The launch date – October 15, 2021 – was set. The three initial launch markets had been chosen. Dozens of new employees had been hired specifically for the business. Several vendors had been lined up to support the effort. And an MVNO partner, Verizon, was ready to go.

All in all, Cox spent roughly $99 million between October 2020 and August 2021 on its plan to enter the wireless industry by selling its own mobile services.

And then Judge Zurn of the Delaware Court of Chancery threw the company's plans into disarray, just days before Cox had planned to launch its mobile service.

At issue was an agreement between Cox and Sprint inked in 2017. That agreement – which covered a wide range of topics – called for Cox to potentially become an MVNO of Sprint if it decided to enter the wireless business. However, when Cox finally made up its mind to join the wireless industry, it found out that it was Verizon, not Sprint's buyer T-Mobile, that offered the best terms.

Cox's decision to dump T-Mobile in favor of Verizon ultimately led to Judge Zurn's ruling – as well as an ongoing delay in the company's mobile efforts that could end up costing Cox millions of dollars.

To mobile or not to mobile

Cox has a lengthy history in the wireless industry. The company built its own 3G CDMA wireless network using 700MHz spectrum and Huawei equipment in 2010. It also sold mobile services through a Sprint MVNO during that period. However, it shuttered the business in 2012.

A few years later, Cox faced off against its one-time partner, Sprint. At issue was a patent-infringement lawsuit involving VoIP technologies that Sprint argued Cox and other cable companies had infringed on.

According to court filings, Cox estimated it could end up owing Sprint up to $500 million over the issue. In order to make that lawsuit go away, Cox CFO Mark Bowser and Sprint CFO Tarek Robbiati entered into a complex agreement in 2017 that focused primarily on Cox providing Sprint with access to its cable network for wireless backhaul. But other aspects of the deal covered not only the VoIP patent lawsuits but also the possibility that Cox could re-enter the wireless industry via a Sprint MVNO.

Figure 1: Cox showed off a number of innovations at the recent CES show in Las Vegas, but not a mobile offering.
(Source: Cox)

According to T-Mobile's latest filings with the Delaware court, Cox in 2017 agreed that it "will enter into a definitive MVNO agreement with Sprint on terms to be mutually agreed."

At the time, Cox had no interest in entering the mobile industry. But that quickly changed.

"Fast-forwarding two-plus years, favorable economic developments in the wireless market made entry potentially attractive," Cox wrote in its own filing. According to T-Mobile, Cox estimated its mobile opportunity was worth $2.2 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) over ten years.

And though neither company specifically mentioned Charter Communications or Comcast, both cable companies launched their own mobile services with Verizon during that timeframe too.

T-Mobile vs. Verizon

After deciding to join Comcast, Charter and Altice in the mobile industry, Cox's next step was to find a willing network partner. The company issued a formal "request for proposal" (RFP) in April 2020, and both T-Mobile and Verizon responded to the offer. (AT&T's apparent absence from the proceedings is noteworthy considering AT&T executives in January of that year discussed the possibility of providing MVNO services to cable companies.) Nonetheless, Cox's RFP process turned up a winner that, to Cox, was obvious.

"Cox's analysis showed that the total cost of Verizon's proposal was $90 million less than T-Mobile's ($203 million versus $293 million) and 9% below Cox's business case, while T-Mobile's proposal was 32% above it," Cox wrote.

But T-Mobile isn't so sure. "Cox incorrectly estimated that T-Mobile's overall price was $90 million more than Verizon's proposal," T-Mobile wrote. "Under a proper comparison, the difference was only $23.8 million."

Either way, Verizon won the contract and Cox signed an MVNO agreement with Verizon on January 16, 2021.

But Cox knew that its 2017 deal with Sprint – inherited by T-Mobile – might come back to bite it. On January 6, 2021, Cox issued a filing with the Delaware court asking for a declaration that its deal with Verizon was good. T-Mobile later issued its own filing seeking to take down the new Cox-Verizon deal.

Next steps

The Delaware court heard arguments on the matter over five days in August 2021. In October, the court made its ruling: T-Mobile was right and Cox was wrong. As a result, Cox's plans to launch mobile services through Verizon were put on ice.

Now, Cox is working to appeal the ruling. During a recent 45-minute hearing in front of the court, lawyers for both sides argued whether the 2017 agreement between Cox and Sprint required the cable company to use T-Mobile as its MVNO, or whether there was wiggle room for Cox to sign a deal with another provider.

T-Mobile, in its filing, offered a number of noteworthy details on the topic, including the apparent concern that Cox executives had about Sprint's network. "Cox's modeling concluded that Sprint's lower quality network would limit subscriber growth," T-Mobile wrote. "Cox referred to this as the 'Sprint factor,' and valued its cost at more than $300 million over ten years."

Also according to T-Mobile, Cox was interested in staying aligned with Comcast and Charter. "Cox nonetheless selected Verizon, primarily on price but also to align with two other cable companies that already partnered with Verizon," T-Mobile wrote.

Ultimately, Cox hopes to win on appeal and move forward with Verizon as its MVNO.

"We believe the market is becoming more attractive for us to enter the wireless space, but have not announced any specific plans. We aren't commenting beyond our filed appeal right now," Cox spokesperson Todd Smith told Light Reading last week.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano