CABLECOS & THE · Cablevision Systems Corp. Comcast Business Cox Communications Mediacom Business...

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$25CABLECOS & THE

CHANNEL: STATE OF THE MARKET 2016By Bob Titsch

2channelpartnersonline.com

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TABLE OF CONTENTS

Introduction…. . . . . . . . . . . . . . . . . . . . 6

Cablecos in Business Communications… . . . . . 7

Market Forecast

Cable’s Role

Cable’s Addressable Opportunity

Role of the Channel

Cableco Channel Program Overview… . . . . . .11

Cablevision Systems Corp.

Comcast Business

Cox Communications

Mediacom Business

Time Warner Cable Business Class

Shaw Communications

Spectrum Business (Formerly Charter Business)

BHN Business Solutions


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TABLE OF CONTENTS

Channel Survey Respondent Profile… . . . . . . .14

Business Model

Annual Revenue

Primary Target Market

Canadian Market

Growth Services

Channel Attitudes… . . . . . . . . . . . . . . . .18

Perception of Cablecos as Partners

Perception of Cableco Services

Cablecos and Telcos as Partners

Perception of Cableco and Telco Channel Programs

Perception of Cablecos as Primary or Secondary Suppliers

Perception of Cableco Channel Partner Programs

Perception of Cableco Partner Program Performance

Perception of Master Agent Program Performance

Important Attributes of Cableco Channel Partner Program


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TABLE OF CONTENTS

Channel Adoption of Cableco Services . . . . . . .31

Years Selling Cableco Services

Routine Quoting of Cableco Services

Cable Service Revenue

Customer Interest in Cableco Products

Reasons for Not Adding Cable Services

Reasons for Adding Cable Services


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Over the past 20 years Bob Titsch has been a technology journalist, publisher, marketer and PR executive. He served as editorial director at FAT PIPE, IP Business and ChannelVision magazines. Prior to that he was the vice president of marketing for Network One, a competitive telco. He also spent several years as the editorial director of PHONE+ and X-Change magazines, and helped launch the Channel Partners show in the 1990s. He can be reached at [email protected].

ABOUT THE AUTHOR

linkedin.com/in/robert-titsch-644521


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CABLECOS & THE CHANNEL: STATE OF THE MARKET 2016By Bob Titsch

INTRODUCTION Channel Partners’ sixth annual Cablecos & The Channel:

State of the Market survey reveals evolution in channel partners’ interest in, adoption of and challenges with selling cableco telecommunications services.

For one, cable companies continue to grab double-digit market share in the commercial accounts space at the expense of incumbent telcos. They’re gaining importance as product suppliers for channel partners, which increasingly see cablecos as viable “primary network” or “carrier of last resort” providers. And, critical to solution providers, mobile and consumer offerings represent vital income streams because most analyst forecasts suggest either flat or declining telecom service revenue trendlines.

“Cable companies have some great benefits,” says Karin Fields, co-owner of Microcorp, a master agency. “Pricing is strong, last-mile concerns are gone and we have not seen any network issues. It’s the buildout-cost surprises and provisioning that cause the most frustration. And yes, network availability is a challenge sometimes because many customers don’t fall within one provider’s footprint. But with recent mergers, much of that problem will be eliminated. Overall, cable is here to stay and will only become more

relevant to our industry and customers.”More good news: In the first quarter of 2016, Comcast

reported a business services revenue increase of 17.5 percent, to $1.3 billion, with small businesses accounting for about 75 percent of revenue and about 60 percent of growth. That performance follows on 15 percent year-over-year commercial services revenue expansion posted by Comcast in 2015.


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In its first quarter of 2016, Time Warner Cable also grew business services revenue, posting a 13 percent year-over-year uptick. In 2015, the cableco’s commercial services revenue grew nearly 16 percent year over year. And, in 2015, Spectrum Business (a division of Charter Communications) grew its commercial services revenue 22 percent. In its first quarter of 2016, Spectrum Business grew business services revenue by a tidy 12 percent.

Given across-the-board double-digit advances, it’s not surprising that the channel partners taking part in our survey generally report growing sales volumes of cable products.

What is eye opening is just how large that growth is shaping up to be.In 2013, about 68 percent of respondents who sold cable products said these

services represented less than 10 percent of total sales. Now, just 35 percent of partners who sell cable services believe they will earn less than 10 percent of total 2017 revenue from cable suppliers.

In other words, in just four years, about twice as many channel partners will earn more than 10 percent of total revenue from sales of cable-supplied products. Moreover, next year, the number of partner respondents who expect cable-supplied products to generate up to 30 percent of total sales should double from 2013.

Our survey also reveals portfolio changes. The single product called “most important” or “important” to revenue growth is

SIP trunking, cited by 87 percent of respondents who sell that product. That’s up by about 10 points from last year’s survey. Conversely, as SIP trunks displace PRIs, it’s not surprising the importance of PRI fell from 55 to 45 percent.

And, because of Charter Communications’ purchase of Time Warner Cable and Bright House Networks, we project that the combined company will surpass Comcast as the largest single provider of cable network products in channel partner portfolios.

In the new survey, about 79 percent of respondents said Comcast services were routinely quoted. Time Warner Cable services were just a bit lower, at 74 percent. Spectrum Business was third, at about 60 percent. After the Charter Communications acquisition of Time Warner Cable and Bright House, partners of all three companies will be reported as a single Spectrum Business category.

Altice, which owns Suddenlink and now Cablevision Systems Corp., also emerges as a more-important supplier. Both Suddenlink and Cablevision are routinely quoted by 26 percent of total respondents. In the future, both will appear in a single category.

CABLECOS IN BUSINESS COMMUNICATIONS MARKET FORECAST

Still, the future isn’t uniformly bright. Partners have understandable questions about overall revenue growth in the U.S. commercial services business; the shifting market share of cable, telco and other suppliers within the industry; and the long-term role of the channel within the distribution process.

