News

Cox Foresees Big Business

11/14/2008 7:00 PM Eastern

Cox Communications' business-services division is on track to become a $1 billion part of the company by 2010, based on growth in telephone and data sales to small and midsized firms and other activities such as capacity wholesaling, according to its vice president, Phil Meeks.

The division, which sells advanced phone and data services to businesses, as well as marketing fiber capacity to such competitors at Verizon Communications and AT&T, has grown in revenue by 18% during each of the last three years, the executive said in an interview. Growth is projected in the 16% range during each of the next three years, he added. The business division will generate 27% of the privately held company's overall growth during the next three years, Meeks said.

The growth projections are in spite of the fact that America's small- and medium-sized businesses have been hardest hit by the recession and credit crunch. Such businesses do not operate with cash on hand, but through the kinds of lines of credit that were frozen in when the financial-service industry melted down.

Meeks said those lines of credit have begun flowing in the last three weeks, so Cox has seen little churn among current business customers. Customers have been most heavily affected in the MSO's Southern California market, hard hit in the mortgage crisis; and Rhode Island, which has the dubious distinction of having the highest unemployment rate in the nation.

“We're certainly keeping an eye on [the economy],” he said.

But the division doesn't solely rely on sales of services to small businesses. Cox also sells wholesale services to Verizon Wireless, AT&T, T-Mobile and Sprint. The business-services division is also helping those vendors build fiber rings to connect their towers and expand the cellular topology in order to deliver 4G services.

“That's a good healthy business for us,” he said

As Cox conducts that business line, it is examining redundancies in the plant of its competitors compared with the planned facilities-based cellular business Cox intends to launch. In some markets, as much as 65% to 70% of the competitor's plant is where Cox is to place its own cellular infrastructure. So, as Cox is building the rings, it is also prepping its own future cellular plant.

The division has also expanded with a non-capital-intensive way of growing business sales. Since July, in two markets, Cox and Nortel Network have partnered for outsourced telesales. Cox provided Nortel with a list of high-speed-data-only customers, which the vendor contacted in an effort to upsell them into full business-services suites. The upside for Nortel: The vendor also sells the customer on its handsets and other equipment.

Meeks said the telemarketing partnership will soon be expanded to all 18 of Cox's markets.

The company is also extending its advanced services further down its hybrid fiber-coax plant, in order to reach more potential business customers. This effort is targeting the company's San Diego, Las Vegas and Phoenix markets. Those have been strong residential markets for the company and the division is examining “clusters of opportunities” for business service expansion.

Meeks said the division is also strategically launching a hosted VoIP product called Voice Manager, the first application it has marketed. The product offers advanced services such as the ability to route calls anywhere a business person goes, as well as to a variety of devices. Because it is a hosted service, small businesses can get specialized telephone services without having to pay for equipment on their own premises or pay an expert to come in every time an equipment upgrade is needed.

Meeks said the division is also considering Internet Protocol security and network-attached storage applications, products for which clients would pay only as needed.

The business-services division has achieved its growth even though its products, though comparably priced, are not necessarily the cheapest option for business users. Meeks said he believes customers select his company offers “the right products, positioned the right way … we don't lead with price.”

Cox, by virtue of the fact it started as a locally franchised business, has local business relationships and representatives that remain in the community after the sale, while other competitors may offer help via a call to another state or country, he added.

The division has gotten the most traction in industries such as healthcare and high-end hospitality — think the high-roller hotels on the Las Vegas Strip. Executives are now mulling how to sell their products down those same verticals, such as selling into smaller healthcare complexes or mid-level hotel properties, he said.

September