Cable Telephony in Small Businesses: The Competitive Threat to ILECs 2004 -2009

TABLE OF CONTENTS

Chapter I EXECUTIVE SUMMARY

1.1 Cable Telephones for Small Businesses

1.2 The Market for Small Business Cable Voice Services

Chapter II CABLE TELEPHONY AND THE SME MARKET

2.1 The Cable Telephony Market

2.2 SME Market Size and Number of Establishments

2.2.1 Size of Establishments

2.3 SME Market Demographics

2.4 Business Line Market Analysis Methodology and Size

2.4.1 Business Line Demand of All Establishment Sizes

2.4.2 Business Line Demand of SME Establishments

2.4.3 Top 30 Incumbent Carrier SME Market

2.4.4 All Cable Markets

2.4.5 Two-Way Capable Cable Markets

2.5 Small Businesses as an Opportunity Space

Chapter III SME MARKET DRIVERS FOR CABLE COMPANIES

3.1 Cable Telephony for the SME

3.2 Bundles for SMEs

3.2.1 Voice Services

3.2.2 Enhanced Services

3.2.3 Data and Internet Access

3.3 What the Telcos Could Offer

3.4 Comparing Basic Bundle Pricing: Telco vs. MSO

3.5 Higher Revenue per Subscriber

Chapter IV TECHNOLOGY IMPLEMENTATION

4.1 Development of the CATV Network

4.1.1 Traditional Coax Network

4.1.2 HFC

4.1.2.1 HFC Components

4.1.2.2 HFC Topology

4.2 Circuit Switched Cable Telephony

4.3 Circuit Switched With Hybrid IP Networks

4.4 IP Cable Telephony

4.4.1 Data over Cable Service Interface Specification (DOCSIS)

4.4.1.1 DOCSIS 1.1 & 2.0

4.4.2 PacketCable

4.4.2.1 Packet Cable 1.1 & 1.2

4.5 Cable IP Telephony Implementation Issues

4.5.1 Primary Line Service/E911

4.5.2 Communications Assistance for Law Enforcement Act (CALEA)

Chapter V MARKET STRATEGY FOR SMES

5.1 MSO Market Strategy for SMEs

5.2 Cox Communications

5.3 LightPath

5.3.1 LightPath`s Large Business Strategy

5.3.2 LightPath`s Small and Medium Business Strategy

5.4 Charter Communications

5.5 Insight Communications Company, Inc.

Chapter VI MARKET FORECAST: CABLE TELEPHONY PENETRATION OF SMES

6.1 Cable Telephony SME Market Analysis Methodology

6.2 Cable Companies Addressable SME Telecom Services Market

6.3 Cable Companies Potential Revenue for Bundled Services

6.4 Model of Acceptance of Telephony Services from Cable TV Companies

6.4.1 Cable Telephony Forecast Model Methodology

6.5 The Market Exposure of ILECs to Cable Telephony

Appendix GLOSSARY

TABLE OF FIGURES

Chapter I

I-1 Cable Service Provider Telephone Service Delivery Model: Total Potential for Small Businesses,

2003 and 2009 ($Millions)

Chapter II

II-1 Total US Business Establishments, 1992-2005 (Millions)

II-2 Distribution of SMEs by Number of Employees, 2004

II-3 Distribution of Business Lines by SME Company Size, 2004

II-4 Distribution of SMEs by Company Size within ILEC Areas, 2004

II-5 Distribution of ILEC SME Business Lines by Company Size, 2004

II-6 Distribution of SMEs by Company Size within Cable Footprint, 2004

II-7 Distribution of SME Voice-Equivalent Business Lines by Company Size within MSOs, 2004

II-8 SMEs by Company Size Within two-way Cable Systems, 2004

II-9 Distribution of Cable Voice-Equivalent Business Lines by SME Company Size, 2004

Chapter III

III-1 Online Computers: Residences vs. SMEs, 2004-2008 (Thousands)

III-2 Online Residences, Broadband vs. Narrowband Connections, 2004-2008 (Thousands)

