Introduction
Comcast has been quietly expanding its fiber footprint – initially to offer cable modem based broadband Internet service to residential customers – but more recently to commercial buildings and even new office parks. Since 2002, the U.S.’s largest MSO has spent over $600M to expand and upgrade its fiber network in Northern California, according to Andrew C. Johnson, Comcast President for CA. Comcasts’ fiber network covers the area from Salinas-Monterey to Yuba City, CA. All major metropolitan areas in Northern California are now served.
In response to a query from this author, Mr. Johnson wrote in an email:
“In 2006, Comcast made a strategic decision to invest in serving small to mid-sized business customers. This provides us with a new opportunity to reach small law firms, small accounting firms, real estate companies, doctor’s offices, and other small and medium businesses that want innovative and reliable service from a company that they already know. Comcast is a household name when it comes to providing customers with residential Internet, voice and video services – serving small and mid-sized commercial customers is a logical progression and natural extension of Comcast’s network.”
Andrew continued, “In Q4 2010, Business Services revenue increased 53.5% to $365 million and 53.1% to $1.3 billion for 2010. The business margins are improving, and we expect the momentum in the small end of the business market to continue. Business Services is in the early stages of targeting medium-sized businesses and Comcast is very enthusiastic about the growth opportunities to serve mid-sized businesses and to also expand cell backhaul efforts.”
A recent press release stated, the company’s fiber based IP network includes 147,000 route miles of fiber optic cable and serves 20 of the nation’s 25 largest markets. Comcast’s nationwide 40G bps fiber optic backbone network consists of inter-connected regional fiber rings. Data is transmitted over wavelengths operating at 10 Gbps, 40 Gbps, and 100 Gbps. According to the company’s website,
the fiber network has the following additional attributes:
- The first and largest 40G backbone in the world
- The first to run a 100G router interface
- Facilities-based infrastructure
- Multi-terabit scaling capabilities
- IPv4 and v6 in production
Please see the network map figure with accompanying caption from Comcast.
 Comcast’s footprint spans 29 regional subnetworks in 39 states and includes:
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Getting fiber much closer to the business customer has enabled Comcast Business to offer a boat load of new services to small and medium-sized businesses (SMBs). Those customers access Comcast Business network with either coax cable (Hybrid Fiber Coax or HFC) or direct fiber connections to the building. The business services offered include higher speed Metro Ethernet, private line, VoIP and PRI trunking (between the on premises legacy PBX and Comcast’s nationwide VoIP network).
Last year, Comcast bought CIMCO, a Chicago-area business services CLEC with about 2,300 SME customers, and New Global Telecom (NGT) – a provider of managed VoIP services.
Until now, most of Comcast’s commercial services revenues – as much as 85 percent, according to industry sources – still originate from businesses with one to 20 employees, a segment that also represents a potential $15 billion in Comcast’s footprint. (Comcast doesn’t break out its commercial services revenues into categories).
In its first-quarter earnings report, Comcast’s business services revenues were up 50 percent over the same quarter a year ago to $364 million. During its first-quarter earnings call, Comcast CFO Michael J. Angelakis said, “Our investment in Business Services increased 57% to $152 million in the first quarter. We are executing our capital plan well.”
Last year, Comcast realized $1.3 billion in commercial services revenue, which was the first time it topped $1 billion. The MSO expects to increase that amount to $1.6 billion this year.
In an excellent market research report on Cable Commercial Services Strategies: Analysis and Revenue Forecast, Pike Fischer Chief Analyst Tim McElgunn wrote, “Comcast executives estimate the total size of the MSO’s commercial services opportunity at slightly more than $30 billion dollars, evenly split between small businesses and the mid-size enterprise and carrier segment.” Pike Fischer forecasts overall cable commercial services revenue is on track to exceed $5 billion, and will grow at a compound annual growth rate of 31% over the next five years.
PRI Trunks Connect on Premises PBX to Comcasts’ Nationwide Network
Last week, Comcast announced its PRI replacement service, targeted at medium businesses customers, is now available to 85 percent of its service footprint. Similar to a traditional T1-based trunking service, Comcast Business Class PRI Trunks connect to customer’s legacy PBX equipment and maximize phone capabilities over Comcast’s advanced IP network. A trunk is a cost-efficient form of VoIP that leverages a network connection to a Private Branch Exchange (PBX), or digital switch. Each trunk can support up to 23 channels and requires an onsite PBX. Trunk services allow business customers to leverage over-subscription vs. dedicated lines to take advantage of additional cost savings. Leveraging it’s already well-built HFC-based network, Comcast has bundled its Business Class Trunks with its 100 Mbps DOCSIS 3.0-based data service.
