Cable MSOs move in on Ethernet services, Heavy Reading finds

Cable multiple-system operators (MSOs) are making inroads into the Ethernet services market, quickly snatching up 25% of market sales and taking business away from telecom operators and Carrier Ethernet suppliers alike, according to the latest report from Heavy Reading Cable Industry Insider, a subscription research service from Heavy Reading.

The report, “Cable Operators & Ethernet: Serious Market Share,” reviews and updates how cable MSOs and their subsidiaries are approaching the Ethernet services business in the U.S. today, comparing their go-to-market and technology strategies. It profiles and analyzes seven of the most significant U.S.-based cable companies (including one specialized data subsidiary) in the data market on how they address Ethernet, including service offerings, expansion plans, strategies, technology suppliers and choices, target markets, and resulting customers and businesses.

"All large U.S. MSOs have moved into the business services market," notes Steve Koppman, research analyst with Heavy Reading Cable Industry Insider and author of the report. "Ethernet is a growing portion of that portfolio, with more than 25% of the U.S. Ethernet services market going to cable operators by the end of 2012."

The emergence of cable operators as a major competitive threat in Ethernet services has a significant impact, Koppman says. "This affects not only the telecom operators that must contend with more local competition, but also carrier Ethernet technology suppliers with a greater opportunity for market expansion," he adds. "Expanded Ethernet service over HFC networks has, meanwhile, facilitated small-business purchases while longer-standing customers over fiber are mostly in the mid-market."

While U.S. MSOs have more than a quarter of the Ethernet market (and a much greater share in the metro), this share is likely to increase and will approach one-third as Comcast ramps up after a late start in 2011, according to Koppman.

The report also notes that wholesale Ethernet is substantially outgrowing retail, expanding as a share of MSO Ethernet from 10% to more than 20% including dramatically growing "Type Two" service as well as cell backhaul. MSOs' historically simple "pipe" approach to Ethernet is evolving into a more application-based vertically oriented posture, giving more weight to issues of service management.

Heavy Reading predicts that MSOs will move "up-market," individually and/or collectively, toward long-haul national customers, while continuing to move "down-market" to address smaller businesses by leveraging their HFC networks, DOCSIS 3 and channel-bonding capabilities.

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