Comcast’s Watson: There’s a lot of upside in business services growth

Comcast Center headquarters in Philadelphia. Image: Comcast
David Watson, president and CEO of Comcast Cable, told investors during its first-quarter earnings call that while its largest segment is still the small to medium business, the cable MSO foresees potential growth in medium and larger businesses.

Comcast may still be an insurgent player in the business services market, but the service provider continues to make inroads with a range of business sizes, a trend that continued into the first quarter of 2017.

David Watson, president and CEO of Comcast Cable (pictured below), told investors during its first-quarter earnings call that while its largest segment is still the small to medium business (SMB), the cable MSO foresees potential growth in medium and larger businesses.

Comcast's Watson Image: Comcast

“There's a lot of opportunity and upside around growth and if you look at the three basic categories that we have: in SMB, we're at 40%; midmarket, we're at 10% penetration; and enterprise is less than 5%,” Watson said during the earnings call, according to a Seeking Alpha transcript. “It’s success-based, but opportunistically looking at a couple of proactive ones where they make sense and get a good return.”

RELATED: Comcast Business to offer 10G links to IBM’s cloud, supports public, private or hybrid cloud solutions

Watson added that “we think those are sound areas to keep investing” and “we like our rate of growth.”

Enhancing network reach, services

Two areas Comcast Business continues to invest in are growing its network and enhancing its services set in areas like cloud services.

Earlier this month, Comcast announced that business customers would be able to access 10 Gbps of private network connectivity to IBM Cloud for public, private or hybrid cloud deployments, as well as bare metal environments, for various business applications.

It has also continued to enhance its network reach. In February, Comcast Business expanded its Ethernet service capabilities in eastern Kansas City, Missouri, posing a new challenge to local incumbent telco Consolidated Communications.

Comcast Business, which is also extending the service set to Olathe, Kansas, will offer local businesses a portfolio of multi-Gigabit Ethernet options to link multiple sites or branch locations, or to connect their offices to a third-party data center.

Besides Kansas City, Comcast began a multimillion-dollar expansion of its fiber-based network across Montgomery County, Maryland, last October. It also won a multiyear agreement with its hometown of Philadelphia to build an Institutional Network aimed at enhancing local business access to higher broadband speeds while reducing costs.

Comcast Business and other fellow cable operators’ aggressive network and service expansions have enhanced the cable industry’s Ethernet service status. According to Vertical Systems Group, cable is the fastest growing provider segment of the Ethernet market.

While Comcast has a small share in the enterprise market, the cable MSO says that it has plenty of room to grow and take share from other providers.

“We have less than a 5% share [in the enterprise space],” said Neil Smit, who recently became vice chairman of Comcast, during the recent Deutsche Bank 2017 Media & Telecom Conference. “We think it's another $13 to $15 billion opportunity within our footprint.”

Ramping up customers

Comcast Business’ aggressive network and service expansion efforts certainly paid off in the first quarter as the service provider saw revenues rise 13.6% to $1.5 billion. Business services now make up $6 billion in annual revenue for Comcast.

The company said that business service revenue growth was primarily due to an increase in the number of small business customers, as well as continued growth in medium-sized business services.

During the quarter, Comcast added 34,000 new business customers and grew revenue per business customer relationship by 5%.

Mike Cavanagh CFO Comcast

“The small business segment accounted for about 70% of our revenue and 60% of our growth, driven primarily by the net increase in customers,” said Michael Cavanagh, CFO of Comcast (pictured above). “Our midsize and enterprise segments continue to grow at higher rates, given the strength of our product set and the earlier stage of our efforts in these areas.”

Total company revenues were $20.5 billion, up nearly 9% from $18.8 billion in the same period a year ago.