Charter Acquisitions Create a Commercial Services Race

The cable industry has always had ambitions in the commercial services area. More specifically, the industry aims at the middle and smaller segment of the small- and medium-sized business (SMB) market.

The telcos generally control the large businesses, though this has evolved a bit over the years. The cable industry became less regionalized and, since it was a newcomer, had more modern equipment. Operators also hired freely from the telco side.

Within the sector, of course, there has always been indirect competition for commercial business. Light Reading reports that Charter, fresh off its acquisitions of Time Warner Cable and Bright House Networks, is making a play to upset what has been a fairly stable apple cart.

During the third quarter, Charter generated $1.38 billion in business services revenue. That’s only a hair’s breadth behind Comcast’s $1.40 billion. During the first nine months of the year, Comcast logged $4.07 billion and Charter $4.02 billion.

Comcast has been on top for six straight years. The move by Charter is not indicative of rearranging the chairs in a zero-sum game. The sector is growing. There is, however, a big gap between the two multiple service operators (MSOs) and subsequent players:

This means that both of the two biggest US MSOs should easily clear $5 billion in commercial revenue for the full year, becoming the first two cable companies to accomplish that feat. Combined, the two cable giants will likely account for nearly $11 billion in business services revenue, or more than two-thirds of the cable industry’s entire total of close to $15 billion this year.

Last week, Zack’s Equity Research reported on Charter. One finding was that the acquisition of the two big competitors should help its commercial services business. This, of course, was verified by the numbers the company released. Likewise, Market Realist reported that Comcast said on its third quarter call that it will continue investing in its commercial services infrastructure.

One of the key differentiators for cable operators is that their equipment is newer and more agile. That claim is perhaps less compelling than it was a few years ago, but still most likely is a point in its favor. The technology upgrade continues. In late September, Wow Internet, Cable & Phone began field testing Juniper Networks Cloud CPE as a means of serving its business customers.

There likely will be growing interest in business services among cable operators. Their networks now are the equal of telcos. Indeed, in some cases, they are superior. The regional nature of the cable industry, while still an issue, is less of a problem than in the past. The biggest driver of any move is that MSOs’ core video business continues to fray around the edges. Increasing investment in business services – and continuing the trend of courting larger companies with more dispersed facilities – makes sense for the industry.

Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at cweinsch@optonline.net and via twitter at @DailyMusicBrk.