AT&T, CenturyLink, other ILECs can steal SMB share from cable competitors, thanks to fiber

Sean Buckley, FierceTelecomWith all of the talk about 1 Gbps for residential customers, it's hard to notice how these services can impact small to medium businesses (SMBs) whose needs are exceeding the boundaries of a copper-based T-1 or DSL line. It should be of no surprise that many telcos, including AT&T (NYSE: T), CenturyLink (NYSE: CTL) and Verizon (NYSE: VZ) are luring SMBs with fiber-based offerings.

Larger telcos have largely penetrated their enterprise accounts with fiber-based services, including 10G, 100G Ethernet, and new cloud-based services.  

When these service providers are building out fiber they are taking a "smart build" approach that allows them to extend the same fiber to nearby local small businesses.  

Such a trend is evident at AT&T, which is extending fiber facilities to address SMBs. Now that it has reached its goal of bringing fiber to 1 million business locations, the next step is to expand the availability of its GPON-based products.

Matt Beattie, executive director of product marketing for fiber to the building at AT&T, told FierceTelecom that as it wires residential homes for FTTP service those homes are adjacent to local businesses that could benefit.

"If we're going to light up an area that may be primarily residential, you'll have all sorts of those businesses that serve that residential community," Beattie said. "They can be retail locations, they can be professional services offices, or small offices of large business accounts."

Not to be outdone is CenturyLink. Similar to AT&T, CenturyLink plans to bring GPON-based 1 Gbps service to residential homes and businesses in select parts of 16 markets. As it has built out FTTH, the service provider has also built out service to over 500,000 businesses.

Stewart Ewing, CFO of CenturyLink, told investors during the Raymond James 37th Annual Institutional Investors Conference a lot of the businesses it serves with fiber are "associated with the residential builds and getting fiber out to neighborhoods."

Then there's Verizon. While Verizon hasn't taken the 1 Gbps plunge, the telco has been advertising a symmetrical FiOS 25 Mbps or 50 Mbps broadband offering that can be purchased either on a standalone basis or as part of a dual play bundle.

Customers will pay $64.99 for the standalone 25 Mbps service or $89.99 for the data/voice bundle, while the 50 Mbps service is priced at $89.99 standalone or $109.99 for the bundle.

Verizon is in an interesting position. After it completes its sale of its properties in California, Florida, and Texas -- three profitable and well-penetrated FiOS markets -- Verizon's FiOS footprint will be largely relegated to the Northeast part of the U.S. with about 70 percent penetration. With no plans to bring FiOS to new areas, the service provider will seek out ways to retain and attract new customers, including SMBs.

However, Verizon could gain more SMB penetration after completing its acquisition of XO Communications' fiber network, which will give it access to 4,000 new on-net buildings.

Larger telcos aren't the only ones that are bringing fiber to SMBs. Cincinnati Bell and Hawaiian Telcom are motivated to keep existing customers happy or lure others from cable. 

During Hawaiian Telcom's recent fourth quarter earnings call, the service provider said as it connects more homes to FTTH it has also installed fiber to about 2,900 business addresses in 2015, enabling these sites to get access to a 1 Gbps connection. Hawaiian Telcom said it plans to continue rolling out fiber to over 3,000 business addresses this year.

Cincinnati Bell is also in an interesting position. In 2015, the telco passed 97,000 new addresses with FTTH and it offers a 1 Gbps service. The service provider is using fiber-based services to either win back or gain new customers from cable competitor Time Warner Cable, subscribers who previously could only get slower speed copper-based services.

Telcos have a clear incentive to extend their FTTP networks to businesses -- that is, cable's impending 1 Gbps rollouts to SMBs. Those cable operators will scale their 1 Gbps influence even further via DOCSIS 3.1.

Comcast (NASDAQ: CMCSA) recently began deep field trials in Atlanta. Initially focused on residential customers, a Comcast spokesman told FierceTelecom it will be announcing services for business customers leveraging its DOCSIS 3.1 infrastructure at a later date.

ILECs may see residential customers as their fiber broadband targets, but these providers can find ways to multitask those network deployments to target SMBs -- an underserved market that's thirsty for higher speeds.--Sean