Business: The other 'underserved' broadband market

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There has been no shortage of efforts to bring broadband to more consumers--including the FCC's Connect America Funding (CAF-I) initiative and Google's (Nasdaq: GOOG) community Fiber to the Home (FTTH) project in Kansas City.

While these initiatives are both promising, neither addresses another obvious problem: the lack of affordable higher speed broadband services for businesses.

Anna-Maria Kovacs, visiting senior policy scholar at Georgetown University's Center for Business and Public Policy, addressed what could be called the business broadband divide in a recent FierceTelecom column.

"While two-thirds of American households see the value of using lines that run at 15 Mbps, the largest enterprises' networks still include many connections that run at 1.5 Mbps," Kovacs wrote, adding, "These companies, and the competitive carriers who serve them, insist that they will need to continue to use those slow links for years to come."

Higher speed broadband services can bring benefits to large and small businesses alike. For a large multinational corporation, the benefit is that they can have more bandwidth to scale not only large headquarters, but also regional offices to take advantage of new cloud-based storage and IT applications.  

At the same time, Tim Sylvester, founder of Integrated Roadways LLC, which plans to embed sensors in pavement slabs to capture data about hazardous roadway conditions, said in a recent Wall Street Journal article that he could also benefit from Google's 1 Gbps FTTH service. Right now, Google's main focus is mainly on serving residential customers, with plans to unveil a business services suite later this year.

Despite all of the movement by the major telcos and CLECs to deploy fiber or higher-speed Ethernet over Copper (EoC) connections to more business locations, the reality is the majority of businesses today still use low-speed, copper-based 1.5 Mbps T1 connections. Such connections are significantly slower than what Google or traditional ILEC Verizon (NYSE: VZ) promise with their 1 Gbps and 300 Mbps proposed speed tiers.

Another key factor in the business-broadband race is the lack of available fiber to serve both small, medium large businesses. As of March 2012, fiber facilities were only available to 20.5 percent of commercial buildings across Europe, and to 31.8 percent of commercial buildings in the United States, according to statistics collected by Vertical Systems Group.

Rosemary Cochran, principal at Vertical Systems Group, said that despite the progress made, "more than one million buildings in these markets are still not fiber-connected."

That's not to say service providers, including incumbent carriers, cable operators, and CLECs aren't making progress with driving more fiber into buildings to deliver services like Ethernet and IP/VPNs.

As seen in AT&T's (NYSE: T) Q2 2012 earnings, business services were a major driver in its wireline segment. The telco reported in Q2 that IP strategic business services, including IP/VPN and Ethernet, grew 13.5 percent over the same period a year ago, while total business data revenues grew 2 percent year-over-year.

No less compelling is Comcast (Nasdaq: CMCSA), where business services rose 34.2 percent, to $582 million, with the main driver being a small businesses segment that's using a mix of HFC-based DOCSIS broadband services and increasingly IP/Ethernet. At the same time it's seeing what it says an "increasing contribution from mid-size business segment."

But the broadband for business drive isn't just an incumbent carrier and cable MSO phenomenon. Other communities, not content to wait for the FCC or an incumbent to deliver service to them, have taken matters into their own hands to serve both area consumers and businesses.

Besides Google's community broadband effort, Virginia-based Bristol Virginia Utilities (BVU), which built out a FTTH network for consumers, saw the effect of how high-speed broadband can be an attraction to businesses deciding to locate facilities in a particular community.

One business that was attracted to BVU's community was public sector integrator Northrop Grumman Corp. (NYSE: NOC). In 2007, the integrator decided to locate their data center in Lebanon, Va., because it could get affordable broadband services. In response, BVU built out a 14-node regional network across an area covering six counties.

Despite all of the debate over how we can provide broadband to every consumer--even to those who see no need for a broadband connection--regulators need to recognize that businesses are big consumers of bandwidth. The FCC and other regulatory bodies need find a way to get that broadband not only into the hands of consumers, but also more business customers, to stimulate more jobs and economic growth. --Sean