Cable VoIP Seeks Foothold in Business Market

A rapidly changing voice-services market is rewriting rules, disrupting established relationships.

By Adam Stone | Posted Dec 19, 2007
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Cable providers are taking tentative steps in the direction of providing VoIP-based telephony for small businesses. Leading players Cox and Comcast have made overtures.

This hardly comes as a surprise, say industry analysts.

They see the move as a land grab by cable—an effort to stake out new territory—even as the big telecom players move toward providing data services to residential consumers.

"If you look at the cable providers versus the voice providers, they are really going into each other's turf," said Alan Weckel, a senior analyst with Dell'Oro Group. "They are battling over the potential installed base footprint they can have."

To that end, Cox took its first shot in November with Cox Business VoiceManager, a telephone platform integrating desktop phone, PC and wireless devices.

With its release, Cox claimed to be the first cable provider in North America to deploy a fully owned IP telephone system for the business community.

Cable giant Rogers Cable in Toronto also has a small-business VoIP offering up and running. Comcast is reported to have its offering planned for limited deployment in 2008.

This is not cable's first foray into voice, of course. For some time now the major cable providers have successfully sold voice into the home as an extension of their existing relationships on the consumer side. From bringing cable into the home, analysts say, it's a perfectly natural step to introduce voice services.

The same will likely not hold true in the SMB realm, however. "Now they are trying to establish a relationship with small and mid-sized business, which in the past have had no relationship with a cable carrier," said Mike Paxton, principal analyst for consumer markets at In-Stat.

"Do they know what businesses even exist within the reach of their services?" Paxton wondered.

Breaking new ground here is "definitely a hurdle," not just because of the new relationships that must be formed, but also because of the intense and complex competition, Weckel said. As an SMB owner, "you are looking at your traditional voice provider, you are looking at smaller local service providers and you are also looking at the cable company to see who has the best bundle for what you are doing."

Cable companies likely will find other hurdles on the way into the SMB market. In particular they may be hampered by the limitations of their own infrastructure.

"There are still significant areas of coverage where they flat-out cannot offer voice services, especially in a number of smaller cities and towns," Paxton said. Even in places where a physical network exists, the build-out to deliver VoIP often has not yet occurred.

Nor will cable operators be able to compete solely on the basis of price. As much as they may be able to deliver low-cost products, business consumers will be looking for more than just price as they shop for telephony. They'll want features.

"Because IP is so flexible, because it is supportive of voice, data, and video, you can really bring a lot to the market," and business owners will expect you to, said VoIP industry analyst Jon Arnold of J. Arnold and Associates. Cable operators will need to think through their offerings in order to bundle the right products for the right audience.

As to performance, cable has the edge for now, with its ability to deliver higher speed at a lower cost. But the telcos are catching up fast and it's likely that speed will not remain a differentiator for long.

In the big picture, analysts say, cable is simply eager to maintain something resembling the status quo in a changing landscape. It needs to do something to broaden its own base while holding the fort against a data-driven incursion by traditional voice players.

"It's really an offensive tactic and a defensive tactic at once," Weckel said.

It likely will take a while for things to shake out, as the players map the landscape and ponder business strategies, Paxton said. "We're in inning two of a nine inning game."

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