Cable Ethernet Business Services The New Engine of Growth  CTAM Business Services Council NCTA Cable Show April 2, 2009 Da...
ETHERNET MARKET SNAPSHOT <ul><li>Business Ethernet market opportunities </li></ul><ul><ul><li>Strong growth in 2008 </li><...
ETHERNET MARKET SNAPSHOT <ul><li>Business Ethernet Market  Opportunity </li></ul><ul><ul><li>Telcos control majority of ma...
CABLE ETHERNET STRENGTHS <ul><li>Cable networks cover most tier 1, 2 & 3 metro areas </li></ul><ul><ul><li>Not just downto...
Cable Ethernet Services <ul><ul><li>Source:  2009 Current Analysis Cable Business Services Product Assessment </li></ul></...
CABLE ETHERNET CHALLANGES <ul><li>Geographic fragmentation </li></ul><ul><ul><li>Regional and sub-regional clustered netwo...
CONCLUSIONS <ul><li>Key Takeaway #1 – Traditional cable markets are approaching limits to growth </li></ul><ul><ul><li>Mar...
<ul><ul><li>Competitive </li></ul></ul><ul><ul><li>Intelligence   </li></ul></ul><ul><ul><li>levels the playing field… </l...
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Ctam Bus Ethernet D Hold 040209

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  • I’M GOING TO JUMP RIGHT INTO WHY I SEE BUSINESS ETHERNET REPRESENTING A PRIME OPPORTUNITY FOR CABLE OPERATORS IN SEARCH OF SERVICE AND REVENUE GROWTH. IN AN OTHERWISE DEPRESSED ECONOMY WHERE 10% GROWTH WOULD BE CONSIDERED HEALTHY, ETHERNET EXPANDED BUY 43% LAST YEAR, NOT EVEN INCLUDING OVERSEAS SALES BY US CARRIERS. FIBER COMPONENTS MEAN LONGER SALES CYCLES AND PROJECT TIMELINES WHICH MAY BE STRETCHED OUT BUT ARE LESS LIKELY TO BE CANCELLED OUTRIGHT. KEY DRIVERS SHOULD HAVE INCLUDED DEMAND FOR BANDWIDTH WHICH CONTINUES TO GROW AND MAY BE RECESSION RESISTENT AS COMPANIES SEEK TO CUT COSTS, NOT BANDWIDTH – ETHERNET OFFERS LOWEST COST PER BIT RATIO BAR NONE VERTICALS INCLUDE HEATHCARE – REGIONAL MEDICAL CENTERS WITH MULTIPLE LOCATIONS IN AND AROUND METRO AREAS – LARGE ENOUGH TO COST JUSTIFY FIBER BUILD IF NOT ALREADY IN PLACE – BANDWIDTH INTENSIVE APPLICATIONS INCLUDE TELERADIOLOGY, PICTURE ARCHIVING AND OFF-SITE IMAGE AND RECORDS STORAGE K-12 SCHOOL DISTRICSTS ARE A NATURAL FIT FOR CABLE NETWORKS, ESPECIALLY THOSE THAT COMBINED DIRECT FIBER WITH ETHERNET/OR BROADBAND OVER HFC TO REACH ALL SCHOOLS IN A DISTRICT; HIGHER EDUCATION, INCLUDING COLLEGE CAMPUSES ARE BIG CONSUMERS OF BANDWIDTH, WHILE STATE/LOCAL GOVERNMENT AGENCIES ARE ALSO A GOOD FIT FOR CABLE’S LOCAL/REGIONAL AND STATEWIDE NETWORKS
  • Worth noting that tw telecom (formerly known as Time Warner Telecom, has about one billion in revenues yet comes in a close second to Verizon. They do this by running fiber to buildings, purchasing special access everywhere else. Meanwhile the largest cable company, Comcast, doesn’t even make the top seven.. Clearly there is a lot of growth potential that is waiting more aggressive moves by cable cos.
  • Suburban focus makes cable a natural for service organizations with distributed locations; school districts, govt. offices, medical facilities, etc. Even banks with many branches around a metro area are a target of opportunity.
