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Comcast Business targets strategic acquisitions and international expansion to fuel long-term growth

TBR perspective  

Comcast Business remains in an enviable position and is an outlier in the telecom industry. The cable operator’s business unit continues to post double-digit revenue growth and is taking market share from a range of competitors in the U.S. The company’s core value proposition is its powerful DOCSIS 3.1-based, hybrid-fiber-coax (HFC) fixed access platform, which provides significantly better value in terms of connectivity performance to price paid compared to legacy technologies such as MPLS and DSL. Comcast Business sees at least another $60 billion in market share that is available to take from less competitively positioned incumbent telecom operators in its domestic market. This sizable addressable opportunity will continue to feed the Comcast Business machine for at least the next few years.

TBR believes Comcast Business also has significant opportunity to sustain long-term revenue growth through international expansion and the company’s evolving sales and marketing strategies. The company is pivoting from a focus on selling its products horizontally across verticals to a solution-centric, verticalized approach, evident in the acquisition of Deep Blue Communications, which specializes in the hospitality, retail and entertainment industries, and also evident in the company’s new product offerings and design principles. Comcast Business is also expanding outside the U.S. and is building presence via acquisitions, in Canada via iTel, in the Caribbean and Mexico via Deep Blue Communications, and in Europe via Sky. Over time, TBR believes the shift to build its international footprint will help Comcast Business win more of the Fortune 1000 companies that have sites in multiple countries and that require global services. In addition, Comcast Business’ acquisition of BluVector, an AI-powered cybersecurity technology company, points to another trend at the company, which is to build out robust security capabilities.

The 2019 Comcast Business Analyst Conference highlighted the company’s business progress and financial performance and detailed initiatives that will spur long-term growth including new acquisitions and portfolio developments as well as Comcast Business’ evolving go-to-market strategies. The event included a State of the Business update by Comcast Business President Bill Stemper as well as presentations focused on areas including the company’s recent Deep Blue Communications acquisition, the ActiveCore SDN platform, network security and Comcast Business’ fast-growing enterprise division.

Deeper convergence of mobility, broadband and video services creates revenue opportunities and disruption for CSPs

The digital era is bringing fundamental, disruptive changes to traditional business models for communication service providers (CSPs), including telecom operators and cable providers, as the mobility, broadband and video industries converge more deeply. These shifts are driven by the following trends, which will gain further traction over the next several years:

  • The rise of cable mobile virtual network operators (MVNOs) — New entrants including Xfinity Mobile and Spectrum Mobile are attracting wireless customers via low price points and the convenience of being able to enroll in multiple services through a single provider.
  • Preference for over-the-top (OTT) video — The popularity of OTT services including Netflix, Hulu and HBO Now are contributing to video subscriber losses for cable providers and bundling opportunities for wireless operators.    
  • Wireless as a broadband replacement — Over the next several years, customers will gradually substitute traditional fixed broadband connectivity with wireless-based services due to enhanced 5G and LTE-Advanced coverage, fixed-wireless services, and increased data allotments for mobile hot spots.

These trends create both revenue opportunities and disruption for CSPs as cable providers have opportunity to take market share from telecom operators and vice-versa. Cross-selling multiple services enables CSPs to maximize revenue opportunities per customer while also helping to reduce churn. Conversely, the deeper convergence within the telecom and cable industries will create greater challenges for CSPs as broadband and video access will become more commoditized, which will make competitive pricing more crucial to attracting and retaining customers.

Graph showing 3Q18 postpaid phone net additions

Cable MVNOs are disrupting the mobility industry

Comcast’s Xfinity Mobile has emerged as a stronger player within the U.S. wireless market as the brand has garnered over 1 million customers since launching in mid-2017 and has been able to consistently outperform AT&T and Sprint in postpaid phone net additions the past several quarters. Contributing to Xfinity Mobile’s success is the low price of its unlimited data plans, which are currently undercutting prices from all Tier 1 U.S. operators, for the underserved market of single-line customers. Xfinity Mobile is also attracting customers by offering pay-as-you-go pricing for $12 per GB, which provides price-sensitive customers who consume minimal data an alternative amid the market’s emphasis on unlimited data plans.

