Competing with Communication
Broadband Is Essential for Business Survival
Bradley Kramer — Dec 01, 2008
Talk is cheap, or so goes the cliché. Tell that to a businessman who relies on talking to communicate with clients. Communication is the means for business and generating revenue. No, talk is not cheap. Talk is money.
Talk must also be fast, reliable and constant. If there is a breakdown in communication — a breakdown in talk — then the business transaction also breaks down. Communication is essential, and in today’s business environment the Internet is king.
Businesses continue to rely more on the Internet and IP infrastructure for day-to-day operations, client transactions and everyday communication. The Internet is a communication tool and marketplace all in one.
E-mail has become the de facto method of communication, able to replace letters, memos and faxes in one fell swoop. Voice over IP (VoIP) is competing with traditional phone lines. Teleconferencing and telecommuting are copacetic to a society where “going green” and saving money are in the verve. Broadband enables the mobile worker.
Tech-savvy businesses demand applications like Web-hosting, remote data storage, e-commerce tools and virtual private networks (VPNs) for remote network access, all of which make the businesses operate more efficiently and help them compete in a global marketplace while allowing employees to stay connected on the go.
Such applications require robust networks with high bandwidth to support traffic from employees to customers alike. Businesses that have access to these high-tech services and applications are better equipped to deal with an uncertain economy.
Moreover, some of these applications are critical to businesses’ operations, says Daren French, vice president of business development and cofounder of XRoads, which provides bandwidth management for companies to monitor and control how bandwidth is used. Some companies use IP applications for such things as accounting and bookkeeping in addition to communicating with and finding new customers.
“For companies not to be using the Internet today is almost a death knell,” French says, “because their competitors are.” Businesses use the Internet to maintain and grow business. “Without access to broadband networks, a business could be in big trouble,” he adds.
And big trouble is exactly what companies want to avoid during an economic slump.
Despite the current economic downturn, the business market — primarily small- and medium-sized businesses (SMBs) and large enterprises — is a strong market for service providers of all sorts, says Juan Vela, director of solutions marketing and strategy for Occam Networks. Municipal network operators, incumbent and competitive local exchanges carriers (ILECs and CLECs), cable multi-service operators (MSOs), private Internet service providers (ISPs), wireless providers and public utilities comprise the providers involved in the business class services market.
Regardless of the economy, “the reliance on the Internet only increases for businesses,” Vela says. “As media and customer transaction numbers increase in size and volume, bandwidth has to keep up to make a business efficient. Broadband enables this efficiency.”
French agrees that broadband is a high growth market right now, as businesses are interested in adding bandwidth for added network capacity and reliability.
“In the current economic climate, a lot of businesses are looking for any competitive advantages they can find to grow and to survive,” French says. “[Broadband] is key for them to have. If companies are going to grow their business using the Internet, then they’re going to need a fast, reliable connection to it.”
Broadband helps level the playing field in terms of competition.
“It makes competition more about the goods and services of a business rather than the location or size of the business,” Vela says. “Broadband enables a small, innovative business to compete with larger, more established businesses by opening up the reachable market through the Internet. Broadband is a great enabler.”
Though the worldwide economy is struggling, businesses continue to demand broadband services because those companies view broadband as an essential component of doing business.
U.S. Businesses Still Rely on Landline ConnectivityBusiness customers use nearly 5.3 million landline connections at their U.S. sites, a net increase of nearly 700,000 lines in the past five years, according to Vertical Systems Group’s latest market analysis. Figures represent access rates ranging from 56 to 64 kilobits per second (Kbps) to gigabit speeds. Business Ethernet and business cable are the fastest growing access segments, while the base of low speed 56 to 64 Kbps connections continues to rapidly decline. “The economic downturn will curtail total connection growth, however enterprise customer demand remains strong for lower cost, higher speed access lines for site connectivity to business services, particularly IP VPNs, Ethernet, [and dedicated Internet access (DIA)],” says Rick Malone, principal at Vertical Systems Group, which studies the networking industry as it relates to businesses. “In the past five years, aggregate access bandwidth has more than tripled as a result of customer network migration to larger capacity access connections.” New research is available through Vertical Systems Group’s ENS Research Programs, which provide analysis regarding service migration across all broadband network services. Research content covers business trends by speed and technology for the United States and European markets. All analysis is Web-based, supported with Excel-ready tables and full-color graphics. To order research or request pricing for a custom ENS Research Program, e-mail research@verticalsystems.com. |
“Similar to electricity, a business needs broadband to operate,” Vela says. “The effect [of the economic crisis] we see is simply in the number of businesses that fail. As consumers spend less, there will be some businesses that do not survive the crisis. Unfortunately, that means fewer business broadband circuits. But those remaining have not decreased demand and those that emerge during or after the crisis will have an increased appetite for broadband to minimize the operational expenses normally associated with offices.”
That being said, Vela considers the business segment of the broadband market to be favorable, especially in the area of Ethernet access. “There is tremendous pressure to increase bandwidth to all markets and that’s driving a push for business class broadband over both copper and optical media,” he says.
In terms of customer service and usage, the business segment differs from the general consumer broadband access market, Vela says. Symmetry is the primary difference between consumer and business broadband, but he says the operational differences are significant. Businesses also typically require service level agreements (SLAs) that put monetary pressure on the service provider to guarantee a level of availability, priority and management that is not typically available to residential consumers.
