Things, while not bleak for the cable industry, are not exactly sunshine and lollipops, either, these days. Industry leaders are scampering to assure shareholders that yes, indeedy, those "rebuilt for the ages" HFC networks can handle the load of high definition and user-created content that’s bearing down on the industry like an out-of-control 18-wheeler going down a hill. HFC, the message goes, is more than enough to fend off all competitors. Pay no attention, they say, to those men behind the curtain with their twisted-pair wires or their satellites or their fiber; we’ve told you before that they’re no match for the genius of cable. Bellheads don’t understand video entertainment and satellite – well, that’s just illogical when you run it up against our highly interactive locally inspired networks.
The story might play on Broadway, but it’s getting bad reviews on Wall Street, which is consuming a big chunk of time for the residential/entertainment side of the business with these public companies.
Meanwhile, on the private side of the street, Cox Communications, unencumbered by public money and the need to explain itself to the technologically backward moneylenders, is doing its thing without worrying about quarter-to-quarter results. Cox’s thing is to make money serving commercial customers.
"I can’t talk about the other operators, but on the Cox side of the equation, we recognize the growth potential we have from a business perspective and the need to continue to grow on the business side of the equation," said Mark Bowser, vice president of Cox Business. "Not just for growth itself, but strategically as well, we need to have a good presence in business."
For Cox Business, the market has a dual edge. Score and defend "It’s both an offensive and defensive strategy for us," Bowser said. "You can’t give your competition a freebie softball that you have no means to go and attack."
While the rest of the industry is scurrying to find ways to jam more channels through coax, Cox is investing time, effort and money in the Extendable Optical Network (EON) initiative to push fiber out to even the smallest blocks of end users. It’s something you can do when you’re private.
EON is only a piece of the network puzzle. Cox this week announced that it ranked above all MSOs (a smaller feat than one should imagine) and several incumbent providers as a top tier Ethernet provider according to Vertical Systems Group‘s Year-End 2007 U.S. Retail Business Ethernet share analysis. Cox’s mid-year market share was 8.9 percent based on delivering Ethernet services to customers via both direct fiber and HFC routes. A good fiber diet "We have a good, strong Ethernet product in the marketplace right now, and a lot of it’s driven off our fiber network, but we’re driving it off our HFC network as well," said Bowser, adding that Ethernet is "becoming an easier sell … it’s becoming a lot more accepted."
At the moment, Cox is positioning its Ethernet service at the "upper end" of its small business space, aiming at companies with 50 employees and above. That’s logical, considering the way Cox slices up its business and its customers. While noted for its direct fiber links to large businesses, the so-called enterprise customers, Cox also serves Ethernet and voice service to "very small," 20-and-under worker customers and "small" 20-to-100 employee businesses, "and we are extremely successful in that very small space."
Part of that success is based on the fact that from the top down, the management at Cox recognizes the value of business customers and encourages its business unit to pursue them. That includes using fiber, HFC and, a little surprisingly, even wireless. Cox was one of the few cable bidders in the seemingly endless FCC 700 MHz wireless auction, and it envisions point-to-point broadband wireless as a supplement to its fiber diet.
"On average, we’re in the range of 35 percent of businesses passed in the franchise are covered by our network, and we continue to work on expanding that to get up to more of the residential numbers – up in the 95-plus percent kind of range," Bowser said. "One means to do that is looking at a wireless point-to-point strategy to get to a PON or network point in a business complex and ultimately go with fiber over time."
Thinking ahead is a good strategy for a company that’s competing, long term, with incumbent telephone companies with a history of thinking behind. Even those telcos, though, are starting to realize that they have an asset that cable lacks – mobile wireless – and that more customers want to link their mobile communications with their fixed lines.
It’s unclear – and Bowser, being under an FCC gag order, wouldn’t cough up any details – what Cox plans to do if it wins the 700 MHz auction spectrum. The company does have a more defined strategy when it comes to what it can do with what it has now. Sprint-ing ahead "We have a partnership with Sprint using Pivot," said Bowser. "It’s principally residential today, but whether it’s the Pivot brand or some other brand, we will drive it to business as we go forward."
Does Sprint know that? After all, doesn’t Sprint compete in the commercial space?
"They are very open and anxious in the business space because they have never been very successful in small business," said Bowser. "Most of their business is in large biz."
So, at least according to Bowser, Sprint would be willing to play nice. That, like most things Cox has going in the business space, will bear close watching, but if the past is the road map to the future, it’s likely it will pay off as Bowser predicts.
– Jim Barthold