A recent wave of cable industry consolidation via major acquisitions may have created three powerhouse cable operators in Altice, Charter and Comcast, and it's clear that these MSOs are driving growth in the cable industry’s Ethernet market.
What’s interesting about the cable industry is that it’s the fastest growing provider segment of the Ethernet market.
Charter’s Spectrum Enterprise, Comcast, Cox, and Altice USA have gained a position on the 2016 U.S. Cable MSO Ethernet Leaderboard, according to Vertical Systems Group’s latest research.
Taking the top position on VSG’s cable Ethernet leaderboard is Spectrum Enterprise, Charter’s business division. By acquiring Time Warner Cable and Bright House Networks, Charter doubled its fiber and HFC reach across multiple markets on which it can deliver Ethernet services.
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“This segment realigned in 2016 with Spectrum Enterprise rising to the top as a result of Charter’s acquisitions of Time Warner Cable and Bright House,” said Rick Malone, principal of Vertical Systems Group, in a release.
Close behind Charter is Altice USA, which established an immediate Ethernet and business services footprint in the Northeast, South and West through its purchases of Suddenlink and Lightpath.
“Altice USA advanced as a major player in the Cable MSO segment on combined Ethernet ports from its acquisitions of Suddenlink and Lightpath,” Malone said.
Charter, Comcast ramp up
Now that it has Bright House and Time Warner Cable under its belt, Charter’s Spectrum Enterprise is in a good position to drive Ethernet and overall business services growth – a factor that was evident in the cable MSO’s fourth quarter revenues.
Charter’s fourth quarter commercial revenue grew 11.8% to $1.42 billion. Within the business segment, small and medium business revenue was $891 million, up 13%, while enterprise grew 9.8% to $526 million.
Driven by 6% and 11.8% of residential and commercial revenue growth, Charter’s total fourth-quarter revenues rose 7.2% to $10.3 billion.
Comcast is being no less aggressive in expanding its presence in the business services arena. With an estimated $5.5 billion opportunity, Comcast is seeing opportunities within three main segments: small medium business (SMB), medium businesses, and enterprise.
“We think that within the small and medium space its $20 to $25 billion opportunity within our footprint,” said Neil Smit, president and CEO of Comcast Cable, during the recent Deutsche Bank 2017 Media & Telecom Conference. “We think we have about a 40% market share there, so there still a lot of room and opportunity you mention there. The medium-size business is about a $1 billion business for us right now.”
Smit also sees growing potential in the enterprise market, one where it is still a relatively new entrant.
“We have less than a 5% share [in the enterprise space],” Smit said. “We think it's another $13 to $15 billion opportunity within our footprint.”
Comcast Business has continued to sign up a number of large-scale enterprise customers. Smit said the company won a small, fast food restaurant chain with about 6,000 locations as well as providing Wi-Fi and internet services to a small retailer with about 13,000 locations.
As it tries to appeal to more business customers, Comcast Business continues to expand its fiber network footprint into more markets. The service provider has made network expansions into new areas like Eastern Kansas City, Missouri and Montgomery County, Maryland.
But since it can’t reach every location with its own network, Comcast Business service provider has established multiple external-network to network interconnection (E-NNI) agreements with other cable MSOs.
“If it doesn't fit in our footprint, we have cooperative agreements with other MSOs where they get their percentage of billing outside of our footprint,” Smit said. “But we do the master bill, so the customer has just one bill to deal with.”
Network expansion is only one part of Comcast Business’ method to appeal to medium and large business customers. The cable MSO began providing enterprise customers private links to the Microsoft Cloud, strengthening its bond further with business customers that are transitioning to cloud-based services, for example.
Altice, Cox enhance reach, fiber networks
By purchasing Lightpath and Suddenlink, Altice gained an immediate large scale Ethernet footprint that operates over hybrid fiber coax (HFC) and fiber.
In the New York metro area, Lightpath’s fiber network spans more than 8,000 lit locations and 6,500 route miles. Additionally, Lightpath’s E-Line (EPL), V-Line (EVPL) and ELAN (EP-LAN) products have all received MEF CE 2.0 certification, giving new customers the peace of mind that the service provider’s Ethernet service complies with the latest standards.
Suddenlink also gives Altice network presence in key markets like Greenville, NC; Charleston, WV; Tyler, TX; and Lubbock, TX.
Cox, while not making the big acquisitions of its cable MSO counterparts, remains an aggressive investor in fiber network expansions to support Ethernet services.
The cable MSO purchased a large stake in Unite Private Networks (UPN), bolstering its metro and regional fiber portfolio across a number of Tier 2 and Tier 3 markets. While Cox did not reveal how much of a stake it would have in UPN, Cox gains access to 6,200 route mile fiber network that connects to 3,750 on-net buildings across 20 states, primarily in the central United States.