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4 Cable Companies to Partner With Sprint on New Wireless Services

Posted on: Wednesday, 2 November 2005, 21:00 CST

CHICAGO _ Cable operators took another step forward Wednesday in their efforts to double as phone companies.

Comcast Corp. and three other cable firms announced a partnership with Sprint Nextel to develop new wireless offerings that include more options for watching television on the go, among other things.

More broadly, the deal provides the cable companies a potent new weapon in an escalating battle with phone giants SBC Corp. and Verizon Communications Inc. to offer consumers an array of services from a single provider.

As soon as next year in some markets the distinction between phone companies and cable providers could disappear.

Already offering television, Internet connections and home phone service, integrating a wireless phone option into the cable bill sets up markets across the country for intense competition.

"This is a real big deal," said Terry Barnich, a telecom consultant in Chicago. "It may force SBC and Verizon to step up their timelines for launching video service, if they can."

Sprint and Comcast hope to have some new services _ including the ability to use a wireless phone to program a home video recorder and then watch those programs on the same phone _ by the summer.

Comcast chief executive Brian Roberts said that while adding wireless phone service to his company's other offerings is helpful, the real power of the partnership will be to integrate the technologies to provide new applications that consumers haven't seen before.

"We want to get ahead of where consumers are," he said in a news conference.

SBC Communications Inc., which earlier this week won federal approval to acquire AT&T Corp., is losing residential customers as Comcast expands its wired phone service. Those losses could escalate as Comcast integrates Sprint's mobile phone service into its product line-up, Barnich said.

"Competition is a wonderful thing," he said. "It's amazing how it transforms people's thinking."

For consumers, the competition could transform the marketplace.

Integrating cable with wireless phone service "will spur more innovation to provide a seamless consumer experience," said Dominic Endicott, a vice president with Adventis, a Boston consultancy. "It will be very competitive."

With a war chest of $200 million _ Sprint will provide $100 million and $100 million will come from the cable operators _ executives involved in the deal said they will develop and market an imposing array of integrated applications.

Customers will be able to read e-mails from any account on a mobile phone or access voice mails from wired and wireless phones seamlessly, said Gary Forsee, Sprint's chief executive.

"Our vision is that in the first half of next year to allow a hand-held device to emulate what users see in their homes on the Internet or on their TV screens," said Forsee, whose company last week announced it will offer music downloading over its phones.

The marketing theme in telecom the past few years has been "bundling," which refers to packages of wired and wireless voice, television and data with price discounts that escalate as customers add more services to their bundle.

Adding Sprint's technology could give cable providers the same advantage they once enjoyed by marketing high-speed Internet service more aggressively than phone companies did early in the decade.

By slashing prices to as low as $15 a month, SBC and Verizon have narrowed the gap between their digital subscriber line service and cable modems, but they are still playing catch-up, Barnich said.

To counter the cable onslaught into their turf, SBC and Verizon are rapidly upgrading their fiber lines to offer television service over phone lines. Verizon is already testing the video service in some markets.

Sprint has a history of cooperating with cable operators and a cooperative agreement such as the one revealed Wednesday has long been anticipated by the industry as a natural fit.

But the cable operators _ which besides Comcast includes Time Warner Inc., Cox Communications Inc. and Advance/Newhouse Communications Inc. _ said they considered alternatives before throwing in with Sprint.

They considered bidding for new spectrum to build their own wireless network and also looked at teaming up with regional wireless operators like Chicago-based U.S. Cellular Corp. to put together a national wireless footprint, said Glenn Britt, chief executive of Time Warner Cable.

"In the end we decided that going with Sprint was the best and lowest cost alternative," Britt said.

Sprint also has a history of partnering with other companies seeking to provide wireless phone service. Sprint provides the network structure for Virgin Mobile's service and is readying a launch of an ESPN-branded mobile service in partnership with The Walt Disney Co.

Another factor in clinching the deal was Sprint's acquisition of Nextel Communications, said Endicott of Adventis.

"Having done that merger, Sprint Nextel is a strong No. 3 player in wireless," Endicott said. "The cable guys were looking for a long-term partner. Without the merger, there was always the possibility Sprint could be acquired."

Comcast's Roberts has long been fascinated with how content presented over different devices can take on different value. People pay twice as much, for example, to download only a portion of a song as a ring tone on their mobile phone as they pay to download the entire song.

He suggested that video content may find similar profitable new applications as cable technology is allied with wireless phones.

Whatever competitive advantage Sprint and the cable companies obtain from their partnership will hinge upon how well they execute the promises they made, said Ranjan Mishra, a principal with consultant A.T. Kearney.

"Often attractive new products are announced, but they never materialize," he said.

Mishra noted that Verizon Wireless and Cingular have been slow to integrate their wireless phone services with the wired networks operated by their parent companies. That may be due in part because they are joint ventures. Verizon Wireless is partly owned by VodaFone, a British wireless firm, and Cingular is owned by SBC and by BellSouth Corp.

It's often difficult for joint venture partners to cooperate sufficiently to fully integrate wired and wireless networks, Mishra noted, and this could prove true for Sprint and its cable partners.

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(c) 2005, Chicago Tribune.

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Source: Chicago Tribune

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