Xfinity Mobile will become a stronger competitor in the U.S. market over the next several years as it expands its retail footprint and Comcast gains additional broadband customers to which it can cross-sell wireless services. Spectrum Mobile, which became available across Charter’s footprint in September, will also disrupt the U.S. wireless market by offering similar pricing incentives as Xfinity Mobile. Additionally, Altice USA plans to launch an MVNO offering in 1H19 that will focus on serving bring-your-own-device customers, giving the company the opportunity to cross-sell mobility services to its current residential base of over 4.5 million customers.

Chart showing single-line postpaid unlimited data plans

To counter disruption from cable MVNOs, operators can capitalize on the value proposition offered by their unlimited data plans, which bundle in popular OTT streaming services as well as other incentives including high-speed data tiers for mobile hot spots. Telecom operators are also relying on the discounts provided to multiline unlimited data accounts, which are not currently offered to Xfinity Mobile and Spectrum Mobile customers, to undercut cable MVNOs.

Chart showing video services bundled with unlimited data plans

Wireless begins to disrupt the traditional fixed broadband market

Significant enhancements in wireless technology over the past few years, such as the inception of 5G, which makes millimeter-wave spectrum viable for commercial use, as well as the inventions of carrier aggregation, 256 QAM and massive MIMO, have made it economically feasible for CSPs to offer mobile broadband as an alternative to traditional fixed broadband services.

Though Verizon was a major driver of this trend with its early use of 5G fixed wireless, TBR expects more CSPs will begin to leverage their wireless assets to provide similar services in 2019 and beyond. AT&T, with its Netgear Nighthawk 5G Mobile Hotspot, essentially provides a nomadic ultra-high-speed broadband connection leveraging 5G. T-Mobile is also looking to jump on the bandwagon, arguably in a much bigger and more market-impactful way, especially if its proposed merger with Sprint is approved. Regardless of whether the deal goes through, T-Mobile intends to leverage its mix of low-, mid- and high-band spectrum assets with the aforementioned wireless technologies to provide its own mobile broadband as an alternative to fixed broadband services.

A new phase of price competition for internet service could come to North America due to wireless. TBR also expects this trend to unfold in other developed and developing markets, especially where fixed access is not widely deployed. Offering wirelessly delivered, high-speed internet services could become a major new business for telecom operators that are in countries where internet penetration is relatively low.

Consumers will reap the greatest benefits from cable and telecom industry convergence

Though CSPs have the opportunity to create new revenue streams from the deeper convergence of mobility, broadband and video services within the cable and telecom industries, these benefits are largely outweighed by the competitive challenges spawned by industry convergence. Consumers will reap the greatest benefits from cable and telecom industry convergence as they gain more flexible service options as well as the ability to enroll in additional services from a single provider. The competition created from cable and telecom industry convergence will also spur CSPs to become more competitive in their wireless, broadband and video pricing to maintain market share.

Comcast Business fuels digital transformation with its ‘Beyond Fast’ message, strategy and execution

TBR perspective

The 2018 Comcast (Nasdaq: CMCSA) Business Analyst Conference explored how Comcast Business is helping its customers go “Beyond Fast.” The story arc over the day-and-a-half gathering highlighted Comcast Business’ emphasis on how it not only equips companies with connectivity but also helps them realize the business innovation and customer experience capabilities they truly desire to grow their own businesses.

Offering the best last-mile gigabit broadband coverage in the U.S. is the foundation of Comcast Business’ strategy; however, the unit and its leadership are focused not merely on promoting accelerated data speeds but also on leveraging Comcast Business’ growing network capabilities and business-enabling portfolio to underpin and advance its customers’ digital transformation initiatives. Customer testimonials were a focal point of the event as technology executives within the sporting venue and quick-service restaurant (QSR) industries shared and extolled how Comcast Business’ solutions have helped to enhance customer experiences, improve operational efficiency and reduce costs.

