The Future of Cable Business Services 2012

Introduction: Taking Care of Business

JUNE, 2012
Alan Breznick
Senior Analyst

Cables Business Services Opportunity

The U.S. has more than 27 million companies of all shapes and sizes, the vast majority of them SMBs and SOHOs U.S. businesses now spend an estimated $130 billion to $140 billion on telecom services annually SMBs alone spend an estimated $50 billion to $70 billion annually on data, voice and video services Cable industrys HFC lines already pass more than three quarters of SMBs in U.S. Yet cable companies take home only $6 billion or so of the overall haul, a mere 4 to 5 percent of total Even Comcast, the MSO leader, reaped less than $1.3 billion from commercial services in 2010

MSO Commercial Market Opportunity

MSO Number of Firms in Region Market Opportunity in Region

Comcast

5.2M very small (<20 workers) 5.6M total

2.3M-2.7M very small 2.5M-3.0M all SMBs 3.0M total

$11.5B very small $49.8B total

$6.3B very small $17B-$21B all SMBs $21B-$25B total $6.2B wireline $4B wireless $5.5B -- total $3.0B very small & small $3.0B-$3.5B midsized & larger firms

Time Warner Cable

Cox 820,000 very small Communications 1.3M total Charter 1M total Communications Cablevision Systems 685,000 very small & small (< 100 workers) 50,000-60,000 midsized & larger firms

MSO Business Services Customers 2008-2010

MSO
Cox Communications*

2008 Totals
250,000 customers

2009 Totals
250,000+ customers 650,000 phone lines

2010 Totals
260,000+ customers 800,000+ phone lines 75,000+ video subs

Time Warner Cable

283,000 data subs; 30,000 phone subs

260,000 customers 137,000 SMBs; 3,500 fiber buildings

295,000 data subs 67,000 phone subs 160,000 video subs

260,000+ customers 140,000+ SMBs 3,800 fiber buildings

334,000 data subs 111,000 phone subs 165,000 video subs

260,000+ customers 140,000+ SMBs 4,500 fiber-lit buildings 4,400 route fiber miles 242,000 customers

Comcast Cablevision Systems (Opt. Lightpath)

Charter Communications

256,400 customers

261,100 customers

*Heavy Reading estimate

Key Vertical Markets for Cable

Health Care

Education

Financial Services Government

MSO Business Services Revenues 2007-2010

MSO Commercial Revenue 2007 Commercial Revenue 2008 Commercial Revenue 2009 Commercial Revenue 2010

Comcast

$394 million

$558 million

$828 million

$1.3 billion

Time Warner Cable

$660 million

$775 million*

$915 million

$1.1 billion

Cox Communications

$740 million

$853 million

$985 million

$1.1 billion

Cablevision Systems (Optimum Lightpath) Charter Communications

$215 million+

$249 million+

$256 million+

$284 million+

$341 million

$392 million

$446 million

$494 million

MSO Business Services Revenue 2010

MSO Q1 Revenue Q2 Revenue Q3 Revenue Q4 Revenue

Comcast

$263 million

$306 million

$334 million

$364 million

Time Warner Cable

$254 million

$268 million

$287 million

$298 million

Cox Communications Cablevision Systems (Optimum Lightpath) Charter Communications

$270 million*

$280 million*

$280 million*

$270 million*

$68 million+

$71 million+

$73 million+

$72 million+

$118 million

$121 million

$126 million

$129 million

*Heavy Reading estimate

MSO Business Services Revenue 2011

MSO Q1 Revenues Q2 Revenues Q3 Revenues Year to Date Revenues % Change

Comcast

$394 million

$435 million

$464 million

$1,293 million

+43.3%

Time Warner Cable

Cox Communications Cablevision Systems (OL) Charter Communications

$312 million

$361 million

$387 million

$1,060 million

+31.0%

$310 million*

$320 million*

$320 million*

$950 million*

+15.0%*

$77.3 million+

$77.1 million+

$77.5 million+

$231.8 million+

+9.4%

$137 million

$141 million

$148 million

$426 million

+16.7%

*Heavy Reading estimates

MSO Business Services Revenue Growth

MSO Business Services Revenue & Growth
450
42.2% 38.9% 34.8%

400

34.7%

350 Revenue ($ millions)

22.8%

300

16.1% 13.5%

16.5%
8.9%

17.5%

250
435

6.2% 464

200
364 334 306 254 263 268 312

394 361

387

150

287

298

100
118 68 121 71 126 73 129 137 141 148 77 78

50

72

77

0 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

TimeWarner Cable Comcast TimeWarner Cable YOY Growth Comcast YOY Growth

Charter Communications Optimum Lightpath Charter Communications YOY Growth Optimum Lightpath YOY Growth

Telco Business Services Revenue Growth

ILEC Business Services Revenue & Growth
10,000 9,000 8,000 0.9% 7,000 Revenue ($ millions) 6,000 5,000 4,000 0.5% 9,715 9,650 9,579 9,469 9,279 9,255 2.2% 9,321

4,487

4,539

4,550

4,577

4,511

4,638

4,591

-2.7%
3,000 2,000 -4.5% 1,000 961 0 977 922 -5.1% 927 -4.1%

Q1 '10

Q2 '10

Q3 '10

Q4 '10

Q1 '11

Q2 '11

Q3 '11

AT&T AT&T YOY Growth

Verizon Verizon YOY Growth

CenturyLink/Qwest CenturyLink/Qwest YOY Growth