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Trouble Looms for Smaller Phone Companies As Cable Swipes Away Business Customers

The cable industry is moving in on the phone companies' best customers: commercial enterprises

The growing competitiveness of the cable industry in the commercial services sector could spell trouble for some of the nation’s smaller telecommunications companies.

A new report from Moody’s Investor Service declares the cable industry is spoiling the business plans of telephone companies to grow revenue selling service to business customers.

With cable companies now investing in wiring office parks and downtown buildings to sell packages of voice and data services to corporate customers, traditional phone company revenue will suffer, declares Moody, which predicts traditional wireline revenue will be flat or decrease this year into next.

Cable Companies Quash Telecom Business-Revenue Rebound,” warns the companies at the greatest risk of revenue declines include EarthLink, Inc., Integra Telecom, Inc., U.S. TelePacific Corp., and CCGI Holding Corp. Among familiar independent phone companies, Frontier Communications, FairPoint Communications, and Hawaiian Telcom are at the biggest risk of losing customers, primarily because all three lack strong business products, according to the Moody’s report.

AT&T, CenturyLink, and Verizon are at a lower risk of losing customers, because all three focus investments on commercial services. CenturyLink’s acquisition of Qwest, a  former Baby Bell, strengthened its business services position, especially in the Pacific Northwest.

The cable companies best positioned to steal away telephone company customers are Comcast and Time Warner Cable, both of which have invested heavily in wiring commercial businesses for service. In the past, cable operators charged thousands (sometimes tens of thousands) of dollars to install service in unwired commercial buildings, but now that initial wiring investment is increasingly being covered by cable operators.

Moody’s declares the business service sector a growth industry for cable. The report notes business revenues only account for $5 billion — just six percent — of the cable industry’s total business in 2011. In contrast, phone companies earn 40 percent of their revenue from business customers.

The report also states individual cable companies are now collaborating to deliver business service to companies with multiple service locations, which used to present a problem when offices were located in territories served by different operators.

If the cable industry continues to erode traditional telephone company revenue, it could eventually threaten the viability of some companies, especially those heavily-laden with acquisition-related debt.

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  • Doug Stoffa: Digital takes up way less space than old analog feeds - agreed. In a given 6 MHz block, the cable company can send down 1 NTSC analog station, 2-4 HD...
  • Phillip Dampier: Digital video TV channels occupy next to nothing as far as bandwidth goes. Just look at the huge number of premium international channels loading up o...
  • Doug Stoffa: It's a bit more complicated than that. Television stations (and the networks that provide them programming) have increased their retransmission fees ...
  • Alex sandro: Most of the companies offer their services with contracts but Spectrum cable company offer contract free offers for initial year which is a very good ...
  • John: I live in of the effected counties, believe it or not our village is twenty three miles from WSKG Tower, approxiamately eighty miles from Syracuse, WS...
  • Wilhelm: I'm in the Finger Lakes where Spectrum removed WROC-8 last Fall, but we still get other Rochester channels, WHAM-13, WHEC-10 and WXXI-21. I have to wo...
  • dhkjsalhf: "Another classic case of businesses being much smarter than governments." I don't know whether this was sarcastic or not, but I feel it's a sentiment...
  • New Yorker: It makes no sense. I wonder sometimes if raising the limits on how much money rich people giving to candidates could make it more expensive to buy of...
  • New Yorker: Will New York go through with the threat? As an upstater I have seen infrastructure projects drag on in cost and time (eg. 1.5 yrs to repair a tiny b...
  • Matthew H Mosher: Another classic case of businesses being much smarter than governments....
  • Matthew H Mosher: Doesn't matter. Rural NY will remain left behind....
  • Dylan: Hopefully this does not happen as I would like to see Charter continue with its current plans of upgrades in NY, like the 200mbps upgrade. Maybe Chart...

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