SureWest: No need to own wireless for quad play

SureWest is also incentivized to get out of the wireless business simply because it erodes the company’s overall margins.

“It’s a vicious competitive world,” Oldham said of the wireless market. “We have 11 competitors for wireless in and around Sacramento. Price became one of the things we used to compete. That knocks margins out of the business. We didn’t like to see that.”

In addition, the wireless business didn’t gel well with SureWest’s core triple-play business because the models are very different, he said. Wireless service is predominantly sold in storefronts, for example, while triple-play services are sold over the phone.

“Wireless is a ‘touch the product’ business,” said William Ho, Current Analysis research director. “While most people understand that they get a landline, Internet and TV, one doesn't really need to touch the set top box. However, with the handset choices and feature variety out in the market today, it becomes a very personal thing.”

However, Ho is skeptical of Oldham’s suggestion that Verizon Wireless, as an example, would be eager to wholesale its service to landline carriers. “That isn't [Verizon’s] core business and is not in their philosophy,” Ho said. “They wholesaled to Amp'd Mobile, and when that MVNO went out of business in 2007, they had to take a write-down. Given that experience and the demise of the MVNO market in general, it's probably really not going to rear its head at Verizon corporate.”

SureWest’s move puts it closer to the model followed by Embarq, which resells the wireless service of its former parent, Sprint, on an MVNO basis. Embarq has maintained that its business depends on converged services that make use of both wireline and wireless networks.

Though Sprint may be more open to wholesaling its service than Verizon Wireless, its success in doing so has been debatable, Ho said. “Sprint’s foray to provide a wireless component to their cable joint-venture partners (Cox, Comcast, Time Warner and Advance Newhouse) has been less than stellar. Their Pivot wireless services haven't really been [so] compelling that cable subscribers want the whole quad-play package.”

As part of the Verizon deal, SureWest retained ownership of its more than 50 wireless towers in the Sacramento, Calif., area. But SureWest is considering selling those too, pointing out that it is averaging less than two tenants per tower while large tower companies typically average two or three. “Someone else may be able to own these more effectively than us,” Oldham said. “That may make the sell value greater than the ownership value. That’s what we’re looking into right now.”