  • THIS REVIEW SHOWS THAT THE FIVE CABLE OPERATORS WE EXAMINED, MOST OFFER THE FULL RANGE OF METRO ETHERNET DEFINED SERVICES. ALL OF THE MSOS LISTED ABOVE ARE MEMBERS OF THE METRO ETHERNET FORUM, AND SOME HAVE GONE THROUGH THE RIGOROUS CERTIFICATION TESTING PROCESS. ALL ARE USING MPLS TO ONE DEGREE OR ANOTHER, OFTEN FOR TRANSPORT OVER CORE NETWORKS -- ALTHOUGH LIGHPATH HAS GONE FURTHER THAN MOST IN BASING ALL SERVICES ON MPLS.
  • OUR STUDY ALSO SHOWED A NUMBER OF CHALLENGES FACING THE CABLE OPERATORS AS THEY SEEK TO FURTHER EXPAND INTO BUSINESS NETWORKING…CHIEF AMONG THOSE IS THE FRAGMENTED GEOGRAPHIC DISTRIBUTION. THE OTHER IS DECENTRALIZED NATURE OF CABLE OPERATIONAL STRUCTURE – HAS ADVANTAGES BUT ALSO DISADVANTAGES
  • Ctam Bus Ethernet D Hold 040209

    1. 1. Cable Ethernet Business Services The New Engine of Growth CTAM Business Services Council NCTA Cable Show April 2, 2009 David Hold Sr. Analyst, Current Analysis [email_address] CONFIDENTIAL – NOT FOR DISTRIBUTION
    2. 2. ETHERNET MARKET SNAPSHOT <ul><li>Business Ethernet market opportunities </li></ul><ul><ul><li>Strong growth in 2008 </li></ul></ul><ul><ul><ul><li>According to Vertical Systems, U.S. demand for Business Ethernet service ports expanded 43% during 2008 </li></ul></ul></ul><ul><ul><ul><li>Tens of thousands of new Business Ethernet service installs </li></ul></ul></ul><ul><ul><ul><li>Drivers included lower cost of bandwidth and greater availability </li></ul></ul></ul><ul><ul><ul><li>Most growth occurred through 3Q08; tapered off in Q4 </li></ul></ul></ul><ul><ul><li>Port & Revenue Growth </li></ul></ul><ul><ul><ul><li>Verizon: Revenues increased by 52% from 2007-2008. VZ projecting Ethernet revenues to increase 60%-80% per year through 2010 </li></ul></ul></ul><ul><ul><ul><li>Cable operators experienced similar rates of growth ranging from 30% at Cox to 45% at Time Warner Cable Business Class in 2008 </li></ul></ul></ul><ul><ul><li>Who’s buying cable Ethernet? </li></ul></ul><ul><ul><ul><li>Key verticals include Healthcare, K-12 Education, local/state Government. Other markets include Manufacturing, Finance, Higher Education, Retail and Hospitality </li></ul></ul></ul>
    3. 3. ETHERNET MARKET SNAPSHOT <ul><li>Business Ethernet Market Opportunity </li></ul><ul><ul><li>Telcos control majority of market </li></ul></ul><ul><ul><li>AT&T & VZ account for 36% </li></ul></ul><ul><ul><li>Cox & Time Warner Cable account for 16% </li></ul></ul><ul><ul><li>Other cable operators with measurable market share include Bright House, Charter Business, Comcast Business, Optimum Lightpath, RCN, Suddenlink, among others. </li></ul></ul><ul><ul><li>Point – tiny tw telecom has bigger share than Time Warner Cable Business Class! </li></ul></ul>
    4. 4. CABLE ETHERNET STRENGTHS <ul><li>Cable networks cover most tier 1, 2 & 3 metro areas </li></ul><ul><ul><li>Not just downtown business districts </li></ul></ul><ul><li>Ethernet over Fiber </li></ul><ul><ul><li>Services include Ethernet private line (EPL), Ethernet Virtual Private Line (EVPL) and E-LAN </li></ul></ul><ul><li>Ethernet over HFC </li></ul><ul><ul><li>A few operators such as Cox and TWC-BC have begun to roll out Ethernet over HFC using DOCSIS 2.0 cable modems </li></ul></ul><ul><ul><li>Ethernet over HFC (currently up to 5 Mbps symmetric) can reach the 85-90% of locations not served by fiber. </li></ul></ul><ul><li>Ethernet over MPLS </li></ul><ul><ul><li>A few operators such as Optimum Lightpath and others are turning to MPLS to scale metro Ethernet services </li></ul></ul><ul><ul><li>Layer 2.5 services are independent of physical media and topology, scalable to larger networks </li></ul></ul><ul><ul><li>VPLS in future? </li></ul></ul>
