New Front In Broadband Battle

NJBIZ, Feb 19, 2007 by McConville, Jim

BASKING RIDGE

Cable companies join Verizon in targeting small business

THE CONTEST between Verizon Communications and cable television operators to deliver a full range of broadband services to homes is rapidly expanding into the small business market.

Philadelphia-based Comcast Corp. and New York-based Cablevision Systems are going after small business customers in New Jersey by repackaging the Internetbased data and telephone service the cable companies sell to residences and offering it to small- to mid-sized businesses.

This represents a vast and largely untapped market for the cable operators. New Jersey is home to roughly 230,000 small businesses, according to the U.S. Bureau of Labor Statistics (BLS), with roughly 13.5 percent of those businesses in the professional services industry consisting of law firms, insurance companies, accounting firms and banks. An estimated 55 to 60 percent of New Jersey's small businesses have fewer than five employees, according to the BLS.

Small business presents "a green-field opportunity for the cable companies," says Bruce Leichtman, president and principal analyst for the Leichtman Research Group in New Hampshire, which tracks broadband and media developments.

Leichtman says cable operators didn't have a complete small business product before 2002 because they hadn't yet added Internet telephony to their lineups. "Now Comcast and Cablevision each have a service with both voice and broadband that can address the business market," says Leitchman. "Clearly, that's a huge potential. If they can just get a tiny share of it, it's a huge, potential new revenue stream."

Comcast, New Jersey's largest cable operator with an estimated 2.5 million residential cable subscribers, plans to spend $250 million this year and an estimated $3 billion over the next three years pursuing the small business market nationally, with a goal of grabbing a 20 percent share by 2012.

Comcast has an estimated 250,000 commercial high-speed data business customers in New Jersey, but none subscribe to its voice-over-cable telephony service. According to Comcast CEO Brian Roberts, "the commercial side of the business is perking up." Roberts promised last fall that "we are going to have a high-speed data business that's going to be able to also include voice- so really a two-play."

Roberts said last month that Comcast will initially target small businesses with 20 or fewer employees. "There's no question that this year the small business is going to a huge focus for us, [Comcast]" says Comcast spokeswoman Bern Bacha.

Cablevision, which has roughly 1 million New Jersey cable-TV subscribers, is driving into the small- to mid-sized business market by offering packages of phone and high-speed Internet service. The company began selling the packages last June.

"We're aggressively pursuing small business because it's really a golden opportunity and it's an immediate opportunity for us to sell voice and high-speed Internet to businesses already passed by our cable network," says Cablevision spokesman Jim Maiella.

"We can offer substantial savings over telecom operators," Maiella says. "We're offering business services at residential prices."

Verizon and cable companies price their services differently. Verizon offers a sliding-scale package priced at $39.99 to $199.99 per month, depending on a business customers needs.

Cablevision offers small business subscribers its Optimum high-speed online and voice in a discounted bundled package of $59.95 a month. Comcast has yet to set a price for its Internet and voice package, which it plans to roll out in April.

Verizon, whose operating headquarters are in Basking Ridge, appears unruffled by the cable operators' push into the small business market. "I get a kick out of the idea that this is a brand new market segment that hasn't existed before, like somehow we [Verizon] woke up and realized 'gosh! There's 230,000 small business customers out there!'" says Bobbi Phillips, associate director of marketing for Verizon's small business group.

"This is a customer segment that we have been looking at and targeting for literally decades," she says. Today, "we're seeing small businesses being more willing and able and interested in spending money. "The [information technology] spending by small businesses is going up by 8 percent this year, which is roughly 25 percent greater than that spent by large businesses."

"There is no one-size-fits-all answer," she says of small business marketing. "In the small business environment, the needs of a 10-person law firm could be very different from the needs of a 10 person manufacturing or construction firm.

E-mail to jmcconville@njbiz.com