The cable operator's consumer market has matured, so it's taking on an old nemesis - the phone companies - on a new front.
While the telephone industry is busy debating the proposed AT&T acquisition of T-Mobile, cable TV company Comcast Corp. is quietly going after the industry's small-business telephone customers.
Faced with slowing growth in its consumer business -- providing homes with TV, Internet and phone service -- Comcast is looking for growth in the highly profitable business market, analysts say.
The company already has business customers in other parts of the country. In June, it launched a Twin Cities initiative using technology called "primary rate interface trunk replacement" that makes it fairly easy to switch existing business phones over to the Comcast network.
So far that means going after small businesses with fewer than 20 employees, widely regarded as the low-hanging fruit of the corporate telephone market. Most small businesses have modest telecommunications needs, allowing Comcast to serve them almost as an extension of its consumer business, although with many more telephone lines, analysts say.
"All the cable companies are seeing their consumer markets mature, so they have to reach into the small- and medium-sized business market to continue to grow," said Dan Hays, a telecom consultant at PRTM Management Consultants in Waltham, Mass. "However, that means completely reengineering their sales and support to meet business customer needs."
Still, he said, "it is a huge threat" to existing telephone companies.
Comcast, the nation's largest cable TV provider, says it's serious about the small-business market. Last year about half of its $37.9 billion in revenue came from its cable business, compared to 10 percent from telephone service. Internet accounted for 23 percent.
"We're already the fourth-largest residential voice provider in the country," said Kevin O'Toole, Philadelphia-based Comcast's senior vice president of business product management and strategy. "But business is a fantastic opportunity."
Comcast's strategy in the Twin Cities has been to offer small businesses a package of online access and Internet phone service at prices slightly below the cost of traditional wired phone service. While direct price comparisons are difficult, some small businesses report saving 10 to 20 percent on a phone and Internet package while sharply increasing their Internet speeds.
Most have been using T1 telephone lines, an industry standard that is limited to download speeds of 1.5 million bits per second. Comcast offers tiers of business Internet service that range from 22 million to 100 million bits per second. An entry-level business package includes about 20 business telephone lines and Internet download speeds of 22 million bits per second for $399 a month.
Some small businesses were attracted by the prices.
Denny Gambiana, vice president of Varidigm Corp., a 12-employee Plymouth maker of furnace controls, recently switched his firm's phone and Internet services to Comcast after the cable company extended its network into the surrounding industrial park.
"Comcast was significantly cheaper on Internet access and slightly cheaper on telephone service," Gambiana said, with total savings of less than 20 percent.
Jason Montgomery, a broker at Twin Cities Real Estate in Centerville, agrees. "We were looking for a combination of compatibility with our phone system and high-speed Internet access," he said. Using Comcast will shave $175 off its $625 a month telecommunications bill while increasing its Internet speed 10-fold, he said.
But Integra Telecom, one of the biggest business telephone competitors in the Twin Cities after CenturyLink (formerly Qwest), says businesses care about more than price.
"Businesses have greater expectations of service than residential customers do," said John Nee, a spokesman for Integra Telecom, based in Portland, Ore. "Our market research shows that most business customers value reliability, billing accuracy and time to resolve problems more highly than they do price."
Comcast spokesman Dave Nyberg counters it has a dedicated business sales and support team and a 24-hour business call center.
There's also the issue of service quality.
"Comcast can't always provide consistency in the amount of available bandwidth," said Pat Crosby, the Twin Cities regional sales director for business phone service provider Paetec of Fairport, N.Y. "We give you a dedicated circuit. We don't have residential customers sucking up the bandwidth at different times of the day."
Nyberg said Comcast's cable network, which simultaneously carries TV, Internet and telephone signals, has so much capacity that business customers will never feel a slowdown in Internet service, no matter how many consumer customers are using the network.
One thing that's not in dispute is that phone companies offer written guarantees of telephone line service quality, while Comcast doesn't. These long-offered "service level agreements" contractually promise certain service quality and repair deadlines.
"Why wouldn't someone offer that to a customer?" Crosby asked. "That's a pretty big differentiator."
Nyberg said Comcast doesn't need to offer the agreements because its network is physically separate from the public telephone networks, and thus not affected by telephone industry outages.
Steve Alexander • 612-673-4553