The coming year is when we see just how formidable U.S. cable companies will be in the small business communications market. To be sure, many veterans of the business communications market don't think cable will much of a factor in the enterprise market. Maybe not. That's not where cable companies are going to focus, which is the small business customer.
Comcast Corp. apparently plans to spend $3 billion to sign up 20 percent of small companies in its territories by 2012. Time Warner Cable Inc. is also pursuing businesses with fewer than 1,000 employees. And Cox Enterprises has been signing up lots of business customers for years.
Phone companies dominate the $25 billion annual market, which can generate profit margins about 10 percent higher than services offered to consumers or enterprises.
On the other hand, large telcos don't generate nearly as much money from phone lines and calling as they used to. In fact, small business lines provide only about five percent of at&t's revenue these days.
Cable providers, with less than five percent of the small business market, may seize one-third by 2012, saus Sanjeev Aggarwal, AMI-Partners VP.
So two things are going to happen. In some cases telcos will cut their own prices to match the discounts cablers are expected to offer. They'll keep share but sacrifice margins. Or, telcos can simply accept the loss of some share to maintain margins for a while longer.
Anticipating the onslaught, Verizon and at&t seem to be prepared to cut prices and bundle services to keep small-business customers who sign up on contracts.
Verizon offers 20 percent off Internet access for companies taking unlimited local and long-distance calling plans for one year. Customers buying voice services from at&t pay roughly 40 percent less with an annual Internet service contract.
About 54 percent of AT&T's small and mid-sized-business customers in areas where cable may compete have might already have signed new contracts, some observers suggest.
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