In Special Access Markets, Competition Exists, and Has Worked

Competition works. Over the last decade, cable  operators and independent business access specialists have dramatically changed market share in the special access (business data services) business, even if new services sold by cable operators are not, in some ways, identical substitute products.

To be sure, in the monopoly era, incumbent telcos were dominant providers of special access services, holding 92 percent of the market for special access services in 1980, for example. All that has changed.

The total market for special access services, roughly $40 billion annually, according to the Federal Communications Commission, now has non-telco providers holding about 61 percent market share (a bit less after CenturyLink’s acquisition of Level 3 Communications).

Time division multiplex (T1 and DS3) services accounted for roughly $25 billion of the total market in 2013, of which incumbent telcos accounted for about $16 billion.

In other words, telcos held about 39 percent of the total special access market in 2013.


As of the end of 2014, four of the five largest cable operators alone accounted for about $8.8 billion of the total special access market, including more than half of special access services based on Ethernet technology, even without counting Cox’s business revenue.

Some will argue, or note, that Ethernet (the next-generation service) is not the same as legacy T1 or DS3. Customers do not seem to care.

The two largest cable companies have small business special access market share in the 35 percent to 40 percent range, according to the FCC.

Price and performance tell the story. Cable services frequently offer scores of megabits per second service for as little as $70 a month. T1 service at 1.5 Mbps often costs around $200 a month.

Higher-speed services (150 Mbp) cost less than that. DS3s (45 Mbps) might cost
$1,000 to $12,000 a month.

Since about 2014, Comcast Business grew revenues by 39 percent, Charter Business by 30 percent and Mediacom Business by 22 percent.  

Comcast Business grew revenues by 70 percent since 2013 and 182 percent over five years, according to researcher Anna-Maria Kovacs of the Georgetown Center for Business and Public Policy, who authored a study for the Federal Communications Commission.

Cable operator Mediacom grew revenues by 38 percent in the last three years. Since 2014, Cogent grew 18 percent and Level 3’s North American operations grew eight percent.

In contrast, during those two years, the business revenues of AT&T and CenturyLink each shrank by six percent  and those of Verizon shrank by nine percent.

Windstream, which combines incumbent and competitive business operations, shrank revenues by seven percent.

Comcast Cable’s share of the small-business market within its footprint is 40 percent, in the medium-business it is 20 percent  and it is five percent in enterprise, a customer segment Comcast entered in late 2015.

In other words, business data services competition has exploded. In 2013 there were 491 facilities-based companies providing special access  in the enterprise market.

Competitive providers--not including cable providers--earned $23 billion of the $45 billion in BDS revenues in 2013.  
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