Comcast and the New Cable Business

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Carl Weinschenk Carl Weinschenk Senior Editor

The huge footprint that will be created by the combination of Comcast and Time Warner Cable will simultaneously create a giant in the interrelated commercial services, mobile backhaul and content delivery network (CDN) businesses.

Carrier Ethernet will be the basis for much of this activity. Comcast was a late comer to the CE sector, said Erin Dunne, the director of research services for The Vertical Systems Group. The operator is making up for lost time, however: Dunne said Comcast is the fastest growing provider of all those covered by the firm and that it has moved up to eighth place on Vertical's Leaderboard.

Time Warner Cable has been in the Carrier Ethernet game since 2006, which makes it an old pro by standards of cable's involvement in CE. Dunne said TWC is the top-ranked MSO on Vertical's Leaderboard and the fifth biggest overall (trailing only AT&T, Verizon, Time Warner Telecom and CenturyLink). Dunne said the operator has focused on New York City and Los Angeles to rise to the top, at least of the cable heap.

Vertical says that a combined Time Warner Cable/Comcast will challenge Verizon for second place behind AT&T in the firm's market share assessment. "They are gaining a lot of footprint [and] entrenched customers and a lot of different MPLS implementations than they had," Dunne said. "They are gaining a lot and have very little overlap. That's somewhat unique."

The combination of Time Warner Cable (NYSE:TWC) and Comcast (NASDAQ:CMCSA) comes at a time when cable's commercial services focus is shifting. The deal may accelerate that shift. MSOs traditionally have focused on small and medium size businesses (SMBs). In recent years, however, operators have set their sights on the larger enterprise segment.

It's not an easy market, however. Enterprises are far more demanding than small businesses. In addition to the need to offer greater overall capacity, success in the enterprise sector requires the ability to provide high levels of quality of service and quality of experience (QoS and QoE) and fulfill increasingly stringent service level agreements (SLAs). This means that the networks must feature lots of advanced technology, including sophisticated backup and monitoring capabilities.

Of course, the two companies know all this. It is a certainty that the new Comcast will make the investments necessary to create an environment attractive to enterprise customers. At that point, they will be able to offer a nationwide footprint in which a higher percentage of prospective customers are served "on-net" and can be served without leaving the Comcast/TWC network.

In addition, MSOs have taken advantage of the explosion in data traffic to get into mobile backhaul. That, too, is a complex business. Indeed, the timing requirements for voice, video and data traffic makes it potentially even more demanding than the business services sector.

CDNs are a prime candidate to take advantage of the infrastructure created by combining the two networks. These networks have, of course, been around for decades. The radical increase in video distribution makes the ability to transport and store data nearer to its intended user an ever more important tool and growth opportunity for cable operators as the amount of data - both their own and over-the-top providers’ - that they need to move grows exponentially.

Time Warner Cable and Comcast both have CDNs. The question is how the combined company will treat them. Dan Sahar, the co-founder of Qwilt, said Comcast has built its own CDN based on open source software, while TWC opted to deploy Alcatel-Lucent's Velocix platform. "I am not sure they are even going to integrate the two," Sahar said. "I think there is a good chance they will go with one solution and let go of the other."

The melding of Time Warner Cable and Comcast, if it eventually does happen - and the strong bet is that it will - will not be the combining of two cable companies. It will be the marriage of two telecommunications companies that long ago realized that the technology that underpins the business is changing - and that change is ongoing, open-ended and will continue into the future.

For that reason, the acquisition shouldn’t be looked at solely in terms of entertainment or even of "cable systems" in the sense the industry has always considered it. The message is that those days are ending. The real strengths and weaknesses of the deal are in the ability to provide nationwide and international services. Perhaps the most interesting thing is that precisely what those services are is, to a great extent, yet to be determined.

Carl Weinschenk is the Senior Editor of Broadband Technology Report. Contact him at carlw@pennwell.com.

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