Every segment of the value chain is affected by expectations about market health. On that score, it is simply not clear whether the value of U.S. commercial account purchases of fixed-network communication services are, in fact, growing, flat or


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slowly declining. That matters to respondents, and not just because of their bottom lines. Sales strategies differ significantly depending on whether a space is rapidly growing, a zero-sum market or declining.

Most — though not all — forecasts of U.S. commercial telecom services show slow growth at best. Insight Research projects that from 2012 to 2017, the total commercial services wireline market will contract from $95.5 billion to $92.3 billion at a compound annual growth rate of negative 0.7 percent. CMR Market Research predicts anemic 0.1 percent revenue growth through 2019.

On the other hand, some analyst forecasts call for revenue growth as high as 6 percent, though that must be qualified. Many such rosy predictions lump together telecommunications and information technology spending, not just core telecommunications revenue.

In addition, it is possible that consumer segment revenues may grow while commercial revenues remain flat, or even contract. That is more likely to be the case in the U.S. market, where mobile and consumer services generally post higher sales than the business segments. In fact, consultants at Deloitte, working from Tier 1 service provider annual reports, estimate that U.S. business spending on telecommunications services sold by these top providers is actually dropping substantially. That analysis includes cable providers, even as cable remains a modest supplier of commercial sales volume.

2002 and 2013 US Telecommunications and Content Distribution Revenue (In billions)

Graphic: Deloitte University Press | Dupress.com


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Between 2002 and 2013, for example, consumer sales have grown, while business sales have declined at a roughly 2 percent annual rate. Looking only at the commercial side, mobile sales are up, while fixed network product sales have shrunk. In fact, all net revenue growth in the U.S. commercial segment, arguably, has come from mobility products as businesses shift to more advanced forms of communications.

To the extent we can make a clear case for telecom services growth in the United States, then, it is in the consumer and mobile segments. In 2016, Moody’s predicts revenue increases could be as high as 3 to 4 percent, including consumer services and the value of phones sold. That’s something for channel partners to keep in mind.

Of course, markets as a whole frequently grow or contract even as sub-segments move in opposite directions. Regarding the role of cable companies in commercial services markets, the relative share supplied by incumbent telcos seems to be shrinking, while cable gains share.

Why revenue is declining is also important. Competition — as expected — is driving down retail prices. The shift from legacy protocols to IP and Ethernet means customers pay less for equivalent functions. The price-per-bit for performance or capacity are lower, and Moore’s Law suggests that costs will likely continue dropping, even as performance improves.

Finally, a shift to cloud-based services further lowers spending for computing infrastructure and associated communications. All of that means buyers can do more while spending less.

CABLE’S ROLEA second major question concerns supplier dominance, or lack thereof. The whole

purpose of deregulation and competition is to allow new suppliers to snatch market share from former monopolists. We’re not going out on any limbs by predicting that legacy providers will lose market share as a result of competition and, in fact, virtually all analysts predict cable companies will keep gaining share in business markets for the foreseeable future. In part, that is because cablecos are strongly motivated to find big new revenue streams, and they’re devoting increasing effort to do so. After conquering the SMB space, for example, Comcast is now targeting enterprise accounts, including Fortune 1000 firms.

Also, cable suppliers have developed competencies in core internet and Ethernet access products, with service reliability and network coverage good enough to drive significant buyer interest. For that reason, commercial revenues earned by cable companies are increasing as a percentage of total sales. In the internet services revenue category, in 2013, the cable consumer segment represented about 67 percent of cable industry internet access revenue, and commercial accounts about 33 percent.

Insight Research predicts that by 2019, commercial accounts will drive about 42 percent of cable-supplied internet access revenue.


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CABLE’S ADDRESSABLE OPPORTUNITYCable TV operators have grown their commercial services revenues about 20

percent annually since about 2011, according to CMR Market Research. That in a U.S. commercial services market worth perhaps $138 billion, according to the analyst firm.

Keep in mind that cable has a structural advantage in commercial markets compared with telcos. Cablecos have no legacy revenues to protect; telcos do.

When a telco adds a next-generation voice account, it often loses a legacy voice (POTS) account, for a zero net gain. When a telco adds a fiber internet access account (FiOS or u-verse, for example), it loses the legacy digital subscriber line account, again for a zero net gain. As AT&T adds DirecTV customers, it loses U-verse video accounts. Cable providers, in contrast, have no legacy accounts to lose in the transition. It’s a net/net win.

Likewise, as commercial customers abandon legacy SONET, frame relay or ATM services, replacing them with next-generation IP and Ethernet solutions, business customer spending in the IP or Ethernet category is offset by declines in the legacy category. In the first quarter of 2016, for example, AT&T legacy revenue declined 17 percent, while IP services revenue grew 14 percent. In its first quarter of 2016, Verizon enterprise revenues dipped 3 percent.

One other notable finding is that respondents tend not to see cablecos as providers of web hosting, managed security or managed storage. That speaks to greenfield opportunity.

The big takeaway: Cable companies are becoming more important suppliers in the commercial services business, and they have room to grow. What does that mean for the channel?

ROLE OF THE CHANNELThe distribution process is always in flux, as new technologies and products

develop, cablecos gain market share and suppliers continue to look for operating efficiencies. Commission rates are an important driver of channel partner revenues and supplier cost, and our survey shows, to no one’s surprise, that commissions are a top concern for channel partners. If commercial services markets remain competitive (as we believe they will), and profit margins remain under pressure (as we expect they will), payouts will continue to be an area of tension—and opportunity—between channel partners and their suppliers.

There are a few big unknowns. As more of the volume of commercial revenues shifts to mobile platforms, the relative value of the channel to at least some service providers could actually increase. As fixed network service revenues become a smaller part of the total revenue mix, meanwhile, AT&T or Verizon could find that channel partners play a more important role in controlling sales and support costs, for example.

Also, to the extent that cable operators gain more share in the commercial services market, and to the extent they continue to rely on channel partners, the value and role of the channel should grow. Relationships matter, and indirect sales are an ongoing requirement in SMB as well as some enterprise sales. Thus, cablecos likely will rely more heavily on channel partners as their market share grows.