III-3 Voice over DSL Generic Architecture

Chapter IV

IV-1 Traditional Tree-and-Branch Coax Architecture

IV-2 Coax Distribution to Customer Premises

IV-3 HFC Architecture Providing Voice and Video Services

IV-4 Circuit Switched Cable Telephony

IV-5 Typical Cable Frequency Spectrum Allocation

IV-6 Circuit Switched with Hybrid IP Network Architecture

IV-7 Cable IP Telephony

IV-8 Basic DOCSIS

IV-9 Basic PacketCable Architecture

Chapter V

V-1 Cox Revenue Mix: All Customers 2002-2003

V-2 Cox Business Customer Mix: By Number of Employees

V-3 Distribution of Cox Business Customer Revenue by Enterprise Size

V-4 Cox Business Customers Served: Customer Base by Numbers of Employees

TABLE OF TABLES

Chapter I

I-1 Top 30 Cable Service Providers: SME Businesses in All Markets

I-2 Four MSO Voice Delivery Options

Chapter II

II-1 Americast Availability by Geographic Area

II-2 Business Establishments by Industry Sector and Business Size (SMEs vs. Large Business Enterprises)

II-3 Percentage Distribution of SMEs by Industry Sector

II-4 Business Line Demand Distribution by Industry Segment

II-5 Business Line Demand Distribution by Industry: SMEs vs. Large Business Enterprises

II-6 Business Line Demand Distribution: SME Lines by Industry Sector

Chapter III

III-1 Slowing Growth in High Speed Access Services, 1999-2003

III-2 North American Broadband Connections, Residences vs. SMEs, 2004-2008 (Thousands)

III-3 NA Residential Broadband Connections by Service Type, 2004-2008 (Thousands)

III-4 NA SME Broadband Connections by Service Type, 2004-2008 (Thousands)

III-5 Enhanced Services

III-6 The Versions and Features of xDSL

III-7 Wireline Basic Communications Pricing

III-8 Wireline Data Access Pricing (256Kbit/s)

III-9 Wireline Data Access Pricing (1 Mbit/s)

III-10 Cable Telephony Basic Communications Pricing

III-11 Cable Telephony Data Access Pricing (256 Kbit/s)

III-12 Cable Telephony Data Access Pricing (1 Mbit/s)

III-13 Comparison of Monthly Pricing for an SME with Five Employees

III-14 Line Features Pricing Comparison: Qwest vs. Cox Cable

Chapter V

V-1 Cox Communications Residential Revenue Mix, 2000-2003 ($Thousands)

V-2 Cox Business Services: Location Growth, Revenue Growth 2002-2003

V-3 Cox Digital Telephone Service: Equipment and Network Costs

V-4 VoIP Softswitch Network-Powered Service: Equipment and Network Costs

V-5 VoIP Softswitch Premise-Powered Service: Equipment and Network Costs

V-6 LightPath Telecommunications Services Suite

V-7 LightPath Revenue Growth, 1999-2002

V-8 LightPath Operating Metrics, 1999-2002

V-9 Charter Communications: Revenue Generating Unit Statistics

V-10 Insight Communications: Telephone Service Performance

Chapter VI

VI-1 Total Number of SMEs by Cable Operator

VI-2 Total Number of SME Business Lines by Cable Operator

VI-3 Total Number of SMEs within Two-Way Markets by Cable Operator

VI-4 Potential SME Business Lines within Two-Way Markets

VI-5 Annual Revenue Potential of Data and Voice Bundle in Two-Way Capable Markets by Cable Operator

VI-6 Four Cable Telephony Delivery Options

VI-7 Cable Telephony Service Delivery Model: Fiber/Copper, 2003-2009

VI-8 Cable Telephony Service Delivery Model: Channelized HFC, 2003-2009

VI-9 Cable Telephony Service Delivery Model: Dedicated Cable Modem, 2003-2009

VI-10 Cable Telephony Service Delivery Model: Shared with Cable Modem Service, 2003-2009

VI-11 Cable Telephony Service Delivery Model: Total Potential for Small Businesses, 2003-2009

VI-12 ADSL and Cable High-Speed Lines, 1999-2003

VI-13 Bundle Pricing-DSL versus Cable, Year End 2003

VI-14 Cox versus Verizon DSL Performance, Year End 2003

VI-15 ILEC Business Line Erosion (Thousands of Business Lines)

VI-16 Top-30 Telephone Companies: Number of SMEs Exposed to Cable Competition

VI-17 Top-30 Telephone Companies: SME Business Lines Exposed to Cable Competition

VI-18 Top-30 Telephone Companies: Number of SMEs Vulnerable to Cable Operator Competition