In a recent CED Magazine article, Kevin O’Toole, senior vice president of product management and strategy for Comcast Business Services, said, “Down the road, we are looking at hosted PBX,” O’Toole said. “About a year ago we purchased a company called New Global Telecom, and now we are in trial with our hosted PBX offering up in Boston and in Western New England. We also see a lot of additional upside in the Metro Ethernet space.”
Metro Ethernet Services
Comcast Business was advertising their Metro Ethernet services (delivered over the MSOs HFC network) in a booth at the Ethernet Technology Summit earlier this year. This author was so impressed; he invited Comcast sales engineer Nicholas Tornetta to present at the March IEEE ComSocSCV meeting. Nic’s excellent presentation – Comcast’s Triple Play Delivery Network and Business Class services, by Nicholas Tornetta, Senior Sales Engineer with Comcast Enterprise Business Services- is available for free download at:
http://www.ewh.ieee.org/r6/scv/comsoc/ComSoc_2011_Presentations.php.
Ethernet Private Line, Ethernet Virtual Private Line, Prvate LAN (Any-to-Any Ethernet connectivity), Ethernet Dedicated Internet Access, and High-Speed Teleworking solutions were described. The IEEE ComSocSCV audience was quite impressed and a lively debate ensued (more in an Addendum to this article).
On May 16th, Comcast announced a suite of higher performance Metro Ethernet services aimed to meet the requirements of larger business customers. The differentiation of the new Metro Ethernet services versus the ones Nic talked about are that the new services are carried directly over Comcast’s fiber optic network to the business premises [rather than coax to the customer as part of a Hybrid-Fiber Coax (HFC) buildout]. Comcast provides 24/7/365 network monitoring and customer support for its Metro Ethernet offerings, from its Network Operation Centers (NOCs).
Targeted at mid-sized businesses with 20 – 500 employees, Comcast’s new Metro Ethernet services provide access to the MSOs “next-generation” fiber optic network, which provides high-bandwidth and is available in multiple locations. These new Metro Ethernet services are available in more than twenty major U.S. markets, with expansion into new markets planned in the months ahead, according to the company’s press release. Comcast Business Class Metro Ethernet Service) provides scalable bandwidth from 1 Megabits-per-second (Mbps) up to 10 Gigabits-per-second (Gbps), as well as point-to-point and multi-point connectivity for mid-sized businesses that may wish to deploy bandwidth-intensive applications like cloud computing, videoconferencing and e-commerce.
Comcast announced four new, fiber based Metro Ethernet Services:
- Ethernet Private Line Service – point-to-point connectivity between two customer sites for bandwidth-intensive applications.
- Ethernet Virtual Private Line Service – a point-to-multipoint connection that allows customers to tailor bandwidth, performance characteristics and cost to meet the needs of their applications.
- Ethernet Network Service – multipoint-to-multipoint connectivity to connect organizations with high-bandwidth requirements and multiple locations across Comcast’s network.
- Ethernet Dedicated Internet Access Service – continuous, high-bandwidth connectivity between customers’ LANs and the public Internet.
Comcast is offering speeds that start as low as 1 Mbps and scale up to 10 Gbps with three Classes of Service (CoS). Each of the services also have the three certifications from the Metro Ethernet Forum (MEF specs 9, 14 and 18), and are backed by service level agreements (SLAs). The access speeds can be scaled in increments of 1 Mbps, 10 Mbps, 100 Mbps or 1 Gbps. This is one of the great advantages that higher bandwidth fiber has over coax cable or DSL/T1 copper twisted pair.
The customers access bandwidth can be upgraded without the need to deploy a new facility. Customers can quickly and easily increase their connection speeds – Comcast can often change bandwidth levels remotely, without requiring an on-site visit from a technician, which is required when the customer has T1 lines from the local telco. Such re-configuration of access speeds has been referred to as “liquid bandwidth.”
The MSO makes two bold claims about the new Metro Ethernet service:
- Metro Ethernet will surpass T1 lines to become the preferred technology for business communications, similar to the way that broadband overtook dial-up lines as the preferred high-speed Internet service for consumers.
- New service has lower cost and significantly higher speeds for business customers who have had limited choice for many years. Based on our research, Comcast’s Ethernet-based services can save businesses anywhere from 10% – 33% over “the phone company.”
“Our fiber-rich network powers our Metro Ethernet services and provides a secure, reliable and cost-effective solution for mid-sized businesses’ data needs,” said Bill Stemper, President of Comcast Business Services. “Metro Ethernet is quickly overtaking T1 and other legacy services as the preferred technology for business communications. Just as broadband supplanted dial-up in consumers’ homes, our new Metro Ethernet services are designed to help businesses compete and win using our fast and scalable digital platform.”