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Feedback from master agencies certainly supports this notion. “Our agent partners are quoting and selling cableco services 15 percent

more year over year,” says Alan Sandler, founder and managing partner of Sandler Partners. “The cable companies are a big part of our business. We are lucky to have them as partners, and we are cautiously optimistic that they will continue to want to support the channel for many years to come.”

CABLECO CHANNEL PROGRAM OVERVIEWCablevision Systems Corp. Company Description: Cablevision Systems Corp. is a media and telecommunications company that serves millions of households and businesses throughout the greater New York area. Cablevision offers Optimum-branded digital cable television, high-speed internet and voice products as well as the Optimum Wi-Fi network. Channel Leader: Joe Magliulo, Vice President, Strategic Sales Date Established: 2006 with a referral program, 2007 with an agent program Number of Indirect Sales Partners: Undisclosed Geographic Territory Partners Can Sell Into: Greater New York metro area with the exception of Manhattan Products Partners Can Sell: Phone, television and internet for SMBs. Phone service includes digital phone lines, business trunking (SIP and PRI) and toll-free. Internet access products include premium tiers with speeds of up to 60 Mbps downstream and 25 Mbps upstream and speeds of up to 101 Mbps downstream and 35 Mbps upstream. Internet service includes Optimum Wi-Fi. Comcast Business Company Description: Comcast Business, a unit of Comcast Cable, provides advanced communication solutions to help organizations of all sizes meet their business objectives. Through a next-generation network that is backed by 24/7 technical support, Comcast delivers Business Internet, Ethernet, TV and a full portfolio of voice services for cost-effective, simplified communications management. The Comcast Business Solutions Provider Program is a comprehensive indirect channel program that enables partners to sell a full line of small, midmarket and enterprise business products from Comcast. As a Comcast Business Solutions Provider, partners are able to diversify their portfolio and earn recurring commission while providing their customers with a valuable alternative to traditional telco carriers. Channel Leader: Craig Schlagbaum, Vice President, Indirect Channels Date established: 2011 Number of Indirect Sales Partners: The program launched with three national master agencies — Intelisys Communications Inc., Telarus Inc. and Telecom Brokerage Inc. (TBI). The program continues to grow at a significant pace, but Comcast has not disclosed any further information about its direct or master agency agreements. Geographic Territory Partners Can Sell Into: 39 states and the District of


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Columbia Products Partners Can Sell: Business Ethernet, Business Internet, Business Voice portfolio, including PRI and SIP trunks, Business TV, hospitality solutions Cox Communications Company Description: Cox Communications is a broadband communications and entertainment company providing advanced digital video, internet, telephone and Wi-Fi services over its own nationwide IP network. The third-largest U.S. cable TV company, Cox serves more than 6 million residences and businesses. Cox is known for its pioneering efforts in cable telephone and commercial services, industry-leading customer care and its outstanding workplaces. Channel Leader: Larry Steelman, Vice President, Cox Business Sales Channels & Programs Date Established: Referral program July 2012, agent program 2015 Number of Indirect Sales Partners: Over 1,000 referral partners and approximately 90 authorized selling agents. Geographic Territory Partners Can Sell Into: All Cox franchise areas Products Partners Can Sell: All voice, data and video products Mediacom Business Company Description: Mediacom Business delivers internet, phone and TV services to businesses of all sizes. With a coast-to-coast fiber network, the company offers anchor institutions bandwidth and connectivity with speeds of 1 gigabit and beyond. Mediacom has invested more than $1 billion over the past four years to operate, expand and upgrade its robust broadband infrastructure that serves businesses in some 1,500 communities across 22 states. Channel Leader: Jim Phipps, Vice President, Commercial Sales Date Established: 2011 Number of Indirect Sales Partners: 45 Geographic Territory Partners Can Sell Into: Entire Mediacom Business footprint which includes 22 states with a significant customer base in the Midwest and Southeast. Products Partners Can Sell: HFC suite of solutions (Business Internet 10 –105 Mbps, Business Phone including Managed Voice Solutions, Business TV & Music) and Gigabit+ Fiber Solutions (Dedicated Internet Access, Transparent LAN, Primary Rate Interface) Time Warner Cable Business Class Company Description: Time Warner Cable Business Services, a division of Time Warner Cable, offers a full complement of business communications tools to small, midsized and enterprise-sized companies under its Time Warner Cable Business Class brand. Its internet, voice, television, network and cloud services are enhanced by award-winning customer service and local support teams. Through its NaviSite subsidiary, Time Warner Cable Business Services also offers scalable managed services, including application services, enterprise hosting, and managed cloud services primarily in the U.S. and U.K. Time Warner Cable


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Business Services, founded in 1998, serves approximately 675,000 business customers throughout Time Warner Cable’s service areas. Channel Leader: Greg Iuzzolino, Senior Director, Partner Channel Sales Date Established: March 2008 Number of Indirect Sales Partners: TWCBC has a two-tier distribution strategy. TWCBC has signed 16 master agencies and has more than 40 direct regional partners and two leading IT distributors. Geographic Territory Partners Can Sell Into: TWCBC operates in 31 metro markets including Charlotte, Columbus, Dallas, Los Angeles and New York City. Products Partners Can Sell: Internet: Business Internet (5 Mbps - 300 Mbps) and Dedicated Internet Access Voice: Business-class phone, PRI and SIP trunks TV: Standard & HD (college, business, bars and restaurants, health care) Network Services: Ethernet (up to 10 Gbps), managed router, managed security, managed Wi-Fi, colo servicesCloud: Managed cloud and hosted solutions through NaviSite Shaw Communications Company Description: Shaw Communications is a diversified communications and media company serving 3.2 million customers through a reliable and extensive fiber network. Shaw serves consumers with broadband internet, Wi-Fi, digital phone and video products and services. The company provides business customers internet, data, Wi-Fi, telephony, video and fleet tracking services. Shaw Business Infrastructure Services offers North American enterprises colocation, cloud and managed services through ViaWest. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index. Channel Leader: Jeremy Robinson, Director, Channel Management Date Established: 2008 Number of Indirect Sales Partners: 4 national partners, 160 regional direct partners Geographic Territory Partners Can Sell Into: Western Canada (British Columbia, Alberta, Saskatchewan and Manitoba) Products Partners Can Sell: All business services offered by Shaw Business Spectrum Business (Formerly Charter Business) Company Description: Spectrum Business is a communications provider for growing enterprises and organizations. The company provides a range of technology solutions delivered over a reliable, secure and managed network, including internet, networking, voice and business video solutions. Date Established: Spring 2010 Number of Indirect Sales Partners: Multiple national master partners, regional direct partners and actively selling subagents nationwide Geographic Territory Partners Can Sell Into: 28 states Products Partners Can Sell: Fiber internet (managed security, cloud backup, web hosting), Ethernet (optical internet, business internet-coax), Layer 3 VPN, PRI, SIP trunking and business video


