Clearly, the Bells are not alone in their understanding of the value of small and medium business customers. Competitive service providers have been reaching out to this group of small enterprises for some time and now cable companies are starting to do the same.
During the last eight years, small businesses across the country have left the Bells to purchase phone and Internet lines from such competitive wireline providers as Broadview Networks Inc., Focal Communications Corp., ITC^DeltaCom Inc. and New Edge Networks. Many CLECs say the small business market is their life blood, and contend they are better equipped than the RBOCs to give mom-and-pop shops and medium-sized businesses the attention and custom solutions they deserve.
The Bells “are clearly being more aggressive and why, I think, is obvious,” says Yankee Group analyst Mike Lauricella. They are “still feeling significant pain in some of the major metros in the U.S. (from CLECs) and they simply need to get more creative and more compelling.” Lauricella says the incumbents also are responding to threats from such long-distance giants as AT&T Corp. and MCI.
Asked about the Bells’ increased sales activity in the small business market, New Edge Networks spokesman Sal Cinquegrani says, “I’ve checked with our sales folks and they have not seen any less or any more competitive activities in our market areas.”
Frost & Sullivan analyst Rod Woodward says CLECs “are going to fight tooth and nail to keep that business.” Woodward says his sister-in-law owns an insurance agency with 11 employees and two branch offices in the SBC territory. The company uses Allegiance Telecom Inc., which Qwest Communications expects to buy. Woodward reports that his relative says the service always has been great, the pricing is very competitive and there is not much of a motivation for her to change service providers.
However, Bob Rosenberg, president of Insight Research Corp., says CLECs don’t pose the biggest threat to the Bells in the small business market. He contends it is the cable companies, which are introducing phone services and still control more high-speed lines than the RBOCs, that are the real concern.
In an analysis conducted at the end of last year, Insight Research found that a cable company providing five business phone lines, one dedicated fax line and high-speed access in the West offered the package for 30 percent less than the incumbent phone provider.
Lauricella agrees cable companies already are a competitive threat in the small business market, particularly with their cable modem services.
But some analysts say it will be a year or two before the cable companies pose a real threat to the Bells’ bread-and-butter — phone service — in the small business market.
It is “probably a year out until [cable operators] really have the scale on voice offerings,” Lauricella says.
And Rosenberg adds that the uncertainty surrounding VoIP, given that the FCC has yet to release rules specifying how to regulate the new service, is impeding the Bells from investing more in the small business market. “I don’t think really the Bells can do much of anything until they have some firm definitions created by the FCC that we can get rid of this boogie man that is stymieing the entire industry called VoIP,” he says.
