US Telcos stand to lose US$4 billion to cable in SMB market

Market researcher finds that telcos stand to lose nearly 10 million small business phone lines by the end of 2007

Cable company incursions into small business telephony could cost incumbent telcos US$4 billion in lost revenue over the next five years, a market researcher claims.

As the top 20 cable operators ramp up efforts to snare a larger share of the small business phone market, incumbent phone companies are expected to lose more than 1.5 million small business phone lines to them by the end of 2007, according to Insight Research. Telcos stand to lose nearly 10 million small business phone lines over the next five years, according to the firm.

Fierce competition between the two in the residential market is now spilling over into the small business market, Insight notes. On a per-customer basis, the revenue associated with providing a small business with data and voice services can generate three to four times the revenue of the residential customer buying a bundle of voice, data, and video services, the firm asserts.

The 20 largest cable operators together have within their operating footprints about 6.5 million out of more than seven million small businesses in the United States, Insight notes.

"Recent announcements by Comcast and Time Warner Cable make it plain that the small enterprise is the next battleground in the cable vs. phone company fight," states Robert Rosenberg, president of Insight.

The situation ILECs now face in the small business market is not unlike that AT&T faced in the years just after its divestiture in 1984, Insight says. The AT&T monopoly was dismantled, creating several "Baby Bell" local exchange companies which then competed with and weakened mother AT&T.

That and other fortuitous events led to AT&T being acquired by one such Baby Bell, SBC, in 2005.

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