-speed Internet, cable TV and circuit-switched telephone service over HFC or optical connections.
Jason Welz, vice president of Cox Business, said "mixed use type real estate is what we would consider to be the low hanging fruit, because in many cases it's aerial plant and our ability to install is very quick. We also look at the new developments and new tall shiny glass buildings." At the high end of cost and complexity, Welz said building laterals into commercial office buildings in the Tysons Corner area can average $20,000 per building.
"Unlike what happened to the CLECs over the past several years, we don't take the build it and they will come approach," he noted. "We're making good sound business decisions to ensure that we have a return on that investment... Today a lot of our direction is coming from the customers themselves. We're being pulled into a lot of buildings by customers because they have interest, and in many cases, we can make the economics work with that sole customer."
To gauge interest level, Cox will pre-market services to tenants in buildings where it has a relationship with the owner. When pre-marketing to off-net prospects, Cox shoots for provisioning intervals of 45 days or less. "We have a mix of inside and outside sales teams, where the inside folks are primarily handling the very small business, and a lot of that is inbound, where the small business is pulling us in," Welz said. He notes that Cox is having good success in closing business on the phone for triple-play service. "Typically that's a customer of probably 20 employees or less," he said. "We get everything from retail establishments to small law firms, insurance firms, and real estate."
Welz said word of mouth and the Cox name and brand recognition are the cable operator's strongest sales tools. "They experience our service at home, they like the experience, and they look for the service at their business," he said. He notes that "the small business likes the triple play approach to be able to get voice, data, and video at compelling rates that incent them to buy in a bundle. They also like the unlimited (local and long distance phone) and being able to have one bill."
When competing against Verizon for DSL, Welz said it comes down to timing and Cox's ability to be nimble and local. For many small businesses looking for broadband, "whoever can bring it to me first is who I'm ultimately going to go with," he said.
Illustrating this point, Capital Realty Services is a small family business offering mortgage lending services for commercial real estate deals. Located in the Great Falls Village Center in exclusive Great Falls, VA, the company used to be approximately 200 feet from the nearest cable installation at a nearby restaurant.
Business owner Chris Graves had tried in vain to get a sales person from Verizon, MCI, or AOL to visit her business to explain its high-speed data service. In contrast, Cox gladly sent a sales rep to meet with her face-to-face and earned her trust. Besides buying Cox's Internet access, Graves switched her firm's local and long distance phone service to Cox and also signed up for cable TV. For $370 per month, Capital Realty receives a 768 kbps downlink/256 kbps uplink Internet connection, six phone lines with unlimited long distance and video service.
"In addition to personalized service, reliability was very important in selecting a service provider," said Terry Graves, Chris's husband and co-owner of the firm. "I was impressed with Cox' rapid response to our inquiries. They did what they said they were going to do and they did it on time. They called back a number of times to answer some additional questions and everything is running as originally planned."
Martin Weiss is vice president of Holmes & Associates, a cable and broadband consulting boutique in Rockville, MD. Previously, he served as senior vice president of marketing at Winstar, and directed Astrolink's efforts to deploy IP services to underserved markets worldwide via satellite. Marty is best known in the cable industry for the pioneering broadband trials he ran for Times Mirror Cable and Cox Communications, culminating in Cox's successful launch of broadband Internet service in Phoenix, AZ in 1997. He can be reached at marty@holmesandassociatesinc.com.