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BHN Business Solutions Bright House Networks is the sixth largest owner and operator of cable systems in the U.S. and the second largest in Florida, with technologically advanced systems located in five states — Florida, Alabama, Indiana, Michigan and California. BHN Business Solutions offers a strong portfolio of video, voice and high-speed data solutions to the small and midsized business segments. In addition, the company provides advanced fiber-based telecommunication services to key industry verticals in the midmarket and carrier segments, including cloud-based hosted voice and innovative managed services solutions that allow enterprise customers to refocus their limited IT staff on strategic business needs. The company is Cisco Master Service Provider-certified under the Cisco Cloud and Managed Service Program.

CHANNEL SURVEY RESPONDENT PROFILE BUSINESS MODEL

More than half of respondents to the Channel Partners survey identify themselves as agents or master agents, though participation by master agents dipped from 31 to 13 percent this year. Independent agents, subagents and managed service providers responded in greater numbers. Indeed, the number of managed service provider respondents more than doubled over last year. Value added resellers (VARs), system integrators, dealers, carriers/service providers and “other” comprise the rest of the group and represent about one-third of the sample.

Business Model

Agent/Subagent Managed Services Provider Master Agent Other Option Carrier/Service Provider Value Added Reseller

(IT Hardware/Software) Systems Integrator Dealer/Interconnect Vendor (Hardware/Software) Distributor (Hardware/Software) (0%)

Source: Channel Partners’ Cablecos & The Channel: State of the Market Survey, May 2016

Figures do not total 100% due to rounding.

13%

8%

6%3% 2% 2%

44%

13%

10%


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ANNUAL REVENUESixty-five percent of respondents generate sales of less than $5 million annually.

Those figures are about the same as last year. However, the percentage of participants billing more than $50 million doubled for the second consecutive year.

PRIMARY TARGET MARKETNearly 80 percent of respondents primarily target small and medium-sized

businesses, (SMBs) while 11 percent focus more on larger enterprises. These figures are nearly identical to results from the 2015 survey.


Annual Revenue


Less than $499,000 $500,000-$999,999 $1 million-$4.99 million $5 million-$9.99 million $10 million-$14.99 million $15 million-$19.99 million $20 million-$24.99 million $25 million-$49.99 million Greater than $50 million

15%5%

5%

5%

3%

2%25%

25%

14%

Primary Target Market


SOHO (Fewer Than 20 Employees)

Small Business (20 - 99 employees)

Medium Business (100-999 employees)

Large Business (More Than 1,000 Employees)

Consumer

5%6%

47%

31%

11%


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CANADIAN MARKET

Last year Shaw Communications was added to the list of covered cablecos, so we began to ask whether participants sold cableco business telecom services in the Canadian market. We found that 30 percent of respondents sold to Canadian businesses, and 12 percent had agents located north of the border. This year, while the number of respondents with agents operating in Canada rose to only 13 percent, the number of respondents selling services to business located in Canada rose to 48 percent.

Canadian Market ParticipationYES NO


48% 52%

13%

12%

87%

88%

Sells services to businesses located in Canada (2016)

Has agents in Canada (2016)

Has agents in Canada (2015)

30% 70%Sells services to businesses

located in Canada (2015)


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GROWTH SERVICES

A majority of respondents (87 percent) cite SIP trunking as “very important” or “important” for driving growth. Hosted VoIP/UC (last year’s top category) and metro Ethernet tied for second place at 79 percent. Since SIP trunks are replacing PRIs, it’s not surprising that the importance of PRI fell from 55 to 45 percent. Last year, traditional voice services rebounded from a sharp decline but dropped again in this survey, sliding from 67 to 52 percent. Data center connectivity also declined considerably.

Services Most Important in Driving Channel Partners’ Growth 2016 2015 2014 2013

86%95%

89%

Hosted VoIP/UC

Cloud Services (IaaS/SaaS)

Metro Ethernet Services

SIP Trunking

Data Center Connectivity

MPLS

Traditional Voice Service

PRI Service

Note: Percentage of partners answering “very important” or “important”

Source: Channel Partners’ Cablecos & The Channel: State of the Market Survey, June 2013 and 2014, August 2015, May 2016

79%

84%78%

82%

73%

84%78%

82%

79%

81%84%

87%

87%

79%82%

81%

65%

82%

76%82%

68%

67%50%

68%

52%

55%56%

73%

45%


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CHANNEL ATTITUDES PERCEPTION OF CABLECOS AS PARTNERS ..Channel partners are generally positive on cablecos as partners, though there is some skepticism about suitability of cable network services for “primary network” or “carrier of last resort” providers. About 52 percent of respondents agree that cablecos could act as the primary network services provider. Some 23 percent disagree.

..Just 29 percent agree that a cableco could be the “provider of last resort,” while

35 percent do not believe a cableco is suitable as a carrier of last resort..

Channel Partners’ Perceptions of Cablecos as Business Telecom Providers

DESCRIPTION AGREE DISAGREE

Internet Access Provider 79 2

Redundant/Diverse Network Provider 76 5

Regional Network Provider 73 6

Big Bandwith Provider 71 10

Triple-Play Provider 71 5

Financially Stable Network Provider 66 8

Low-Cost Provider 60 8

Voice Provider 56 16

Primary Network Provider 52 23

Niche Network Provider 42 19

Reliable Network Provider 42 16

Carrier of Last Resort 29 35

Note: Percentage of partners who “agree” or “disagree” with these descriptions



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..That noted, cablecos are generally considered favorably as suppliers of network redundancy, regional networking and internet access.

..Significantly, channel partners tend to rate cablecos favorably in terms of network reliability, an important achievement for an industry whose networks once were not considered terribly reliable. And, there was strong agreement that cablecos tend to provide the best retail prices for customers. Some 60 percent agree that cablecos were the low-cost providers.

PERCEPTION OF CABLECO SERVICESChannel partners generally perceive cablecos as top suppliers of internet access,

Ethernet access, TV and voice-data bundles. Cablecos are less often seen as providers of web hosting, managed security or managed storage. The general pattern is that cablecos are viewed more often as suppliers of connectivity than managed services such as email or hosted voice services.

That pattern is not unusual. It almost always is the case, in any newly-contested segment of the telecom market, for upstart and competitive providers to offer services that deliver useful functionality at a lower price, even if they are not deemed initially to offer the “best quality” and “most comprehensive” services.

Upstarts gain inroads with basic functionality and low price and then gradually, over time, enrich their services, add features and eventually emerge as full competitors to incumbents on every important dimension of service quality. Cablecos are at a much more formative stage than their entrenched telco opponents, but there is no reason to believe cablecos will not “move up the stack” over time.

Channel Partners’ Perceptions of Business Telecom Services Cablecos Offer

2016 2015 2014 2013

98%

78%

Internet Access

Ethernet Access

Cable Television

100%

90%97%99%

80%90%96%

84%81%84%

(continued on next page)


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Channel Partners’ Perceptions of Business Telecom Services Cablecos Offer (Continued)

2016 2015 2014 2013

93%

96%

86%

79%

80%

Voice+Internet Bundles

Triple-Play Bundles (Voice+Internet+TV)

Metro Ethernet

SIP Trunks

Voice (POTS)

PRI Trunks

75%91%90%

80%91%

87%

72%83%

77%

75%76%

80%

67%76%

73%

75% N/A N/A N/A

71%

50%

32%

30%

64%

66%60%61%

66%53%

57%

49%48%

39%

49%34%

20%

49%33%

20%

Hosted Voice/PBX

Email

Web Hosting

Managed Security

Managed Storage




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CABLECOS AND TELCOS AS PARTNERSCompared to telco partners, cablecos generally are viewed as having less complete

network coverage, and also are viewed as less capable than telcos in the areas of network reliability (quality) as well as end-user service and support. On the other hand, cablecos are deemed far superior than telcos where it comes to end-user pricing.

About 60 percent of respondents said cable end-user prices are “much better” or “better” than comparable telco prices. Some 42 percent indicated that cable network availability or coverage is “worse” or “much worse” than telco coverage. About 35 percent of respondents ranked cable end-user service and support as “worse” or “much worse” than telco levels of support.

17% 59% 22% 1%33% 49% 11% 7%

14% 66% 20%

25% 36% 30% 8%

22% 53% 16%1% 1%11% 59% 21%

3%5%

13% 52% 30% 5%27% 50% 14%5% 4%

Price (End User)

Network Quality & Reliability

Network Availability/Coverage

2016

2015

2014

2013

2016

2015

2014

2013

2016

2015

2014

2013

2016

2015

2014

2013

19% 48% 29% 1%

12% 33% 44% 10%1%

19% 32% 39%6%

14% 36% 32% 16%2%


2%

3%

14% 45% 31% 10%8% 53%

39% 38% 10%1% 12%16% 38% 36%5% 5%

Service & Support (End User)

3%31%

Channel Partners’ Perceptions of Cablecos as Business Telecom Providers Compared to Telecom Providers

Much Better Better Neutral Worse Much Worse

5%


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PERCEPTION OF CABLECO AND TELCO CHANNEL PROGRAMSTelco channel partner programs are deemed “much better” or “better” than cableco

programs in a couple of ways, including commissions and lead generation, while cableco partner programs are ranked “much better” or “better” than telco programs for ease of quoting and ease of provisioning.

About 35 percent of respondents said telco partner programs are “much better” or “better” than cableco programs where it comes to commissions, while 32 percent reported telco performance on lead generation was likewise “much better” or “better” than cableco performance.

Channel Partners Compare Cableco and Telco Partner Programs


Commission to the Partner

Ease of Provisioning

Access to In-Person Training

Ease of Quoting

Access to Human Sales Support

Ease of Ordering

Access to Self-Service Sales Support (e.g., Portal)

17% 52% 21% 5%15% 48% 16% 19%

5% 13% 33% 25% 23%4% 13% 35% 31% 17%

5% 28% 43% 16% 4%27% 42% 23% 5%

8% 15% 28% 31% 19%5% 22% 44% 24% 5%

28% 40% 22% 14%7% 14% 36% 28% 15%

5% 16% 42% 31% 5%

16% 41% 22% 14%11% 38% 29% 19%3%

5% 16% 38% 29% 11%

24% 47% 12% 10%1%17% 50% 19% 10%3%

16% 41% 26% 16%1%7% 11% 58% 18% 5%

16% 64% 14% 5%17% 56% 13% 5%

11% 55% 24% 11%4% 9% 63% 20% 4%

12% 67% 10% 5%15% 60% 13% 8%

53% 23% 18%5%1%

4% 15% 63% 16% 2%

23% 48% 16% 8%

44% 11% 10%31%3%

3%

5%

8%

5%

2%


2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014

2013


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Channel Partners Compare Cableco and Telco Partner Programs (Continued)


Access to Web-Based Training

Assistance With Lead Generation

4% 9% 59% 13% 15%57% 15% 27%1%

12% 64% 5% 12%11% 56% 16% 16%

5% 13% 62% 15% 5%11% 64% 12% 12%1%

4% 12% 64% 14% 2%23% 60% 10% 6%


2%


PERCEPTION OF CABLECOS AS PRIMARY OR SECONDARY SUPPLIERSSo far, surveyed channel partners tend to view cable as “best” when used as

suppliers of secondary or backup services, where telcos tend to be viewed as better choices as primary suppliers. Some 65 percent of respondents said cablecos were best in the roles of secondary or backup providers.

