TMCnet News
Sprint, Cable Giants Form JV to Offer Converged ServicesBy ROBERT LIU
TMCnet Wireless and Technology Columnist
NEW YORK – The biggest cable companies in the U.S. have finally established a major presence in the wireless sector and, in doing so, illustrated the clearest example to date of the oncoming convergence of consumer communications services.
Comcast Corporation, Time Warner Cable, Cox Communications and Advance/Newhouse Communications have partnered with Sprint Nextel to form a joint venture that hopes to accelerate the convergence of video entertainment, voice over IP and wireless data and communications services, the companies announced on Wednesday.
But the long-awaited deal is more than simply “stapling wireless” into a Triple Play offering of video, voice and data services, the principal CEOs that architected the venture told the media and financial analysts at a midtown press luncheon.
“This is indeed a convergence of great magnitude,” said Robert Miron, chairman and CEO of Advance/Newhouse.
“We felt that's where the consumer was going. That's where we wanted to go,” explained Jim Robbins, president and CEO of Cox Communications, who added he has personally wanted to see to fruition his company’s three-year initiative of diversifying into the wireless realm before he retires shortly.
In a joint press statement, the companies said the deal spans for 20 years but is mutually exclusive for the first three years. The companies will jointly capitalize the new entity with a combined initial financial commitment of $200 million: $100 million of which will be committed by Sprint and $100 million of which will be committed collectively by the cable companies. The investment is expected to be used to fund the development of the converged services, national marketing initiatives and back office integration.
The financial commitment implies that Sprint is clearly more motivated to gain access to the cable companies’ content rights than the cable companies to Sprint’s wireless capabilities. Indeed, Time Warner Cable’s CEO Glenn Britt acknowledged that his company also examined the option of bidding on new wireless spectrum at auction.
But one of the key advantages that Sprint brought to the table was the fact that its cellular network was based on EV-DO technology and already deployed in various U.S. markets, according to Brian Roberts, Comcast’s chairman and CEO. Earlier this week, Sprint rolled out its Power Vision service to offer music, video and other high-speed services.
“We chose our wireless partner carefully,” Roberts said in his opening remarks.
In fact, Sprint officials at the press conference demonstrated first-hand the capability of delivering live streaming video content (thanks to Comcast) over new Power Vision phones. The value-added capabilities even included the ability to access emails and a digital video recorder.
“This agreement puts us well on the road to deliver a new Sprint,” said Gary Forsee, president and CEO of Sprint Nextel.
The top executives explained that other cable companies – namely Cablevision and Charter Communications – aren’t excluded from the venture. However, Sprint’s mobile virtual network operator (MVNO) partners won’t be provisioned to offer the higher capabilities to prospective customers. The four cable companies currently serve approximately 41 million customers while Sprint Nextel has nearly 46 million wireless subscribers. The venture has the potential to reach approximately 75 million homes currently passed by the cable companies, the companies said.
The announcement comes as two of the nation’s largest regional Bell operating companies (RBOCs), Verizon and SBC Communications, are preparing to buy their way into a national presence through deals with MCI and AT&T. More alarming to cable operators, the RBOCs are also preparing to rollout IP video services via fiber-to-the-home initiatives. The RBOC encroachment into the cable companies’ turf fueled speculation over the summer that Deutsche Telekom would sell T-Mobile to a cable company to provide a wireless play against the incumbent carriers.
Beginning in 2006, the executives said the joint venture plans to offer a new "Quadruple Play" bundling four services (video, wireless, VoIP and data services) to consumers. But unlike MVNO, the companies participating in this joint venture will retain full economic benefits of the acquired customers, similar to what they currently enjoy through their direct retail channels.
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Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.
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