Are mobile operators really worried about cable operators' entrance into the mobile world? The answer may be: It depends.
Earlier this month, cable provider Cox Communications revealed a little more about what it will do with the 700 MHz licenses it won earlier this year in the 700 MHz spectrum auction. Speaking at the Progress and Freedom Foundation's Aspen Summit, Cox President Patrick Esser said the company will provide simple calling plans and it will integrate all its services into one device with a consistent cross-platform interface that will make all the company's content and applications mobile. Cox has reportedly tapped Chinese infrastructure vendor Huawei to build its CDMA-based network in the U.S.
That sounds a lot like what Cox tried to do with other major cable companies and Sprint Nextel with the Pivot wireless venture. Pivot was supposed to enable cable partners to offer wireless service and applications such as wireless email and place-shifted programming. It was plagued with provisioning problems and basically ended up becoming another service cable customers could buy from their provider. The joint venture ended in April.
Before the demise of Pivot, Time Warner CEO Glenn Britt said interest in Pivot was tepid. And he questioned how wireless could help cable operators. "The broader point is whether people will really have a great desire to buy cell phone service from the people they buy wireline triple-play services from," Britt said last November. "There's nothing in our market research or experience to indicate demand for that is overwhelming."
Nevertheless, cable folks keep looking for ways to effectively compete in the wireless industry. We just don't know much about their plans. SpectrumCo, which consists of Comcast, Cox, Time Warner and others, is sitting on $2.37-billion worth of AWS spectrum. Charter Communications is sitting on spectrum in the 700 MHz band. Do these players really want to go outside of their core competency and spend billions on network rollouts? We have yet to see an outsider come into the wireless industry and successfully compete, and such initiatives have often turned into unwieldy mega-million dollar investments. Just look at EarthLink's muni-WiFi debacle.
Perhaps most promising is the investment Time Warner, Comcast and Bright House have made in the new Clearwire, which is combining with Sprint's WiMAX business, to create a nationwide WiMAX player. At least wireless broadband is more closely aligned to what cable operators are offering today. Moreover, Comcast's plans for femtocells might be the smartest strategy yet. Dave Williams, Comcast's senior vice president of wireless and technology, recently revealed that part of the cable company's deal with Clearwire calls for 5 megahertz of spectrum across the U.S. to be set aside solely for WiMAX femtocells.
The femtocell spectrum will be available for any of the new Clearwire partners to use, but Williams said that the cable companies will have the most incentive to use it because it allows them to cost-effectively deliver wireless to the home. While we continue to hear about the benefits of femtocells for the mobile operator community, namely expanding coverage and offloading high-traffic, femtocells will be just as important to cable operators. That's because residential mini base stations will require the mobile traffic to backhaul through a wireline broadband connection. Once consumers begin using their cable connections for such a purpose with mobile operators behind the initiative, cable operators risk losing their VoIP customers while giving up their bandwidth to the competition. Plus a player like Comcast has the power to guarantee QoS in the home.
As such, Comcast is smart to push WiMAX femtocells and content that will run over them before the proliferation of femtocells from the mobile operator community. And that notion is one that should concern mobile operators.--Lynnette