Cable Begins SME Voice Assault

If 2007 is the "Year of" anything, it will be the year the cable industry began its assault on SME voice revenues. But it might not be until 2008 that cable giant Comcast makes its own move. Charter Communications, Cablevision Systems Corp. and Videotron Telecom have added voice offerings to their commercial services packages. Cox Communications has been doing so for some time.

Cablevision Systems is pitching a new multi-line VOIP product targeted to firms with fewer than 25 employees. A four-line package costs $29.95 a month for each line in the first year of service. Notably, the commercial service initially costs no more per line than the company's popular VOIP product, Optimum Voice, for consumers.

“We’re trying to break that traditional [price] line between business and consumer” service, says Joseph Varello, Cablevision VP. Comcast, Time Warner Cable, and Bresnan Communications all say they will start selling voice optimized for SMEs. In the New York area alone, Cablevision estimates that businesses spend nearly $5.9 billion a year on phone services, with SMBs accounting for $3.5 billion of that total.

Comcast estimates that businesses spend about $20 billion a year on phone services in its territories. The company aims to start offering commercial VOIP next year.

Cable experts argue that it also makes sense to expand into business telephony because it's a way to hurt the phone companies in one of their prime markets and undercut their ability to subsidize low residential phone rates.

"The telco subsidy swamp can be drained to the extent that SMB spending is diverted to cable, and even more so once telcos respond to competitive pressure by reducing their rates to SMBs and investing more in SMB customer support," writes Peter Shapiro, a principal at PDS Consulting. "Thus cable will benefit twice from the growth of its commercial business: first, by increasing top-line revenue; second, by limiting resources otherwise used by telcos to compete for cable's core residential customers."

Speaking at the Society of Cable Telecommunications Engineers' (SCTE's) Business Services Symposium in Chicago last week, cable strategists said they're targeting smaller companies because these firms are usually located either within the reach of existing cable plant or not very far away. In contrast, big companies are usually located farther away from cable's residentially-oriented plant.

David Pistacchio, executive VP and general manager of Cablevision Optimum Lightpath EVP, has urged cable executives to "price disruptively."