Hot Telecom Deals for Small Businesses

Phone and cable providers are duking it out for small business customers as other markets mature, and that spells savings.

By Michael Doan, Senior Associate Editor, The Kiplinger Letter

July 8, 2008

When it comes to telecommunication services, small firms are in the catbird seat. With markets for big businesses and consumers maturing, telecom providers are turning to the small business market with juicy new deals aimed at drumming up new customers.

Providers see new opportunities to increase market share by selling services in bundles, combining desk phone, Internet and mobile phone coverage. Plus, they're throwing in business tools such as corporate e-mail, Web hosting and document collaboration. All of this comes at fast Internet speeds that rival the quickness of big business lines. Providers find it easier to offer larger packages at lower costs because their own costs for operating fiber-optic lines and cellular airwaves are coming down.

More and more small companies are eagerly snapping up deals. Last year, IT and telecom spending by U.S. small and midsize businesses increased 6.5%, the highest level in years, according to AMI-Partners, a telecom research organization. Despite the slowdown in the economy, the company expects small business telecom spending to continue to outpace gross domestic product growth. "IT is increasingly considered essential rather than just nice to have," notes AMI analyst Melissa Chong.

So what do these deals look like? This summer, Comcast, a leading communications firm, is offering unlimited phone service for $19.95 per month to its Internet business customers who already pay $59.99 for Internet service. It's also boosting Internet downloads to speeds that are 10 times faster than those of a traditional T-1 line, a staple of big business use. Moreover, Comcast is providing its $99/month consumer package of voice, video and Internet to businesses but also throwing in faster speeds plus Web hosting, virus protection, customer support and improved e-mail service. Coming soon -- at a higher cost -- are offers for Web speeds up to 30 times that of a T-1 line. Note that most of Comcast's offerings are in suburban markets, close to the networks that serve consumers.

Not to be outdone, AT&T and Verizon are switching many business customers from DSL to FIOS higher speed Internet lines. AT&T offers a business plan mimicking some features of its family plan for consumers. For $60 a month, a company can have five cell phone lines, with the phones sharing 700 anytime minutes. Forty users can share 20,000 anytime minutes.

Verizon provides business customers with unlimited land line calls for $35 to $40 per month. If the customers subscribe to the wireless service, too, for as low as $40 per month, they can call five business land lines without using any wireless minutes. But they must pay a $4.99/month fee. The company also offers a land line package with Internet and unlimited calls for two phone lines, online storage, backup and tech support for $119.99 a month.

Down the road, small firms can expect to see high-speed wireless packages that include laptop computers, instant messaging and telephone Web surfing. Competitors will jump through hoops to get small firms to buy telecom services strictly from them.

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