Cable operators certainly enjoyed a strong tailwind and rapid growth as they entered into the business services market. Their strategy of leveraging existing Data over Cable Service Interface Specifications (DOCSIS)-based Internet access services to penetrate the small enterprise market and their fiber expertise to deploy MEF-certified metro Ethernet services into midsize enterprise markets worked well.
These internet connectivity services enabled the cable operators to quickly gain market traction as a primary connection provider in the SMB market and as a secondary or redundant link provider for many midsize and larger enterprise accounts. In fact many operators experienced business services revenue growth rates that outpaced the market.
Yet, it would appear that cable business services growth has hit a headwind. Their customer satisfaction scores rank below industry averages for most segments in a recent JD Powers and Associates US Business Wireless Satisfaction Study Report, and in reviewing the 2017 industry 10-K reports, the days of 20+ percent growth rates, for some providers, are gone. Business services revenue growth rates for leading operators has dropped from 20-15% over the past few years, and the overall business services revenue remains less than 15% of cables overall revenue for these same operators.
10-K report financials of 5 Leading Cable Operators ($ in millions)
|
Revenue |
2017 |
2016 |
% Change |
|
Residential: |
|||
|
Video |
$47,649 |
$46,687 |
2% |
|
Internet |
$35,789 |
$33,024 |
8% |
|
Voice |
$9,305 |
$9,850 |
-6% |
|
Business Services: |
$15,434 |
$13,407 |
15% |
Source: Juniper analysis; cable industry 10K reports
To remain competitive and successful, cable operators will need to:
- Improve customer satisfaction scores, which are currently below the industry average
- Address the increased competition in the SMB carrier services market
- Deliver new services both on-net and off, so they can target larger national accounts
- Displace incumbents in mid to large enterprise segments
- Provide agile and flexible solutions that allow customers to take greater control and ownership of their services
- Automate processes for greater efficiency to improve their current profitability
Luckily, the future isn’t bleak and the opportunity for greater growth is still there. Enterprise customers, now more than ever, are looking to control costs by outsourcing more of their IT infrastructure investments to managed service providers. As more workflows move to the cloud, there is an increasing dependence on the WAN. IT managers are looking for service providers who can fill more of their IT infrastructure needs—including cloud connectivity and cloud-based services. They are looking for CSPs who can provide them the ability to deploy, customize, and manage their services themselves—from a customer portal.
The good news is SD-WAN provides a solution to all of these checklist items and can help cable operators rise above their current competitive and customer satisfaction headwinds, allowing cable service providers to regain the higher growth rates they enjoyed just a few years ago.
Quick Primer on SD-WAN
Service providers have for years offered enterprise customers a sort of premium connectivity services: Multiprotocol Label Switching (MPLS), Carrier Ethernet (CE), or IP VPN. Each of these can essentially prioritize certain internet protocol (IP) traffic over others within their own networks.
As enterprises shift to cloud-based business applications and services, they are transitioning their WAN connectivity from legacy DSL and time-division multiplexing (TDM)-based private line services to less expensive metro Ethernet and broadband internet connections over alternative, higher priced IP MPLS VPN services.
Because of this, SD-WAN has risen to prominence as enterprises look to control costs, move workloads to the cloud and outsource IT to managed service providers. It is a valuable new service that enhances their current portfolio with application-aware routing, analytics, and service-level agreement (SLA) compliance. With SD-WAN, CSPs can expand their service footprint and capture new revenue faster using centralized orchestration in conjunction with distributed end-to-end delivery.
A good way that cable operators can capitalize on SD-WAN is offering it as a virtual service from a cloud-based customer portal.
But that’s easier said than done.
Technical Challenges of the Current Approach
Cable business clients receive services today over multiple access network types: hybrid fiber coaxial (HFC), metro Ethernet, xPON, DSL, and optical infrastructure. While some operators have decided to deploy all new business services over metro Ethernet, the mix of access network types limits their ability to deliver infrastructure-based connectivity services ubiquitously across the network to all of their end-user locations.
Few cable operators have complete access network coverage across all metro areas in a given region, limiting their ability to address business customers with locations outside their local areas. While consolidation has enabled some cable operators to increase their footprint, this consolidation has created a situation where operators have multiple disparate backend systems, making it difficult to automate service delivery ubiquitously across regions.
While the metro Ethernet private networks that cable uses to deliver their premium business services today are high-performing and secure, they may not be agile or responsive enough to meet the rapid changes happening in the market. They are L2 networks with limited ability to integrate additional new services. Moving forward, the cable business faces the following challenges in service delivery:
- Multiple infrastructure types
- Limited regional footprint reach
- Disparate back-office systems with manual processes
- Unsecure basic internet access services
- Lack of metro Ethernet service agility
Capitalizing on SD-WAN
Gartner predicts that by 2020 more than half of customer premises equipment (CPE) refresh initiatives will be influenced by SD-WAN. Large enterprises may continue to leverage MPLS/VPN and integrate SD-WAN to improve their business outcomes, but small- to medium-sized businesses may choose that approach or employ a complete SD-WAN overlay approach.
As cable operators look to capitalize on this shift they will need to remain focused on the following:
- Implementing a secure, multi-tenant SD-WAN solution that enables their ability to scale service delivery, without increasing operational complexity
- Choose an SD-WAN solution that is open and extensible, enabling them to build a virtualized managed service platform. One that will deliver a portfolio of services, allowing them to compete with regional incumbent and larger national telecom competitors
- Deploying an SD-WAN solution that integrates well with their existing network infrastructure because it leverages standard based protocols and APIs
- Selecting an SD-WAN solution that provides integrated security, including NGFW and UTM capabilities
By selecting the right SD-WAN solution. Cable operators will be able to:
- Automating processes for greater efficiency to improve their current profitability and customer satisfaction scores
- Deliver SD-WAN and additional new services, both on-net and off
- Increase revenue by targeting larger national accounts
The Bottom Line
IT managers are looking for service providers who can fill most, if not all, of their IT infrastructure needs – including cloud connectivity, cloud-based services, and the ability to deploy, customize and manage their services themselves – from a customer portal.
When handled correctly, offering SD-WAN as a managed service helps customers achieve better business outcomes. Businesses can forge better, more secure B2B relationships; mergers and acquisitions can be accomplished faster and more efficiently; and access to cloud-based applications can be provided more cost effectively.
Steven Veneman is the Director of Marketing for Managed Service Solutions at Juniper Networks. Steven has been in the communications industry for over 20 years, focusing on the design, development, marketing, and sale of cable infrastructure equipment, optical semiconductors, embedded operating systems, network systems, and network systems equipment.
