Cable operators are in an interesting position to drive new competition in the wholesale special access market, giving CLECs the ability to connect their multi-site business customers in areas where they can't economically reach with their own facilities today.
The presence of cable operators could potentially shake up the wholesale special access space where incumbent telcos AT&T (NYSE: T), Verizon (NYSE: VZ) and CenturyLink (NYSE: CTL) have enjoyed a monopoly position for decades.
While cable is still arguably a small part of the broader last mile wholesale market, they do have a few things going to become a larger factor in a market that's been held hostage by local incumbent telcos: their ongoing aggressive buildout of fiber facilities into more markets to serve Ethernet and wireless backhaul and their widely-deployed hybrid fiber coax (HFC) facilities.
On the fiber side, all of the major cable operators such as Comcast (NASDAQ: CMCSA), Cox, Time Warner Cable (NYSE: TWC) and even regional cable operators such as WOW! have been deploying fiber to support their growing Ethernet service sets. These operators may not have nearly the same market share as larger telcos that serve multi-national companies like AT&T, but according to Vertical Systems Group, cable represented the fastest growing segment in the Ethernet market.
HFC is also an important element of cable being able to serve CLECs, particularly those that need to get quick access to an alternative resource that operators have deployed widely throughout their networks. Having a set of HFC-based options, including Ethernet over HFC, means that a cable operator could address perhaps lower speed needs between 2-10 Mbps.
Comcast has been advocate of such an approach on the retail side with its [email protected] service, targeting the emerging teleworking movement for businesses. The MSO could potentially replicate similar lower speed services in the wholesale market for CLECs that need access into business locations.
Cox and Time Warner Cable today offer a mix of speeds over their existing HFC networks as an alternative to traditional T-1 access from the telcos. On the HFC-based network, Time Warner Cable can deliver speeds ranging from 512 Kbps--10 Mbps, while the fiber network will offer speeds from 5 Mbps--10 Gbps
Charlie Reed, partner for Atlantic-ACM, said that while much of cable's wholesale focus has been on serving wireless backhaul opportunities, it has a tremendous opportunity to offer similar HFC-based lower speed services to CLECs.
"Cable is beefing up their mid-speed and low-speed access products," Reed said in an interview with FierceTelecom. "We've seen Cox and Time Warner Cable be in that area and it's all about having a different option for T-1s with that lower 2 or 5 or 10 Mbps services, and I think you'll see Comcast gear up and play in that space more."
However, cable is still a relatively small part of the overall special access wholesale segment.
According to Atlantic-ACM, cable operators make up only $1 billion of the entire $14 billion local wholesale transport market. Over half of the wholesale segment that cable serves consists of wireless backhaul.
This means that CLECs still primarily have to rely on traditional telcos like AT&T and CenturyLink, which argue that competitive providers have plenty of choice.
CenturyLink said in a filing arguing for forbearance of its dominant carrier classification that competitive carriers "can deploy their own facilities, use a cable provider's or other third party's wholesale services, 53 use TDM-based DS 1 and DS3 services or use copper loops purchased at TELRIC rates, as many CLECs have successfully done."
Comptel, an industry group representing competitive providers, protested CenturyLink's recent move to get forbearance from dominant carrier status, saying that CLECs will continue to have to rely on incumbent telcos because of the broad reach of their wireline network infrastructure.
"As a practical matter, only incumbent local exchange carriers enjoy the benefit of a ubiquitous network that represents the cumulative investment of decades, supported by a geographically dispersed customer base that is still significant, even after years of competition," Comptel wrote in its filing. "Certainly parts of this network must be replenished, but much of the core investment – in poles, conduits, rights-of-way, fiber and even copper – is easily reusable in a broadband infrastructure. CLECs, on the other hand, would have to duplicate the entire ILEC network."
Cable companies may have a long way to go in becoming a larger factor in the broader special access market, but their presence is needed to help put more options into the hands of competitors that are in need of new alternatives to support their growing business service customer base.--Sean