Fifty-six of respondents said that “lack of service level agreements” on cable coax connections prevented the partners from recommending cable as a primary provider.

On the other hand, it already is clear that channel partners are comfortable quoting cable fiber connections and are highly likely to recommend a cable fiber connection as a primary service. Some 66 percent of respondents would recommend a cable fiber access service as a primary service.

Respondents tend to agree that service level agreements for hybrid fiber coax connections (copper) would provide more confidence when it comes to quoting a coaxial cable connection for a primary access service.

That pattern — new suppliers come to market initially as secondary suppliers — historically has been followed by virtually all competitive providers in every market segment, as the value proposition is simple and clear: “Use us as a complement or backup to your primary service.” Over time, as customers gain confidence, competitive suppliers are able to move up and contend for status as primary providers of any service. That undoubtedly will be path cablecos follow as well.

Willingness to quote a cable fiber connection as a primary access shows that cable already has gained parity in that area.

Channel Partners’ Perceptions of Cablecos as Primary vs. Secondary Providers

Strongly Agree Agree Neutral Disagree Strongly Disagree

They are best as a primary provider

2016

2015

2014

2013

29% 48% 12%3% 5%11% 46% 33%5% 5%

37% 33% 12%2% 16%16% 38% 27% 13%5%


2016 2015 2014 2013

2016 2015 2014 2013


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Channel Partners’ Perceptions of Cablecos as Primary vs. Secondary Providers (Continued)

Strongly Agree Agree Neutral Disagree Strongly Disagree

If there were SLAs on coax services, I would be more likely to recommend them as primary providers

Lack of SLAs on coax services prevents me from recommending them as primary providers

I would recommend cablecos as a primary provider for fiber-based services, such as Ethernet

They are best as a secondary/backup provider

2016

2015

2014

2013

2016

2015

2014

2013

2016

2015

2014

2013

2016

2015

2014

2013

16% 52% 31% 1%15% 50% 33%

15% 63% 18% 1%2%

2%

18% 54% 25% 4% 4%

26% 45% 17% 10%25% 41% 28%

23% 44% 19% 10% 4%20% 50% 23% 7%

22% 31% 28% 19% 5%25% 31% 28% 15% 2%

20% 33% 20% 23% 4%18% 30% 38% 12% 2%

22% 47% 24% 1%5%

15% 46% 30% 1%10%

13% 37% 33% 13% 4%9% 41% 43% 2%

5%


5% 2%

High speeds on coax services compensate for lack of SLAs

41% 22% 26%5% 5%22% 35% 28%10% 5%

11% 32% 26% 26% 5%20% 27% 29% 23% 2%

2016

2015

2014

2013


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Channel Partners’ Perceptions of Cablecos as Primary vs. Secondary Providers (Continued) Much Better Better Neutral Worse Much Worse

They offer SLAs on fiber-based connectivity, such as Ethernet

Low prices on coax services compensate for lack of SLAs

5%7% 38% 28% 17% 10%7% 27% 35% 27%

19% 39% 17% 17% 8%15% 36% 35% 13% 2%

34% 36% 26% 1%1%

30%28% 38%3%

2%

33% 48% 18% 1%18% 57% 21% 4%

2016

2015

2014

2013

2016

2015

2014

2013



PERCEPTION OF CABLECO CHANNEL PARTNER PROGRAMSOf many potentially important attributes of cableco partner programs, several

are viewed as very important or important: commissions, ease of quoting, ease of ordering and ease of provisioning. Commissions are always of high concern for channel partners, since that is the revenue driver. Some 72 percent of respondents say commissions are “very important” or “important” attributes of partner programs.

That noted, ease of quoting, ordering and provisioning matter as well, since those features of a service make possible efficient sales operations and help ensure customer satisfaction after a sale.

Fully 77 percent of respondents indicate that quoting is “very important” or “important.” Three-fourths (75 percent) say ordering is “very important” or “important.” The same percentage report that provisioning is “very important” or “important.”

It’s worth noting that, as important as commissions are, they are deemed less important than sales and fulfillment capabilities.

Importance of Channel Program Characteristics to Channel Partners

1 2 3 4 5 (With 1 being the most important, 5 being the least)

44% 31% 19% 5%

42% 35% 16% 5%


Ease of Quoting

2%

2%

Source: Channel Partners’ Cablecos & The Channel: State of the Market Survey, May 2016Figures do not total 100% due to rounding.



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Importance of Channel Program Characteristics to Channel Partners (Continued)

1 2 3 4 5 (With 1 being the most important, 5 being the least)

40% 35% 16% 3% 5%

37% 35% 17% 3% 8%

8%

28% 26% 36% 3% 7%

7%

26% 35% 21% 11% 6%

15%

18%

12% 41%

25%

20%

20%

43%

37%

10%

15%

18%

10%





Ease of Ordering

Assistance With Lead Generation


Source: Channel Partners’ Cablecos & The Channel: State of the Market Survey, May 2016Figures do not total 100% due to rounding.

PERCEPTION OF CABLECO PARTNER PROGRAM PERFORMANCEWhen it comes to perceptions of cableco performance, commissions and quoting

ease are almost perfect bell curves: 40 to 42 percent are “neutral” on cableco performance, with equal and lesser percentages rating cableco performance as good or bad. Assistance with lead generation is an area where 42 percent of respondents say cableco performance is less than average, although many channel partners would probably agree that their expectations in this area are modest.

