Channel revenue from the sale of cable telecom services to businesses is small but growing quickly, according to Channel Partners’ “Cablecos & The Channel: State of the Market 2011" survey.
In 2010, more than half (53 percent) of respondents to the survey, which was fielded in the latter half of June, said cableco revenue was 1-10 percent of their annual revenue. Nearly one-third said it accounted for zero revenue in 2010.
In 2011, however, the revenue picture is expected to shift dramatically. Again, about half (55 percent) of respondents expect cable revenue to be about 1-10 percent, but nearly a fourth (21 percent) said it will be 11-10 percent of their annual revenue. Only 7 percent said it would be zero.
The share of channel partners’ revenues from cable telecom services is expected to increase through 2015. Significantly, only one-fourth (28 percent) projected revenue to remain in the 1-10 percent range, compared to one half in 2011. The revenue has shifted up, with one-fourth projecting it to be in the 11-20 percent range and another quarter projecting revenue in the 21-30 percent range. About one in six respondents said cable would account for more than 31 percent of their revenue in 2015.
Throughout the forecast period, the number of respondents stating cable would not contribute any revenue remained at 7 percent.
Cable’s growing share of channel revenue is due in part to the service providers’ increasing interest in selling through indirect sales agents. Four of the five top cable providers now have partner programs giving channel partners the ability to sell their entire footprint. Many of the initial forays into the channel were made by individual regional systems within each multiple system operator.
At the same time, channel partners increasingly are interested in cableco services as an alternative to traditional ILECs and CLECs. Among the top reasons for adding cableco business telecom services to their portfolios, channel partners responding to the Channel Partners’ survey cited:
- Lower price, cost savings, value to customers
- Bandwidth/speed requirements of customer (this was often mentioned hand in hand with low cost)
- Competition, losing business, portfolio diversification
- Customer demand
- Redundancy/backup requirements of end-user
Interestingly, several respondents said they had been recommending cable services for years and now are glad to be receiving payment.
The holdouts that have not added cableco telecom services cite the lack of or low commissions as one deterrent. The others are lack of business-class offerings with SLAs and poor provisioning/back-office processes. Price (and, therefore, commission) erosion was also cited as a disincentive.
The Channel Partners’ survey also found that the channel’s perception of cablecos as business telecom service providers is highly specialized to fill a specific need in the market based on service type, application, geography or cost.
However, it did uncover evidence that channel partners are beginning to consider cablecos as primary providers. Respondents were split almost evenly on their perceptions of cablecos as “primary network providers." Thirty percent “agreed" or “strongly agreed" while 35 percent “disagreed" or “strongly disagreed." Even though channel partners were more likely to perceive cablecos as backup providers (82 percent), they are not excluding them entirely as a primary carrier.
In thinking about how they are selling cableco business telecom services, respondents said overwhelmingly (77 percent) that cablecos are “best as secondary backup providers." Only 13 percent said they were “best as primary providers."
Sixty-seven percent of respondents “agreed" or “strongly agreed" that the lack of SLAs prevents them from recommending cablecos as a primary provider. However, respondents on a 2:1 basis said cablecos’ high speeds and low prices compensate for the lack of SLAs.
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