    5. 5. Cable Ethernet Services <ul><ul><li>Source: 2009 Current Analysis Cable Business Services Product Assessment </li></ul></ul>Cable Operator Carrier Ethernet Services Charter Business Type: EPL, EVPL, E-LAN Ethernet over HFC: Yes Ethernet over MPLS: No Cox Business Type: EPL, EVPL, E-LAN Ethernet over HFC: Yes Ethernet over MPLS: Yes Optimum Lightpath Type: EPL, EVPL, E-LAN Ethernet over HFC: No Ethernet over MPLS: Yes Suddenlink Type: EPL, EVPL Ethernet over HFC: Yes Ethernet over MPLS: Yes Time Warner Cable Business Class Type: EPL, EVPL, E-LAN Ethernet over HFC: Yes Ethernet over MPLS: Yes
    6. 6. CABLE ETHERNET CHALLANGES <ul><li>Geographic fragmentation </li></ul><ul><ul><li>Regional and sub-regional clustered networks </li></ul></ul><ul><ul><li>Decentralized operational structure </li></ul></ul><ul><ul><ul><li>Inconsistent SLAs and performance parameters </li></ul></ul></ul><ul><ul><li>National network backbones generally lacking </li></ul></ul><ul><li>Limited business penetration </li></ul><ul><ul><li>Cable networks laid out to serve residential, not business customers </li></ul></ul><ul><ul><li>Cable networks have evolved to encompass broadband, voice </li></ul></ul><ul><ul><li>High speed business grade services are the next stage </li></ul></ul><ul><li>Customer Perceptions </li></ul><ul><ul><li>Many enterprise IT managers do not regard cable-based services as suitable for high availability, non-stop operations </li></ul></ul>
    7. 7. CONCLUSIONS <ul><li>Key Takeaway #1 – Traditional cable markets are approaching limits to growth </li></ul><ul><ul><li>Market saturation, competition from fiber-based Telco TV results in slowing growth, shrinking market share </li></ul></ul><ul><ul><li>Success with Business Broadband & Voice can be followed by Optical and Ethernet </li></ul></ul><ul><li>Key Takeaway #2 – Business Ethernet markets growing at double digit rates </li></ul><ul><ul><li>Cable optical and HFC networks are an under utilized resource that can be leveraged to increase share of high growth market </li></ul></ul><ul><li>Key Takeaway #3 – Cable industry needs better positioning and focus on business grade services </li></ul><ul><ul><li>Practices that were acceptable in SMB market are not acceptable for mission critical large enterprise services </li></ul></ul><ul><ul><li>Industry needs to develop and implement best practices for high availability, non-stop operations </li></ul></ul><ul><ul><li>Changing customer perceptions will take time and persistence – with big payoff for success in long run </li></ul></ul>
    8. 8. <ul><ul><li>Competitive </li></ul></ul><ul><ul><li>Intelligence </li></ul></ul><ul><ul><li>levels the playing field… </li></ul></ul><ul><ul><li>Current Analysis is the only competitive research firm that provides solutions to improve your company’s Competitive Response </li></ul></ul>For more information, please contact … David Hold Senior Analyst, Network Services [email_address] <ul><ul><li>Competitive </li></ul></ul><ul><ul><li>Response </li></ul></ul><ul><ul><li>enables you to </li></ul></ul><ul><ul><li>Win. </li></ul></ul>
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