2016 2015 2014 2013

2016 2015 2014 2013

Channel Partners’ Ratings of Cableco Partner Programs 1 2 3 4 5

(With 1 being the best, 5 being the worst)

19% 28% 36% 7% 9%6% 23% 40% 23% 8%

9% 29% 32% 16% 14%11% 27% 38% 16% 9%

24% 28% 29% 16% 2%10% 19% 44% 19% 8%

13% 27% 22% 28% 11%9% 29% 41% 13% 9%


Ease of Quoting



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Channel Partners’ Ratings of Cableco Partner Programs (Continued)

1 2 3 4 5 (With 1 being the best, 5 being the worst)

19% 28% 28% 21% 4%13% 21% 42% 13% 11%

6% 24% 27% 28% 14%7% 34% 37% 14% 9%

11% 19% 44% 13% 13%14% 12% 36% 28% 9%

6% 18% 25% 32% 19%9% 16% 46% 18% 11%

12% 28% 31% 12% 9%6% 29% 28% 25% 12%

6% 29% 37% 17% 10%

11% 33% 38% 11% 7%

9% 36% 31% 12% 9%12% 20% 57% 5% 7%

4% 32% 39% 16% 9%5% 22% 45% 20% 7%

4% 24% 43% 17% 10%5% 12% 58% 20% 5%

5% 14% 34% 30% 16%32% 41% 18% 7%2%

5% 28% 47% 12% 5%8% 20% 55% 12% 5%

6% 28% 39% 16% 10%5% 29% 43% 18% 5%

16% 16% 24% 9% 22%10% 12% 37% 22% 20%

5% 14% 16% 29% 35%22% 27% 44%3%

5%

Ease of Ordering






Help With Lead Generation

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013




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PERCEPTION OF MASTER AGENT PROGRAM PERFORMANCEChannel partners tend to rate their master agency programs largely as they rate

their cableco partner programs, but also tend to rate the master agencies more positively. Master agency programs are rated significantly higher for commissions, quoting, ordering, provisioning and sales support.

Where 29 percent of respondents rate cableco agent program performance on commissions “very good” or “good,” 41 percent of respondents rate their master agencies “very good” or “good.” Likewise, where 29 percent of partners rate their cableco partner program performance for quoting ease “very good” or “good,” some 45 percent rank master agencies “very good” or “good” for ease of quoting.

It seems as if cablecos could learn a thing or two from their master partners.

Channel Partners’ Ratings of Cableco Master Agency Programs 1 2 3 4 5

(With 1 being the best, 5 being the worst)

19% 38% 22% 9% 7%13% 28% 39% 13% 7%

14% 36% 23% 16% 10%11% 31% 31% 16% 11%

22% 31% 28% 10% 4%15% 30% 39% 13% 3%

13% 22% 36% 16% 12%15% 31% 31% 18% 5%

16% 36% 26% 14% 4%11% 33% 38% 15% 3%

7% 32% 32% 16% 12%13% 22% 44% 16% 5%

10% 28% 47% 12%9% 36% 26% 14% 4%

6% 32% 32% 16% 12%7% 22% 44% 16% 5%

3%

17% 28% 28% 19% 4%14% 23% 38% 16% 9%

13% 34% 44% 5%

11% 27% 47% 9% 5%

10%

3%

28% 33% 10% 14%10% 20% 54% 12%

9% 25%

3%

39% 16% 12%9% 22% 45% 16% 7%


Ease of Quoting

Ease of Ordering




2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013



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Channel Partners’ Ratings of Cableco Master Agency Programs (Continued)

1 2 3 4 5 (With 1 being the best, 5 being the worst)

7% 14% 41% 24% 7%12% 15% 54% 14% 5%

7% 10% 41% 25% 16%20% 53% 16% 5%5%

9% 24% 40% 10% 12%15% 17% 58% 7%

6% 33% 38% 13% 10%6%

3%

33% 44% 11% 6%

10% 12% 33% 14% 26%7% 14% 37% 20% 22%

5% 15% 35% 18% 27%25% 14% 45%6% 10%



Help With Lead Generation

2016 2015 2014 2013

2016 2015 2014 2013

2016 2015 2014 2013



IMPORTANT ATTRIBUTES OF CABLECO CHANNEL PARTNER PROGRAMSAccess to a dedicated channel manager and field sales assistance are viewed as

the most important elements of a cableco channel partner program. A whopping 75 percent of respondents say availability of dedicated channel managers is “very important” or “important,” while 57 percent rank field sales assistance as “very important” or “important.” That makes sense given that customer satisfaction is Job 1 for channel providers.

More than half (54 percent) also say the ability to work through a master agency or master VAR is “very important” or “important” — again, not surprising given the satisfaction with master agent program performance.

Importance of Cableco Partner Program Capabilities 2016 2015 2014 2013

82%91%

89%

73%70%

54%

75%

57%

Dedicated Channel Manager

Field Sales Assistance



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Importance of Cableco Partner Program Capabilities (Continued)

2016 2015 2014 2013

79%76%

66%

61%60%

54%

57%49%

39%

55%67%

52%

50%50%52%

43%35%

32%

41%32%

29%

27%23%

15%



55%

47%

50%

54%

47%

28%

44%

23%

Access to Multiple Cablecos Through One Agent Agreement

Working Through a Master Agent/Master VAR

Partnering Between Non-Like Peers (Agents And Vars) Facilitated by the Cableco

Joint Educational, Marketing or Communication Initiatives Facilitated by the Cablecos

Industry Standard Training On Cable Networks and Technology and How to Optimize Selling Success

Teaming With Cablecos’ Direct Sales Representatives

Participating in an Online Peer Community to Discuss Cableco Solutions to Customer Requirements

Working Through An Aggregator (Rebiller)


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CHANNEL ADOPTION OF CABLECO SERVICES YEARS SELLING CABLECO SERVICE

More than 65 percent of respondents have been selling cableco business telecommunications services for four or more years. Nearly 45 percent report they have been selling cableco services for at least six years, and 23 percent say they have been selling cableco services for more than 11 years.

About 13 percent of respondents report they do not sell cable services. Keep that figure in context: about one-third of respondents are managed service providers, carriers or service providers and “other.” Not all of them are in a position to sell cable services directly to their customers, but that doesn’t mean they’re unfamiliar with offerings.

