2020 Forecast: Where Will Cable's Growth Come From?

Craig Leddy

By Craig Leddy

Industry conferences typically provide opportunities for speakers to hype new products, make bold projections and rattle their sabers at competitors. So it was a bit surprising that a recent Light Reading conference on cable business services was rather subdued, with a notable lack of hutzpah that had punctuated the conference in recent years.

Cable providers have been embracing The Next Big Things, including SD-WAN, virtualization and IoT. But products in those areas require longer lead times and they present operational challenges. While the next-generation opportunities are getting sorted out, cable is focusing on connectivity and apps that “ride off the central nervous system,” as Christian Nascimento, vice president of product management for Comcast Business, put it.

Comcast Business’ Christian Nascimento

Revenue from business services continues to grow for cable providers, but the annual rate of growth has been declining in recent years largely due to a saturated market for broadband access. Cable providers are seeking to leverage their current strengths with SMBs and key verticals by adding products that are organic to their primary services, which also could spawn more opportunities with midmarket companies and enterprises. New applications are adding customer capabilities to broadband, voice and television.

Television? Yes. During the Light Reading conference Nascimento touted Comcast’s X1 for Business, including a version for the hospitality market that uses its popular X1 voice-controlled video platform for cable TV, on-demand movies, applications and hotel services. Reflecting the adage that everything old is new again, Comcast Business has introduced a GameOn service for the hospitality market that enables patrons to engage with live sporting events, a concept that originally was introduced in bars more than 30 years ago.

Giving a facelift to good ‘ol cable television doesn’t mean that cable providers are stuck in the past. Among other Comcast enhancements to its product lines — “elegant solutions,” as Nascimento called them — are SecurityEdge, a cloud-based cybersecurity protection; SmartOffice, including camera monitoring; LTE Backup, to prevent mobile outages; and WiFi Pro, to manage Wi-Fi service and collect analytics.

At the higher end, several providers are offering SD-WAN. Comcast has been pushing its ActiveCore virtual platform that supports its SD-WAN product, which it’s been selling for more than two-and-a-half years.

Spectrum’s Satya Parimi

In early 2019 Spectrum Enterprise launched its Managed SD-WAN running on its edge compute platform, including virtual security that the company will be upselling to customers, said Satya Parimi, group vice president, enterprise data and smart cities, Spectrum Enterprise. Cox Business has made its first SD-WAN deployment and expects more this year, according to Brian Rose, senior director, product development, Cox Business.

While cable is making headway with SD-WAN, implementing the platforms poses challenges. At Spectrum Enterprise, Parimi said the company has been working hard to provide the right level of capacity and scaling; address costs and licensing with partners; provide service assurance; and give customers a quick onboarding process. It requires changes in processes and personnel training, he noted.

Many business customers have been slow to embrace SD-WAN. Carrier-managed SD-WAN accounts for less than …

… 5% of the $40 billion worldwide revenue for managed SD-WAN, MPLS, and site-to-site VPNs, according to Erin Dunne, director of research services, Vertical Systems Group. Many businesses are clinging to their MPLS services, although reliance on T1/T2 lines is dropping off and is ripe for conversion, she said.

VSG’s Erin Dunne

Similarly, cable’s plans for more managed security services have met resistance from companies that want to use their own security provider or are concerned about how cable will provide such services, be it on-prem, in the cloud or elsewhere. “We’ve taken our lumps,” one provider acknowledged.

Despite the flattening of growth rates, researcher Greg McNiff, a cable services analyst for Nomura Instinet, said cable’s relationships with SMBs remain strong and provide opportunities to increase ARPU (average revenue per unit). For the medium-sized business sector, McNiff projects cable annual revenue to rise from $2.4 billion in 2019 to $3 billion in 2023, with penetration increasing from 26% to 30%. Similarly, cable’s penetration of enterprises will increase from 11% today to 15% in 2023 with annual revenue rising from $3 billion to $4 billion in that timeframe, he predicted.

Cable foresees new opportunities in key verticals that have been foundations for growth, especially government, education (K-12), health care and hospitality. Based upon research presented by David Strauss, principal, Broadband Success Partners, customers in those verticals are looking for solutions, not just products, and they value cost-effective broadband with reliable capabilities for WANs and cloud-based services.

Strauss said cable providers are exploring new verticals, including: agribusiness for farming; e-gaming for higher education; energy and utility management; and automation support for manufacturing. Most of these opportunities will arise depending on the types of institutions in a provider’s geographic area, he noted.

For the long haul, some observers believe cable must add a mobile play to its business arsenal. Comcast and Charter offer residential mobile service in MVNO (mobile virtual network operator) agreements with Verizon and Altice USA with T-Mobile Sprint. McNiff said he expects cable providers to pursue owners’ economics in the form of either a large acquisition or merger, or a network consisting of CBRS (citizens broadband radio service), small cells and Wi-Fi.

As capacity and capabilities grow, cable will keep moving toward the hallowed world of virtualization, but it is staying grounded in its roots.

Spectrum’s Parimi said: “We will for an extended period of time be in a hybrid scenario where we have some virtualized services but also device-based services. We have to learn to operate in both worlds. So it’s a learning curve for everybody.”

Quick Bits

Craig Leddy is a veteran cable industry writer, speaker and market analyst, and a contributing analyst for Light Reading and Heavy Reading, which are Informa properties. Leddy founded Interactive TV Works, a media consultancy, to promote understanding of advanced digital services. He is a former editor of Cablevision magazine, senior analyst for The Myers Group and contributing editor for Multichannel News. He teaches the popular How Cable Works industry courses that include CTAM’s Advance Executive Education. He also founded and hosts the Interactive Case Competition, a leading case study contest for business students. Follow him on LinkedIn or Twitter.