Though Comcast Business’ portfolio is maturing, Comcast Business continues to innovate with significant opportunities ahead, as the unit seeks to gain market share and increase revenue from its existing solutions. Unlike its largest competitors — AT&T (NYSE: T), Verizon (NYSE: VZ) and CenturyLink (NYSE: CTL) — Comcast Business is not encumbered by legacy assets, which has enabled the company to sustain double-digit year-to-year revenue growth over the past 30 consecutive quarters. Comcast Business has the potential to take up to $60 billion in market share from its main rivals as the company targets continued growth through its broadband services and adjacent solutions in areas including managed services, SD-WAN, unified communications, security and video.

Ready when you are: Nokia prepared to migrate customers to 5G

TBR perspective

At Nokia’s (NYSE: NOK) 2018 Analyst Conference, held in Tokyo in August, the company emphasized that its end-to-end portfolio, supported by a robust R&D program, is ready and able to take its customers into the 5G era. The vendor also stressed that 5G is much more than just a radio upgrade and that realizing the full potential of 5G requires a fundamental change to the architecture of the network.

Given how much disruption is facing the telecom industry, it was refreshing to see that Nokia is being proactive in aligning with where the market is trying to go, even if that means disrupting itself. Though a part of the company will remain focused on servicing the legacy platforms of the past, the other part of the company will focus on realizing the future. Given that most operators are stuck in between both worlds as well, it is fitting that Nokia will be able to support the migrations of its customers toward the network of the future.

Event overview

Nokia hosted a select group of industry analysts in a two-part event. The first part of the event was a two-day workshop about the company’s global Fixed Networks business, and the second part of the event was a two-day Asia Pacific and Japan (APJ) regional update to deep dive on specific trends occurring in those markets.

In addition to the usual market overview, strategy and portfolio updates, Nokia hosted several customers at the event, namely Infracapital, KDDI, NTT DOCOMO, SoftBank and Marubeni, to discuss their own businesses and share how Nokia is helping them achieve their goals. A representative from Japan’s Ministry of Internal Affairs and Communications was also present to provide an overview of Japan’s telecom industry and how policy is shaping that country as it transitions into the 5G era.

Hosting the event in Japan was pertinent and timely given the country’s history as an early technology adopter and its upcoming adoption of 5G. With the 2020 Summer Olympics less than two years away, Japan will showcase for the world cutting-edge use cases of telecom networks leveraging 5G technology. The country also symbolizes the monumental changes occurring in the telecom industry, namely that domestic operators are challenged to evolve into digital service providers to better compete against digital-native competitors in their home market, such as Rakuten, as well as realize new business models from the 5G era to grow.

Leading operators are accelerating their 5G timetables, justifying the investment due to the competitive advantage 5G technology provides

HAMPTON, N.H. — The efficiency gains offered by 5G are spurring operators to accelerate their deployment timeframes, according to TBR’s 3Q18 5G Telecom Market Landscape.

“5G is up to 10 times more efficient on a cost-per-gigabyte basis compared to LTE,” said TBR Telecom Senior Analyst Chris Antlitz. “This is the driving force behind most operator commitments to deploy the technology thus far. With data traffic continuing to scale globally, operators will need to invest in new technologies, such as 5G, that can help them more cost-effectively support that traffic while providing an overall better quality of experience for their customers.”

TBR estimates over 85% of 5G capex spend through 2020 will be driven by operators in four countries: the U.S., China, Japan and South Korea. Most Tier 1 operators in these countries have aggressive 5G rollout timetables and intend to leverage the technology for fixed wireless broadband and/or to support their mobile broadband densification initiatives. The seamless software upgradability of new RAN platforms to 5G will facilitate deployment at incremental cost, keeping overall spend scaling quickly but at a relatively low level compared to prior RAN generation upgrades.

TBR’s 5G Telecom Market Landscape tracks the 5G-related initiatives of leading operators and vendors worldwide. The report provides a comprehensive overview of the global 5G ecosystem and includes insights pertaining to market development, market sizing, use cases, adoption, regional trends, and operator and vendor positioning and strategies.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.