Comcast Targets Big Businesses to Offset Consumer TV Defections

Goes Up Against AT&T and Verizon

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Comcast Chairman-CEO Brian Roberts.
Comcast Chairman-CEO Brian Roberts. Credit: Andrew Harrer/Bloomberg

Comcast has begun selling high-speed internet and phone service to large businesses, hoping to offset the decline of cable-TV subscribers by entering a market dominated by AT&T and Verizon Communications.

The biggest U.S. cable company has signed up about 40 customers so far, including several Fortune 1000 companies in the banking, retail and hospitality industries. Comcast didn't disclose customer names, but said one of its largest contracts generates about $350,000 per month in revenue.

Since 2007, Comcast has sold internet, TV and phone service to small and mid-size companies, many with less than 500 employees. Some of its biggest customers are hospitals. It has been one of the fastest growing parts of Comcast's business, generating about $4 billion in revenue last year.

In the second quarter of this year, Comcast lost 69,000 TV subscribers as Americans drop their cable subscriptions for cheaper online alternatives like Netflix. Meanwhile, revenue from Comcast's business customers rose 20% to $1.16 billion in the quarter, or about 6% of its $18.7 billion revenue.

Until recently, Comcast wasn't able to attract large business clients partly because it couldn't serve their offices spread across the country. One reason why Philadelphia-based Comcast wanted to buy Time Warner Cable was to acquire cable systems nationwide so it could better serve big businesses.

Though Comcast abandoned that deal earlier this year in the face of regulatory hurdles, it has laid the groundwork to handle corporate clients, according to Bill Stemper, president of the business services division. Comcast has cut deals with other cable operators to support businesses in areas it doesn't cover. It also recently acquired a small technology company called Contingent Network Services that managed Internet connections for larger companies, and hired Glenn Katz, the former chief executive officer of a similar company, Spacenet.

"We're prepared to talk to businesses of any size and any geography," Mr. Stemper said in a phone interview.

Comcast will be competing for corporate customers with AT&T and Verizon. The two phone companies control about 75% of the market, according to Jonathan Chaplin, an analyst at New Street Research.

Mr. Chaplin said cable companies may need to buy large Internet infrastructure providers to present a real challenge to AT&T and Verizon. Serving business customers across the country requires a massive sales force, many engineers and access to data centers, he said.

"Without an acquisition that brings them a different set of capabilities, it's difficult to see them being credible players in the Fortune 500 arena within the next three or four years," Mr. Chaplin said.

Comcast could still win customers in parts of cities where Verizon doesn't offer fiber-optic Internet, said Melanie Posey, an analyst at the information-technology research firm IDC.

"It's going to be harder for Comcast to compete head-to- head where Verizon has carpet-bombed the whole area with fiber," Ms. Posey said. "But in situations where that's not the case, it's a much more addressable market opportunity for Comcast."

Mr. Stemper said Comcast's push for large business customers likely won't show up in the company's results until 2018. He said it took eight years, for instance, for Comcast to gain 30 percent of the market for small businesses.

"We're at the very beginning," Mr. Stemper said. "We are now poised to go after it."

-- Bloomberg News

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