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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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  • krichnercom: That's not the only way they are "fleecing the customers" if you leave them they will make it very difficult to return the equipment if your in a rura...
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