Sandra Palumbo, Research Fellow at Yankee Group, commented, “As mid-sized businesses increasingly operate within a virtualized IT environment of cloud and SaaS resources to improve productivity and reduce operational expenses, their demand for secure, reliable and high-performance connectivity will continue to grow. This market segment has high-bandwidth requirements across multiple sites and values the lower cost of ownership, simplicity and scalable capacity of Metro Ethernet. Significant last mile networks and investments in advanced Carrier Ethernet network infrastructure are vital.”
Analysis
Comcast’s new PRI Trunking and fiber based Metro Ethernet service suite indicates the nation’s largest MSO is very serious about taking on AT&T, Verizon Business, Century Link, other ILECs and CLECs to serve medium-sized business customers. We have been grousing for years about those telcos very slow effort to build out their fiber plant to cell towers and commercial buildings; and all we got were excuses.
Comcast takes a different approach. In recent years, approximately 70% of the MSOs capital investment has been to expand and upgrade their network infrastructure, according to Mr. Johnson. Comcast assembles a team of executives that evaluate, on a case-by-case basis, whether a given fiber buildout to a commercial building (or cell tower) makes financial sense. This fiscally driven policy is intended to ensure that the large capital expense of extending fiber to the building will realize a decent payback or ROI within a reasonable time frame The MSO is also looking at greenfield fiber build out opportunities, such as new business parks.
Once Comcast decides to build fiber to a commercial building, it is all systems GO. There are field engineers, technicians working on the ground and sales engineers to support their efforts. Comcast does not disclose the number or percentage of business customers are directly served by fiber. However, we expect that number to grow in coming months and years as Comcast Business strives to serve more large customers with larger bandwidth needs.
We are extremely impressed with Comcast’s initiatives for business customers and predict they will take the lead in leading edge services such as Metro Ethernet and Business Class Voice services from the large telcos (e.g. AT&T and Verizon) who have devoted much more resources to their wireless and residential broadband (U-Verse and FiOS) networks. MSOs Cox Business and TW Cable must also be watching closely.
Addendum:
Email exchange between IEEE ComSocSCV Discussion List members and Comcast Sales Engineer Nicholas Tornetta who presented at the March 2011 IEEE ComSocSCV meeting. Note any IEEE member can join this list. Sign up at www.comsocscv.org
Question from Discussion List members:
Does Comcast offer Business Class Internet access/services to SMB;s located in strip malls, business parks or suburban areas? Some of our IEEE members asked if those services were restricted to densely populated urban areas (or not).
Nicholas Tornetta: Coax (whether commercial or residential) services are not restricted to densely populated areas. Comcast offers SMB coax services wherever there are coax serviceable locations. It doesn’t matter if it is a strip mall, a business park, your own home, a traffic light, a treehouse (although that might not be what you would consider an “environmentally controlled” location), etc. Much of our Coax footprint is concentrated in suburban/residential area due to delivery of video and voice services, so SMB High Speed Internet (Coax) has greatly benefited from that footprint.
Challenges with bringing coax services to any business location have a number of factors. This includes whether or not the building owner wants to grant us right of entry, construction costs and if the build is financially viable, etc. I mentioned that during the panel discussion last month. Cell Backhaul, K-12 schools & district offices, Metro E for business and the like have been the main motivations for extending our fiber network. There have been targeted commercial build outs as well and a prime example of that would be the proactive builds we have been working on to various data centers around the Northern California area.
Although much of the Comcast Metro Ethernet growth has been mainly focused on regional service delivery over the past year, there is also focus on connecting regional CRANs to open up long haul delivery options too (as the article mentions). The addition of Ethernet over DOCSIS will also allow us to extend Ethernet to the Coax medium, ultimately resulting in the ability to have Ethernet services wherever the coax plant can reach as well.
Thanks to (the acquisition of) NGT and some very intelligent senior staff at Comcast corporate, we are rolling out business voice services like PRI Trunking (and eventually SIP Trunks and Hosted PBX) with very compelling features and lower costs than most companies delivering IP voice services today.
References:
Q1 transcript….http://files.shareholder.com/downloads/CMCSA/1261548698x0x464890/a9432fc4-bf26-4db5-81a5-5548501e9ced/CMCSA_TranscriptQ1_5.4.11.pdf
Q1 slides accompanying transcript….http://files.shareholder.com/downloads/CMCSA/1261548698x0x464465/10901ea7-220b-47f6-92f2-8bf0690c648d/CMCSA_EarningPres_5.3.11.pdf
Enterprise Solutions site….http://business.comcast.com/enterprise/index?INTCMP=ILC-DOTCOM-20110222-MDLGBZ-001
white papers…http://business.comcast.com/enterprise/index/resources
Compare Comcast Business To The Competition – Verizon FiOS for Business, AT&T Business Direct, and Qwest http://business.comcast.com/comparison/compare.aspx
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