This February, Bud Mattern opened It's A Grind Coffeehouse in Paoli, a trendy franchise operation with a jazz, blues and early-rock theme. To launch, he bought coffee brewers and grinders, refrigerators, wall decor and lounge chairs.
Looking at costs and Internet speeds, he also made an unusual selection for his business telecom provider - Comcast Corp., the nation's largest residential cable company. Mattern ordered two business phones with unlimited domestic calling and a high-speed Internet line. The monthly cost for his level of service: $130. "I pay that just for my phone at home," Mattern said Tuesday.
With AT&T Inc. and Verizon Communications Inc. eating away at its core pay-TV business, Comcast is seeking to diversify its revenue sources. One market it considers ripe for picking is businesses with fewer than 20 employees.
The Philadelphia giant - which has about 24 million pay-TV customers - is offering a promotional $99-a-month "triple play" of video, phone and Internet to small businesses. It's good for 12 to 36 months. Comcast is making other offers, too, including a phone line for $19.95 a month, for a year, when the small business orders a high-speed Internet connection. This special is about half the regular price of competitors' phone lines and ends in July. The most Comcast phone lines a small company can have is eight, but that number could be fewer in some areas.
Comcast says that Verizon and AT&T have neglected small businesses, and that its cable-and-fiber network already passes many Main Street businesses but does not connect with them. So this won't be a huge capital investment. Comcast executives say they hope to capture with the "Business Class" service about 20 percent of the small-business revenue in their area by 2011. This would pump up revenue $2 billion to $3 billion a year. Comcast's total revenue last year was $31 billion.
The new division has added 1,000 salespeople in the United States in the last year and has said it will open business-only call centers. One is already located in Plymouth Meeting, with 130 employees. Small-business customers "have never really had someone calling on them with viable alternatives," said Bill Stemper, Comcast's president of business services.
AT&T and Verizon disagree, saying there has been competition for years. Some competitors stay; some quit this difficult business, which is highly sensitive to broad economic conditions.
The telephone companies aren't exactly quaking in their boots.
AT&T and Verizon officials say that they offer a superior product and that if they lose small-business customers initially because of Comcast's price discounting, they'll get them back by being more responsive to customer complaints and needs.
"It's a serious goal and it's a serious statement. But the fact of the matter is that I win back as many lines as I lose," said David Frendo, director of business voice and broadband for Verizon.
Verizon, which competes directly with Comcast in the Philadelphia area, says it has more than two million small-business customers in the United States.
The Philadelphia company is "taking their consumer product and slapping a business sticker on it," Frendo said. "You definitely have to compete on a different level with business customers."
"There are a lot of factors that come into play, and so there is a lot of churn in that segment of the market," said Tom Wilson, AT&T's executive director of small-business marketing.
He expects small businesses to experiment with Comcast's products but return to AT&T. "Until you try something else, you don't know what you had," he said. AT&T competes with Comcast in other areas of the country, including Chicago, Atlanta and Houston.
Craig Moffett, equity analyst with Sanford C. Bernstein & Co. L.L.C., said the planned small-business expansion at Comcast was "a lot more than just a nice add-on."
The market for small and midsize businesses "is almost as big as the entire consumer video market, and has much higher margins. And best of all, the network already passes the vast majority of businesses, so these customers can be served very cost-effectively," Moffett said in an e-mail.
Comcast estimates that 1.3 million small businesses are potential customers in its franchise territories in Pennsylvania, New Jersey, Delaware, Maryland, Virginia and Washington, D.C., said William Andrews, vice president of commercial services for the company's eastern division.
The biggest potential clients are likely to be restaurants and bars, lawyers' and doctors' offices, accounting firms, and financial planners. Comcast has served some businesses, such as restaurants and bars, that needed pay-TV for years. But it hasn't focused on expanding phone and data services.
In Paoli, Comcast jumped at the opportunity to wire Mattern's 14-employee coffeehouse, as well as the nearby Paoli Village Shoppes with their 35 retail and office tenants, said Stephanie Cappelli, property manager for Paoli Village. Verizon has not expanded its high-speed FiOS lines to the area yet, she said, so Comcast's main competition for Internet service is Verizon's DSL service.
Mattern, 59, a former banker, said he had Comcast's pay-TV service in his home and had been happy with it. "It's not that I never had an outage in my home, but I have never had a long-term outage," he said as he sat in a chair by the fireplace in his new coffeehouse. "I hope I have not cursed myself for saying that."