Verizon calls cable operators a wild card in the business services market

Verizon (NYSE: VZ) says that cable operators' efforts to build fiber networks to deliver Ethernet and IP-based services will enable them to compete in 77.1 percent of the carrier's wireline markets.

In an FCC filing, Verizon cited data collected by independent consultant Arthur Menko, who looked at how business customers can get broadband services from cable operators leveraging their existing hybrid fiber coax (HFC) network.

By looking at five Core-Based Statistical Area markets where cable operators have deployed DOCSIS 3.0 technology, Menko said he took a "conservative approach, because it only picks up areas where cable companies provide voice service to a business customer."

"Cable operators also provide non-voice services like data and video over DOCSIS 3.0 facilities to business customers that do not use their voice service," Menko said, according to the FCC filing. "Typically, cable providers serve more commercial data customers than voice customers."

Verizon points to how Comcast (NASDAQ: CMCSA) continues to ramp up its business service presence by establishing its Enterprise Business unit and expanding fiber into more markets.

In September 2015, Comcast announced a new division focused on serving satellite offices of large enterprises. As part of that effort, it also established E-NNI agreements with various cable MSOs and continues to expand its fiber network into new markets and win new customers like the College & Crown development in New Haven, Conn., and Huntsville, Ala.

At that time, Comcast said it had already signed large customers from multiple industries, including financial services firms, banks, hospitality chains and retailers.

"Cable companies are now "a disruptive wild card" in the marketplace," Verizon said in a FCC filing. "One example of this disruptive force is Comcast's September 2015 formation of a new business unit to provide enterprise broadband services to Fortune 1000 enterprise customers -- a development the 2013 data could not have included."

When Comcast launched its enterprise unit it saw "continued growth in the number of customers receiving [its] Ethernet network and cellular backhaul services" and growth in revenues at the highest levels in its history."

Verizon's filing comes as the FCC continues to review the special access market.

A number of competitive carriers like Level 3, BT Americas, and Windstream have argued that Verizon, AT&T (NYSE: T) and other incumbent telcos have an unfair hold on the special access market.

While these service providers have built out their own last mile facilities to serve their business customers, all of have had to supplement those builds by renting facilities from local ILECs like Verizon. Level 3 said it currently pays Verizon about $103 million per year, while a comparative service from a competitive carrier would be about $86 million a year, for example.

Verizon claims that as the FCC looks at special access rules, it should consider how cable has emerged as a new competitor in the market.

"As it considers competition related to special access services, the Commission must determine where competition from cable or other providers is possible," Verizon said. "For cable, this means taking into account cable's advantages resulting from its ubiquitous broadband networks, the enterprise facilities it has deployed to date, and rising demand that increase the available revenue opportunities. Comcast's announcements spotlight the need for a forward-looking approach that takes into account all sources of both actual and potential competition."

For more:
- see this FCC filing (PDF)

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