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Cable Firms, Sprint in Fixed/Mobile Deal

A quartet of U.S. cable operators has reacted to the combined fixed/mobile might of the leading RBOCs by forming a joint venture with Sprint Nextel Corp. (NYSE: S) to develop converged fixed/mobile services.

Collectively, the four cable operators -- Advance/Newhouse Communications, Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. (NYSE: COX), and Time Warner Cable -- will invest $100 million in the joint venture (JV), with Sprint Nextel stumping up the same amount. That cash will fund "the development of the converged services, national marketing initiatives and back office-integration," the partners stated.

The agreement, which is exclusive for the first three of its 20-year term, will see the JV "develop converged next generation products for consumers that combine the best of cable's core products and interactive features with the vast potential of wireless technology to deliver services anywhere, any time," according to a prepared statement.

These products, or services, will be marketed to the cable operators' 41 million customers and Sprint Nextel's 46 million wireless subscribers. Participation by other cable operators is a possibility, noted the firms.

The move comes as the RBOCs plan their own converged fixed/wireless and IPTV services that will compete directly with the cable operators. (See SBC Stretches Lightspeed Timeline , SBC Jumps on Lucent IMS Bandwagon, BellSouth: The IMS SuperBowl? , BellSouth's Smith Details IPTV Plans, and Verizon Attacks Video's 'Biggest Barrier'.)

The cable quartet and Sprint plan on moving fast. They plan to launch a quadruple-play (or 'four-play') service of video, wireless voice and data services, high speed Internet, and cable phone service (or any combination of those) in 2006. They also plan to develop and market co-branded, integrated cable/wireless services that can be accessed by a single device, using Sprint's 1,600 retail outlets, RadioShack stores, and the cable firms' own outlets to push the new services.

These services include a single voice mailbox for calls received at home or to the customer's wireless handset, wireless access to the customer's cable email account, streaming entertainment services to the wireless handset across Sprint's EV-DO wireless data network, and unified billing.

— Ray Le Maistre, International News Editor, Light Reading

stephencooke 12/5/2012 | 2:55:27 AM
re: Cable Firms, Sprint in Fixed/Mobile Deal This is the single worst scenario for incumbents... cable providers with a significant wireless offering. If this JV can get its act together, and create a visionary piece of CPE, they can threaten significant amounts of RBOC marketshare. The $200M investment seems a little light for what they are chasing but it may be enough if used properly.

Basically it will come down to timing. Which markets are addressed in what order and how long it will take to develop the CPE and back office interfaces. Even if they take 3 years they should still be significantly ahead of equivalent RBOC rollouts.

This will make things very interesting in the next few years.

Steve.
digits 12/5/2012 | 2:55:23 AM
re: Cable Firms, Sprint in Fixed/Mobile Deal Despite the talk about back office integration and new, integrated applications and services, how much of this is about pure marketing? Isn't a well-branded, financially attractive bundle enough to start with?
stephencooke 12/5/2012 | 2:55:22 AM
re: Cable Firms, Sprint in Fixed/Mobile Deal Ray:
"Despite the talk about back office integration and new, integrated applications and services, how much of this is about pure marketing? Isn't a well-branded, financially attractive bundle enough to start with?"

Are you trying to say that these companies existing bundles are not "well-branded" or "financially attractive"? What are the components of this "financially attractive bundle"? What is the competition offering? With 4-play you can cover all bases and move the margin around to make multiple bundles "attractive". If the competition doesn't have video offer the other 3 services at slightly better prices and offer a 'deal' on video with a set contract. Play on the fears that telcos have of truck rolls and show quick installation times and customer service.

Show a progression of features/services that will be coming in the near future so that your customers can ask the questions of the telcos when they are researching their purchase decision. Come up with innovative installation cost-sharing ideas so that utilities can do automatic meter reading through your CPE. Basically do all the things that the telcos should be doing, or are afraid of doing, and win marketshare. Leverage areas where telcos can't compete effectively yet.

It is difficult to get people to change once they are comfortable. That is why a lever is needed. If you can make the package look attractive you can gain share until the lever is duplicated by the competition. At the same time you can service your existing client base with new features to make them more resistant to being plundered by the competition.

This is sales 101 and it works best if you have extra tools that your competition doesn't. That said, if you don't have your ducks in a row on the operations front (ie: the back office systems, etc.) you can cause serious damage to your credibility.

Steve.
materialgirl 12/5/2012 | 2:55:22 AM
re: Cable Firms, Sprint in Fixed/Mobile Deal Bundles are a pathway to oblivion. Bundles sell for what the dumbest local competitor offers, period. They also cheapen all of the component services. Ultimately, costs go up faster than revenues.

The handset business sounds custom made for MOT, since they already sell cable gear and handsets, especially those NXTL handsets. It might not take as long as you think for MOT to cook something up under Zander.
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