Mobility is another driving factor for businesses seeking access to broadband networks, says Dan Shey, principal analyst of business and consumer mobility at ABI Research.
“Broadband is important for business because it allows a mobile worker who relies on information to gain network access without having to find a Wi-Fi network,” Shey says. Mobile workers often rely on mobile phones for information and communication, but document exchange is better accomplished with a notebook computer, which requires remote access to a broadband network, he says.
Although it’s too early to tell how the current economy has affected mobile broadband access, the market has hitherto been robust. “Over the past two years mobile broadband access adoption has been growing at greater than 50 percent,” he says.
Sales of notebook computers with embedded connectivity is one avenue of opportunity that Shey considers as a way to drive mobile broadband adoption in the business market.
“I would suspect to see more cooperation between notebook OEMs and operators on this front to help drive sales of notebooks with cellular connectivity and mobile broadband,” he says. “I think at this point, this cooperation will be more for driving sales of embedded modem notebooks and mobile broadband to businesses versus a more consumer sale. It will be interesting to see how these two partners work together as operators have an interest in getting customers to their stores and selling them USB modems and PC cards for their mobile connectivity needs versus buying a notebook with embedded connectivity.”
Though broadband access is important to businesses, mobile broadband access is often more of a luxury convenience, Shey says. “Essentially, these occupations are willing to pay for this convenience as it optimizes their time.”
However, mobile broadband will not replace fixed line broadband access as the Internet is too important to businesses because relying only on a mobile broadband connection for Internet access would be too risky.
“Something to watch,” he says, “is the all wireless office and mobile broadband facilitates creation of the all wireless office.”
Network Concerns
Wireless and fiber-optic cabling might be the future of network infrastructure, but it’s copper that still rules the roost. “Industry estimates put the percentage of business locations served by copper in the 82 to 86 percent range,” Vela says. “Fiber makes up the rest of the wired connections. Wireless coverage is high as well. Though there are considerable tradeoffs with bandwidth and convergence capabilities with wireless technologies.”
These old copper infrastructures are sometimes problematic to service providers.
“The challenges are twofold,” Vela says. “First of all, connectivity remains a challenge as bandwidth consumption continues to increase.”
Because most SMBs still rely on copper infrastructure, DSL and Ethernet in the first mile (EFM) products are the most cost-effective, near-term option for broadband speeds, he says. The coverage required to reach businesses is considerable and the density of the SMBs at a given geography makes it challenging to maintain disparate residential and business access networks.
“Second, the sophistication of the broadband connection that guarantees SLAs for a business is still evolving to ensure parity with traditional TDM-type business access options,” Vela says. “Performance monitoring and end-to-end [operations, administration and maintenance (OAM)] are just two examples of the sophistication I’m speaking of. These capabilities are evolving and innovative suppliers are integrating these capabilities into their platforms in the near term future.”
Network resiliency and redundancy are critical to business operations. Without a reliable network, businesses can’t access those critical online services. Without access, workers will be rendered unproductive.
A network failure, French says, “essentially stops businesses from working. If an outage is too long, it could seriously impact the business as a whole.”
Vela considers network resiliency to be a “critical differentiator” for a business to choose a service provider.
“Network resiliency ensures ‘round the clock’ operations and enables peace of mind for the business,” Vela says. “Operators that offer network resiliency as an option for a business could have a potentially huge differentiator versus a competitive provider.”
Developing the Business
Business class broadband service isn’t just for the likes of AT&T, Comcast, Time Warner and Verizon. Municipal network operators can also go after the business segment and drastically improve the community’s appeal to businesses and residents.
“Typically, municipalities focus on businesses as the means to attract high paying jobs to their communities,” Vela says. “Munis depend on businesses as a catalyst for community growth and therefore approach the segment with a strategy of growth through enterprise.”
Retaining and attracting businesses is an important aspect of economic development in municipalities, and without broadband a community minimizes its ability to remain relevant in the world, Vela says. In light of the economy, business customers should be a more attractive prospect.
By providing advanced services like Web-hosting, VoIP and IP security, Vela says municipalities could make their offerings as attractive to businesses as private service providers.
“I think most municipalities focus on connectivity,” Vela says, “while private service providers focus on services above and beyond access.”
The idea that talk is cheap is one that broadband service providers should place by the wayside, as communications are essential for doing business. Talk is money.
Bradley Kramer is associate editor of Last Mile. He can be contacted at bkramer@benjaminmedia.com.
Fiber Access Grows in U.S. Business MarketBusiness fiber availability increased by 5 percent in the United States between 2003 and 2007, according to research studies by Vertical Systems Group. Fiber penetration now extends to 15.3 percent of U.S. commercial buildings with 20 or more employees, up from 10.2 percent in 2003. All remaining locations comprise the “fiber gap” — or business locations with no fiber access facilities. Optical fiber is a key enabler for the delivery of broadband network services at speeds up to gigabit rates, including business Ethernet, IP VPNs, VoIP and IP video. “Service providers cite fiber expansion as their top challenge to delivering business broadband offerings like Ethernet,” says Rosemary Cochran, principal at Vertical Systems Group. “Fiber gaps are closing, but not rapidly enough to meet market demand across all customer segments. Fiber penetration rates are substantially higher for large enterprises than [small and medium businesses (SMBs)], and this disparity widened in 2007. A positive trend for SMBs is that residential fiber buildouts are extending accessibility to adjacent business sites, which are predominately small and medium enterprise locations.” |
