The ongoing weak economy has proven one fact in telecom: Businesses – SMBs and enterprises alike – turn to IP services when forced to crimp spending. The trend has especially been a boon for the CLECs and agents that focus on SMBs. Such a boon, in fact, that cable wants finally wants in on the action. The test case of this interest – Comcast Corp.’s (CMCSA) takeover of Cimco Communications – has yet to reveal what that really means for competitive service providers. The bigger unknown is how cable-CLEC pairings will affect channel partners.
Several years ago, analysts predicted it wouldn’t be long before cable started jockeying for SMB market share. Those forecasts have yet to pan out as a meaningful trend; however, the largest cable company in the United States has made good in a small way. In October, Comcast bought Chicago-based CLEC Cimco, which specializes in IP services for SMBs. Cable operators need additional revenue sources, analysts say, and SMBs relying on digital networks are among the best targets. Indeed, the numbers support cable’s increased interest in this segment. By the end of 2009, for example, IP Centrex and hosted unified communications service revenue alone will have shot up 26 percent, year over year, according to Infonetics Research. That’s among the reasons why Comcast snapped up Cimco. And agents and CLECs had better pay attention.
Cable + CLECs + Agents = ?
For agents, watching how Comcast treats the channel may well indicate the destiny of the indirect sales channel. Steve Hilton, a vice president at Yankee Group, has high hopes.
“Some day Comcast will need an indirect channel across its footprint: Consider the Cimco channel as Comcast taking Intro to Indirect Channels 101,” he said.
The cable company, Hilton added, will “relish” the chance to see the indirect channel in action.
“Comcast will learn as much about the Cimco indirect channel processes, incentives, training, recruitment, etc. as possible,” he said. “And then it will apply it to its own indirect and direct channel efforts.”
The impact of the Comcast-Cimco on agents remains unclear then, and the same goes for CLECs.
There’s disagreement about whether Comcast’s move will spark copycat M&A. On the one hand, Comcast is the first operator to fulfill observers’ projections, perhaps indicating that its peers are ready to take the same risk. Cable MSOs are “frantically looking for additional revenue sources,” said Mike Jude, a program manager at Stratecast. SMBs represent a segment where cable can “make more money without a whole lot of additional infrastructure investment,” he added.