Ice Bucket, Bathrobe and Road Runner

Residential customers are the backbone of cable operators’ highly profitable high-speed data business, but commercial customers are becoming increasingly important. MSOs are seeking to gain a foothold in vertical segments of this higher-margin market, even as telecom companies are rushing to do the same. Just weeks after Time Warner Cable announced the launch of a suite of Road Runner services to the hotel and motel industry, for example, Qwest announced it had signed agreements for long-distance voice, data and IP services with more than 500 medium-sized businesses, enterprise customers and government agencies in 13 states. As Friedman Billings Ramsey analyst Alan Bezoza pointed out in a recent research note, commercial services could be the next battleground for cable/telecom competition as businesses migrate to high-speed cable modems from the more expensive T1 Internet connections offered by incumbent phone companies. It’s been several years since MSOs recognized the commercial opportunities available to them, but expansion was delayed in 2001 and 2002 as the stock market swooned, scandals erupted in the industry and the capital necessary to bulk up was curtailed. While all the big MSOs have waded into the market, Cox Communications, which has been offering business services since 1993 (and since 1997 on an advanced HFC network), has been a pioneer. Cox Business Services has focused on several business segments, including government, education and hospitals. Time Warner Cable SVP, commercial services, Ken Fitzpatrick believes companies in the hotel industry will sign up for the Road Runner services in part due to the credibility of the brand. “We’re seeing a move toward hotels giving this service away just to be competitive,” he notes. With Road Runner, hotel companies “know they are dealing with somebody who is going to be around.” The company has signed agreements with Marriott hotels in multiple cities; Holiday Inns in Charlotte, N.C.; Hampton Inns in multiple cities; Hilton Garden Inns in Green Bay, Wisc., and Syracuse, N.Y.; the Cincinnatian in Ohio; and South Shore Harbour Resort and Conference Center in Houston. Although the company is in talks with many of the larger chains, Fitzpatrick says, no national deals have yet been cut. Time Warner Cable is also focusing on retail and consumer electronics. As of September, the company had 115,000 commercial high-speed data subscribers, up from 67,000 the previous year.