INNOBLOG

A reader passed on a recent NYT story discussing how the cable companies are beginning to compete for business customers ("Not Just TV, Cable Competes for the Office Domain"). For a long time, it was difficult for cable companies to effectively serve business customers. For one thing, their coaxial cables didn't pass by many office locations. Even worse, their best offering (video) wasn't exactly what business customers needed.

Technological innovations have altered the landscape. Businesses now of course are looking for the high-speed data connections that cable companies provide. Even better from a cable company's perspective (and worse from a phone company's perspective), VoIP solutions allow cable companies to offer solid voice services at reasonable prices.

One of the big questions for the cable companies will continue to be how they pick their fight with the phone companies. All of the signs in the marketplace continue to suggest a full-on assault on the core business of the phone companies. Cable companies have a compelling offering with the ability to combine voice, video and data on a single bill. Now that they've moved away from offering circuit-switched solutions to IP-based solutions, they can actually create a compelling and reasonably priced combined offering that doesn't hide under the smoke screen of marketing bundles. From a disruptive perspective, the problem of course is that they are going after markets that established incumbents will hate to lose. In response, phone companies are continuing to work to improve their video offerings and partner with satellite providers so they too can go after the cable companies core business.

All of this suggests that the intensifying competition is going to end up bruising both the video business and the phone business (we discussed this in Chapter 10 of Seeing What's Next). I'm still waiting for someone to break free of the obvious no-holds-barred, head-to-head competition and find a disruptive path. If not, I'd bet we're going to see more consolidation over the next couple of years. One of the cable companies might pick up Vonage. Then a cable company and a phone company will merge. None of this will help the goliaths fight back against disruptors such as Skype and emerging IPTV providers. It will be interesting to continue to watch how this unfolds.