Feb. 13 (Bloomberg) -- Jack Sappenfield was driving in rural Oklahoma on Father’s Day 2009 when he lost control of the left side of his body. Alarmed and dizzy, he quickly turned back to a small local hospital.
“The emergency room staff was actually really excited when I came in, and I didn’t know what to make of it,” said Sappenfield, 73. Here’s why: The clinic had just installed technology that allows specialists to remotely examine patients via videoconference, and Sappenfield became the first stroke victim to be treated using the system, running on Cox Communications Inc.’s cable network.
He was examined remotely by a doctor in Oklahoma City, whose instructions helped him recover.
“It was an amazing turnaround,” said Sappenfield.
The technology that saved Sappenfield is becoming more mainstream and providing fresh vitality to Cox and other U.S. cable carriers, which are seeking new revenue sources as growth in TV customers slows. The companies are ramping up sales staffs to sell broadband access and related services to regional hospitals and doctors’ offices, trying to squeeze more money out of a network they used to use mainly for carrying TV signals.
To do that, they need to loosen the grip phone companies such as AT&T Inc. and Verizon Communications Inc. have over health-care customers. That won’t be easy, as the rivals devote more resources to divisions dedicated to the sector, such as AT&T ForHealth and Verizon Connected Healthcare Solutions.
Cutting the Cord
Basic cable-TV subscribers have fallen every year since 2005, from 66 million to 59.3 million in 2010, according to data compiled by Bloomberg. Video sales fell 1.1 percent in 2011 from a year earlier at Time Warner Cable Inc., the second-largest U.S. cable provider. Comcast Corp., the largest cable carrier, reports earnings Feb. 15.
While cable companies still rely on residential services for the majority of their revenue, the biggest growth in the industry is from connecting regional businesses with broadband and other services, particularly hospitals and schools.
Time Warner Cable’s sales to companies and organizations rose 37 percent to $409 million in the fourth quarter, leading Chief Executive Officer Glenn Britt to call business services “our biggest success story” on a conference call last month. The company projects 25 percent to 30 percent growth in 2012.
Hospitals are prime candidates to upgrade their Internet networks from slower connections to cable broadband as the government mandates the digitization of medical records, said Phil Meeks, Cox’s senior vice president of business services.
“Within our franchise area, about 80 percent of annual health-care revenue is still being captured by telecommunications companies,” said Meeks, who values the health-care market in Cox’s service regions at $460 million.
Health care accounts for about 10 percent of Cox’s overall business services revenue, or about $100 million. That’s 20 percent higher than a year ago, and annual growth will probably accelerate as Cox boosts its sales efforts and improves its so-called telemedicine services, Meeks said.
Satya Parimi, Time Warner Cable’s senior director of health-care solutions, said his division is one of the company’s fastest-growing sales channels. The New York-based company and Comcast don’t release health-care revenue separately from business services.
Comcast, Time Warner Cable and Cox, the three largest U.S. cable companies, have a multifaceted approach to making money from the health-care industry. The first step is to connect facilities with broadband. Once connected, hospitals can link to satellite clinics and doctors’ offices with dedicated fiber lines, allowing for rapid and secure transport of high-bandwidth files such as X-rays and MRI results.
Comcast’s Metro Ethernet network, introduced in May 2011, is targeted to business customers, including hospitals. The company can transport data at faster speeds than traditional phone company Internet connection, said Kevin O’Toole, Comcast’s senior vice president of product management and strategy for business services. A hospital can download a 500 megabyte digital X-ray in 40 seconds with Metro Ethernet, a file that would take 44 minutes to download with a slower connection, said Jennifer Khoury, a Comcast spokeswoman.
Hospitals are more likely to bundle services, including television and landline phone, if they buy broadband from cable companies, O’Toole said. Philadelphia-based Comcast’s business-services market opportunity is about $10 billion to $15 billion, and health care is a “large part” of that, he said.
“The bundling of services allows cable to offer lower pricing to get into the market,” said David Joyce, an analyst at Miller Tabak & Co. in New York. “Now that cable companies have been focusing on the commercial market, they should be expected to take more share.”
Displacing Verizon and AT&T is a challenge, Joyce said. They’re large enough to engage in a pricing war and they offer wireless access, which cable doesn’t have, he said. Verizon’s new network using so-called long-term evolution technology is available in most U.S. hospitals and can frequently achieve speeds faster than a cable modem, according to Peter Tippett, vice president of Verizon Connected Healthcare Solutions.
Verizon is also touting data security as competitive advantage. The 1996 U.S. Health Insurance Portability and Accountability Act set security standards for transferring data, making it illegal for doctors to e-mail health records without specific safeguards. Verizon’s acquisition of cloud provider Terremark Worldwide Inc. last year and Cybertrust in 2007 allows the company to provide the “most secure” network to send and store private health records, Tippett said.
Not Just Speed
AT&T’s longevity serving hospitals is an advantage over cable competitors, said Randall Porter, assistant vice president of AT&T ForHealth. The Dallas-based company can fortify an already existing network by adding mobile devices, sensors and software to enhance its service. AT&T has boosted health-care spending in recent years and gets about $5 billion a year in revenue from the industry, Porter said.
“It’s not just about broadband speed,” Porter said. “You have to have the device, the application and the network to provide the experience.”
To persuade businesses to switch from phone companies, Comcast, Time Warner Cable and Cox have partnered with technology companies to build more advanced applications on top of their cable networks as added enhancements.
One example is home health monitoring. A Time Warner Cable service allows an individual’s vital statistics to be entered daily into an application that’s viewed by a physician. The information is stored on servers hosted by NaviSite Inc., a cloud storage company acquired by Time Warner Cable last year.
Having years of data on blood pressure, weight, insulin levels and other statistics allows doctors to make more accurate diagnoses, said Scott Patch, a family physician in Portland, Maine, who uses Time Warner Cable’s infrastructure.
Patch is also using an application that allows him to videoconference with patients who also have Time Warner Cable’s broadband service at their home. The product is particularly useful for elderly patients who have trouble getting to the doctor’s office routinely.
“I have one patient, a diabetic, and I was talking to his wife on videoconference, and I see him eating a bag of chips in the background,” Patch said. “I’m like, ‘Hey you, don’t eat that whole bag of chips!’ The televisits allow doctors to see how patients are doing away from the very sterile doctor’s office environment.”
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