WIRELESS WISHES BECOME REALITY SHOW

The cable industry's entry into wireless service to complete a ‘quadruple play’ may not be as imminent as it appears, despite many public pronouncements by cable CEOs at National Cable TV Association's The National Show 2005 in San Francisco last week. Those on the front lines of cable's foray into voice say firmly that adding wireless, either on its own or to facilitate an integrated wireless/wireline offering, is not happening any time soon.

The reasons are multiple, and they start with the obvious — cable companies don't own spectrum.

“Strategically, in the very long term — time TBD — every major service provider or broadband provider will have to have a wireless or mobility offering to be competitive,” said William Markey, general partner of RelevantC, a management consulting firm. “Having said that, it's not easy. There is not a very clear path. It's not like doing data. The dependencies are very, very high on partners or spectrum or technologies that aren't here yet.”

That didn't stop Comcast Chief Operating Officer Steve Burke, Cox President and CEO James Robbins, and Sprint President and COO Len Lauer from proclaiming the cable industry's intent to meet consumer demand for mobility, in addition to providing voice, data and video.

“We've gone to global companies to discuss [wireless service],” said Robbins in a general session panel discussion. “Those conversations are going on.”

On the same stage, Lauer made clear his company's intention to work with cable in any way possible, as a partner in its voice over IP (VoIP) as well as its wireless aspirations.

“Sprint Nextel will be your ideal partner, and we're not interested in just having one bill,” he said. “We believe in the convergence of devices and wireline/wireless services, and we want to work with cable to assist you in differentiating your service. Your enemy is SBC and Verizon, and they are our enemies, too — we have the same pictures on our dart boards.”

Sprint has signed a trial agreement with Time Warner for the latter to be a mobile virtual network operator (MVNO) in Kansas City, but Sprint officials describe the trial as relatively modest and primarily a starting point. For now, the two companies are combining bills and customer service contacts as well as enabling free calling between a customer's cable phone number and wireless number, according to John Overy, Sprint business development director.

“At first, the trial will stay very simple,” Overy said. “We're learning how we can help Time Warner add wireless to their product portfolio. We're learning how we can make this a seamless, streamlined process.”

Mike Smith, director of business development for cable solutions at Sprint, agrees it's still early for such relationships.

“We are still talking about what the business framework would look like,” he said. Most of what Sprint does today with cable operators amounts to an expanded distribution deal. “They sell Sprint service plans and phones,” he said. “It's a loose bundle — there's a single bill, and they provide Tier 1 customer care, but that's it.”

The cable executives involved in the marketing and engineering of services agree that they intend to go much farther in integrating mobility than just adding a wireless service to their repertoire. That makes sense, says consultant Markey, because of current calling patterns.

“Forty percent of all mobile calls occur within 10 feet of a landline,” he said. “So you have two key drivers — the ability to steal minutes of use and the ability to steal subscribers.”

It is very possible, in the near term, for cable firms to create converged service packages that don't require mobility and therefore access to wireless spectrum, said Alan Stoddard, general manager of Converged Multimedia at Nortel.

“There are a lot of capabilities you can bring together that don't have anything to do with mobility,” he said. Early entry points include caller ID on the television, an application widely demonstrated on the NCTA exhibit floor, including at the Nortel and Siemens booths, and roaming from a cell phone to a Wi-Fi network within the home, on a dual-mode phone.

“Handsets are important — they gate everything,” Stoddard said. “There will be more than 6 million Wi-Fi/wireless phones shipped this year, and 50 million or more in 2006.”

Technology is now coming onto the market from companies such as BridgePort Networks, Longboard and others that enables roaming of voice calls from a mobile network to a cable broadband network. BridgePort demonstrated this capability live with Commoca and PCTEL as part of the CableNET 2005 demonstration at the show.

Such solutions would work with differing business models, however — cable would only have to have roaming agreements with wireless carriers under one model, while they could establish full MVNO status under another.

The cable execs most directly responsible for existing cable VoIP service said they see mobility as strategically important in the long run but a potential distraction today.

“We think having a wireless play is critical, but it's not critical today,” said Sam Howe, senior vice president of marketing, for VoIP at Time Warner Cable. “We could do a lot of things today, but it would slow things down in terms of penetration. We have to have a base.”

“We are going to launch cellular — we're all looking at it, and we're all thinking about it,” said Jay Rolls, vice president of telephone data and engineering for Cox. “But there are baby steps you can take in that direction as you integrate products like having a portal to view services.”

“There are a lot of challenges around wireless,” said Tom Buttermore, vice president of engineering and operations at Adelphia. “We have a long ways to go before there's true integration [of wireless with cable VoIP].”

Markey believes cable companies will acquire access to spectrum in some fashion and sees multiple options.

“The laws of physics apply — they will somehow acquire spectrum,” he said. “It could be a second virtual spectrum like Wi-Fi. WiMAX is a consideration, but that requires a massive overlay. Or it could be through acquisition of a wireless company or an MVNO.”

Yet another possibility, Markey said, is for a “benefactor” to the cable industry to step up and buy national spectrum and make it commercially available.

But there is a potential downside if cable companies don't move quickly enough to incorporate wireless capabilities into their service bundles. Like telephone companies, cable companies could see their broadband services become “a dumb pipe” that more agile service providers use, said Nortel's Stoddard.

Or they could lose what many perceive as their current advantage over the telcos by allowing SBC and Verizon to partner with Cingular and Verizon Wireless, respectively, and develop more dynamic service packages, Markey concluded.

“Operators wisely are focusing resources on amortizing their current assets with VoIP,” he said. “But the value of mobility is overwhelming, and they will have to have a strategy down the road.”