MVNOs GIVE WAY TO FULL INTEGRATION

After more than a year of deliberation, the major cable TV companies have finally done what the industry expected: They've partnered with Sprint to add wireless service to their bundles. However, the deal Advance/Newhouse Communications, Comcast, Cox Communications and Time Warner Cable have brokered is no mere resale agreement or mobile virtual network operator scheme.

Circumventing any possible competitive conflicts, the five have formed a separate company tasked not only with creating a unique wireless voice and data service for each cable operator but also extending their cable services and content over the airwaves of Sprint's network. The joint venture will create the first major multi-operator converged network in the country, utilizing the next-generation network assets the companies have been separately building since the beginning of the decade: Sprint's new 3G data networks and evolving IP multimedia subsystem (IMS) architecture, and the cable companies' voice-over-IP (VoIP) platform and digital and interactive TV services. In doing so, the still unnamed joint venture is redefining what the industry means by bundling, making it more than just — as Sprint CEO Gary Forsee put it at the venture's kickoff event — “stapling wireless” onto the cable bill.

“This is about integration, this is about convergence,” Forsee said. “This is about allowing the [wireless] device to emulate what you see on the TV screen.”

The cable operators are initially looking at simple applications, such as a single voice mailbox for wireless and home service, the creation of a cable-branded user interface and portal, and a specialty application that allows customers to program their digital video recorders (DVRs) from the cellphone. Augmenting those services will be video content, which at first is likely to be unicast content similar to what's offered on Sprint TV, but as the service evolves, the cable firms will evolve their services to mirror the programming packages offered for the home, creating a unique video service distinct from Sprint's Power Vision, said Mimi Thigpen, vice president of strategy for Cox.

“The experience Cox is looking for is an extension of the service at home,” Thigpen said. “You're not going to see something on the wireless side that you wouldn't want to see on the cable side.”

Key to these new services will be Sprint's EV-DO network, which will perform the heavy lifting for the new array of video services, said John Garcia, senior vice president of Sprint's strategic partner program. Any content package will likely be optimized for 3G networks, Garcia said, but allow customers to access that content as they roam on the 1X network, making the service similar to the data-centric MVNOs being launched by ESPN and Amp'd Mobile. But while the service decisions are up to the individual cable operators, Garcia said they're likely to offer different tiers of service, ranging from the high-end cable TV phone integrated fully with a customer's DVR and programming package at home to a voice-centric service, which while not supporting the full range of features, could still take advantage of some converged services such as a unified voice mail and free calling between home and wireless numbers.

This initial set of services is all part of the joint venture's plans for a mid-2006 launch. While every feature may not be available then, Garcia said, the venture should roll them out by the end of 2006.

“What we're doing is pretty straightforward — just moving packets around — though clearly we'll have to do some plumbing to get the networks to work together,” Garcia said.

Discussing services beyond that initial set, however, the joint venture plans become more vague. While the companies said they still have to work out the details of future convergence services, they all concede that the possibilities are immense. Integrating Sprint's IMS architecture and the cable companies' new VoIP and packet cable networks could lead to a host of new voice and data applications bridging the home beyond a mere voice mail service. Single-number services, unified e-mail and messaging, cellular/wireless local area network convergence services and even things as futuristic as video conferencing between the handset and TV are all possibilities.

And with the joint venture's heavy focus on TV and video services, the consortium could likely be the biggest potential customer for the new multicast video technologies being developed by Qualcomm and digital broadcast video-hand-held vendors. A service like Qualcomm's planned FLO service would support dozens of simulcast video and audio channels without taking up any of Sprint's capacity, allowing the joint venture to almost emulate exactly the live programming it offers over the cable box.

The four cable operators sit on cable plants passing 75 million homes and have a combined 39.2 million cable subscribers. The companies have invested an initial $200 million, and the money is expected to increase as the venture gets off the ground. The partners also made it clear that they aren't forming an exclusive club — Charter Communications and Cablevision have both been invited to participate, and several smaller single system providers also are interested.

In fact, there is plenty of incentive for those firms to sign up. The integrated services would be attractive, but cable firms also may find it difficult to strike MVNO agreements with national carriers for competitive reasons — the two largest mobile carriers are owned by telcos. Even non-RBOC-affiliated carriers may have competitive reservations. Wireless carriers tend to embrace MVNOs because they go after market segments or demographics outside of their normal audience. But, cable customers are the same customers Sprint and the Tier I operators actively pursue. Wireless carriers aren't keen on helping MVNOs turn their existing direct customers into wholesale subscribers, said Ranjan Mishra, wireless analyst for A.T. Kearney.

“The cable companies have a very broad customer base,” Mishra said. “From Sprint's perspective, an MVNO with a cable company could be a double-edged sword.”

The impact of the venture is sure to be felt immediately by the RBOCs, which have been bundling wireless into their bills for some time. Just having a wireless element puts cable firms on even ground, but they also are counting on the fact that service integration will push them far ahead of their Bell competitors. It's not just the bundle customers want, Cox's Thigpen said: “Our customers are looking for the next-generation bundle.”

Mishra said telco reaction depends on how far the cable venture takes its convergence promises. “Until now [the Bells] haven't felt the need for this kind of integration,” Mishra said. “The moment Sprint and the cable companies even offer the most simple integrated applications, the RBOCs will be forced to act.”