Comcast Targets Mid-tier Markets

Comcast Corp. (CMCSA - Snapshot Report) has decided to increasingly focus on the small and medium sized businesses (SMB) segment. Recently, the company signed a deal to acquire Cimco Communications Inc, a privately held competitive local exchange carrier in the Chicago area. However, the financial terms of this acquisition have not been disclosed. Cimco has more than 23,000 customers in the mid-tier commercial business segment. 

In addition to bringing in a new base of customers, Cimco will give Comcast some innovative engineering, customer service, and operations, specifically designed for the mid-range business services market. Cimco has strategic relationship with some industry leading original equipment manufacturers like Cisco System Inc (CSCO - Analyst Report), Alcatel-Lucent (ALU - Analyst Report) and Adtran Inc (ADTN - Snapshot Report). 

Cable MSOs are facing fierce competition from telecom service providers. The U.S. telecom giants such as AT&T (T - Analyst Report) and Verizon Wireless (VZ - Analyst Report) are gradually expanding their fiber-optic networks. As a result, these companies are quickly gaining market share from cable MSOs by offering Mobile TV and other high-speed broadband services. Comcast alone lost 214,000 basic video customers in the last quarter. To counter competition, Comcast has decided to target the SMB segment, so far a core market of telecom service providers. Various industry researches estimate that the SMB segment is a $15 billion market opportunity. 

Despite being a late entrant in this segment, Comcast generated $558 million of revenue in fiscal 2008 from this segment. In the previous quarter, its business services unit generated revenues of $198 million, up 51% year-over-year. The company is aiming to more than quadruple that amount by 2012. Recently, Comcast has launched its first next-generation high-speed voice and Internet service SMB segment. Leveraging on the DOCSIS 3.0 platform, this new service will provide downstream speeds of 100 Mbps and upstream speeds of 15 Mbps.