Channel Partners’ Years Selling Cableco Business Telecom Services

11 or More Years 6-10 Years 5 Years 4 Years 3 Years 2 Years 1 Year 0 Years


23%

21%

13%

13%

10%

11%

6%3%


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ROUTINE QUOTING OF CABLE SERVICEReliance on particular cable suppliers is one area that will change in 2016 compared

with 2015, because of two important sets of mergers: Charter Communications (Spectrum Business) buying Time Warner Cable and Bright House Networks, as well as Altice (SuddenLink) acquiring Cablevision Systems Corp.

Because of the Charter Communications purchase of Time Warner Cable, Charter should surpass Comcast as the largest single provider of cable network products in channel partner portfolios.

In the latest survey, respondents collectively report 239 instances of “routinely quoting” services provided by a cable operator. Each instance represents one partner quoting a particular cable operator brand and indicates that some partners are routinely quoting services by multiple cable operators.

Comcast represents about 21 percent of total supplier mentions — but also represents quoting activity by 49 firms (79 percent of the sample of 62 companies).

Time Warner Cable services were just a bit lower at about 19 percent of supplier mentions and 74 percent of the sample of 62 companies.

Spectrum Business was routinely quoted in about 15 percent of instances, but by 60 percent of surveyed firms. After the acquisition of Time Warner Cable and Bright House, however, Charter Communications and their business division, Spectrum Business, will become a bigger factor in the market.

Altice, which owns Suddenlink and now Cablevision Systems Corp., also emerges as a more-important supplier in terms of routine quote activity.

Cablecos Channel Partners Are Routinely Quoting for Business Telecom Services

2016 2015 2014 2013

78%79%

81%84%

74%74%

78%64%

66%60%

58%38%

29%52%

27%34%

Comcast Business

Time Warner Cable Business Class

Spectrum Business

Cox Business



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Cablecos Channel Partners Are Routinely Quoting for Business Telecom Services (Continued)

2016 2015 2014 2013

28%34%

20%4%

NA

26%26%

12%14%

17%26%

12%0%

12%19%

9%2%

0%

3%6%

10%6%

2%2%

Bright House Networks

Cablevision/Optimum Lightpath

SuddenLink

MediaCom

Other Option

Shaw Communications Inc.

None


8%

2%NANA


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Channel Partners’ Reported Revenue Percentage From Selling Cable Business Telecom Services — 2013-2018

2018 (estimated) 2017 (estimated) 2016 (estimated)

2015 (estimated) 2014 (actual) 2013 (actual)


14%14%

32%37%

41%42%

21%

7%

31%

11%

24%19%

15%11%

18%

5% 5%

20% 20%

11%7% 8% 8%

5% 5%

13%

3% 2% 5%7% 8%

3% 3%3%7%11%

15%18%

33%

12%11%11%

41-50% 51%+None 1-10% 11-20% 21-30% 31-40%Figures do not total 100% due to rounding.

CABLE SERVICE REVENUERespondents report higher revenue expectations for 2016 than was the case in

2015, with expectations of even higher sales of cableco services in 2017. Where in 2015 about 15 percent of respondents reported zero cableco revenue, in 2016 only about 12 percent of respondents expect to have zero contribution from cableco products.

Where in 2015 about 37 percent of respondents expected cable product sales to represent one to 10 percent of total sales, in 2016 about 32 percent expect cableco product sales in that same range. Over 65 percent of respondents expect cableco revenue contributions to range from one to 30 percent of total revenue.


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CUSTOMER INTEREST IN CABLECO PRODUCTSAs you might expect, channel partners generally align their product sets to customer

demand. And, customer demand looks to be highest for internet access (75 percent of respondents say customers want to buy it) and Ethernet access (73 percent say customers want to buy). Some 65 percent of customers want voice-plus-data bundles.

About 52 percent of customers still want to buy POTS services. As you would expect, channel partner services tend to match those perceived

customer wants. About 69 percent of channel partners polled say they sell internet access; 71 percent of partners sell Ethernet access. Some 55 percent of respondents indicate they sell voice-plus-data bundles.

In nearly half of the product categories, partner supply is higher than perceived customer demand.

Cableco Business Telecom Services Channel Partners Are Selling Customers Want to Buy Company Is Selling

75%69%

73%

65%

56%

52%

52%

48%

42%

71%

55%

56%

50%

44%

45%

45%

Internet Access

Ethernet Access

Voice + Internet Bundles

Metro Ethernet

SIP Trunks

Voice (POTS)

PRI Trunks

Hosted Voice/PBX



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Cableco Business Telecom Services Channel Partners Are Selling

(Continued) Customers Want to Buy Company Is Selling

39%

39%

23%

21%

16%

15%

10%

44%

42%

35%

27%

24%

23%

10%

Cable Television

Triple-Play Bundles (Voice+Internet+TV)

Managed Security

Managed Storage

Email

Web Hosting

None


REASONS FOR NOT ADDING CABLE SERVICEThough 90 percent of all respondents expect to be selling cable services by 2018

(see the chart on Page 34), about 12 percent of respondents expect to sell no cable services in 2016. Among the reasons cited for not doing so: lack of knowledge about cable services, competitive concerns and perceptions of inadequate reliability or products that did not match the customer requirements. We may add that cablecos are still less often seen as providers of web hosting, managed security or managed storage, all important value adds for partners.


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REASONS FOR ADDING CABLE SERVICECustomer demand, high bandwidth, good prices and diversity are among the top

reasons channel partners added cable services to their product lines. Compared with responses from earlier surveys, more partners cite price advantages, bandwidth and network coverage or network diversity as reasons for adding cable services.

But the biggest new reason simply seems to be end-user demand. More customers are aware that cable offers business services, and they’re asking for quotes. That speaks to success in marketing campaigns by cablecos.

Editor’s Note: Channel Partners surveyed its readership using an online poll in May 2016 to ascertain channel partners’ interest in, adoption of and challenges with selling cableco telecommunications services to businesses. Sixty-two qualified respondents — primarily telecom agents and master agents — provided the data contained in this report.

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