Can the Cable Industry Succeed at Wireless?


The third time is not always a charm -- at least not when it comes to the cable industry succeeding at selling wireless services. By my count, the cable industry has made at least three attempts over the past two decades to gain a foothold in the wireless industry and build the elusive quad-play offering of cable, wireless, landline and Internet. So far, these attempts (including its latest venture reselling Clearwire's WiMAX service) have met with little success.

Some may think I'm premature to declare Comcast and Time Warner Cable's participation in Clearwire (NAS: CLWR) a failure (these two companies along with Sprint Nextel (NYS: S) , Google, Intel, Trilogy Equity Partners and Bright House Networks invested $3.2 billion in Clearwire in 2008). But during the company's recent second quarter earnings call with investors, Time Warner Cable CEO Glenn Britt noted that customer response to the WiMAX service has so far been lackluster. He even hinted that there might not be much of a market for the quadruple-play that the cable providers have been working so hard to provide to customers. Britt also said that while Time Warner Cable isn't ready to give up on wireless, it probably won't invest any more money in Clearwire.

Meanwhile, Comcast lost its most vocal supporter of wireless when Dave Williams, formerly the senior vice president of wireless at Comcast, left to join the wireless infrastructure firm Stoke. In an interview with FierceBroadbandWireless, Williams wouldn't comment on Comcast's view of the wireless industry, but he did hint that the cable industry is becoming very interested in Wi-Fi.

In addition, Roger Enter of Recon Analysis recently noted in a FierceWireless column that in the second quarter Clearwire announced 1.5 million wholesale net adds while at the same time Sprint Nextel announced it added 1.7 million 4G WiMAX customers. Entner said the discrepancy indicates that Clearwire's cable partners have lost 200,000 WiMAX subscribers.

With all these attempts but no clear success, I wonder if the cable industry can succeed at wireless. Jim Barthold, senior analyst with NPD's Connected Intelligence Group, thinks that the cable companies are intent on offering wireless service but just haven't given it much of a priority -- at least not yet. "I think they have other things they are working on and they are not getting pushed to do wireless," Barthold said. "When it does become a priority, they will move fast."

Barthold added that Clearwire's Aug. 3 announcement that it will deploy LTE-Advanced in addition to its existing WiMAX network may be an indicator that the firm's cable partners are looking for a more widespread 4G offering.

Cable industry executives have repeatedly said that cable must have a wireless offering if it wants to remain competitive with the telcos. In fact, at the National Cable Show earlier this summer, several cable executives were quoted as saying that wireless must be part of their offering.

Perhaps the answer to cable's wireless dilemma lies in the vast amount of spectrum some have accumulated. Time Warner Cable and Comcast are both investors in SpectrumCo, which purchased $2.4 billion worth of AWS spectrum licenses during the FCC's 2006 spectrum auction. Although neither has made an attempt to actually use that spectrum, it certainly could be their next step should they decide to give up on the wholesale game.

Let's revisit cable's various wireless attempts:

1994: Sprint, Tele-Communications, Comcast and Cox Cable formed a joint venture in which the companies planned to build a nationwide network to provide wireless, local and long distance phone service and cable TV to consumers. The companies won PCS licenses and built a network. However, in 1998 Sprint assumed control of the business and bought the cable companies' interest in the company.

2005: Comcast, Cox, Time Warner and Advance/Newhouse formed a joint venture with Sprint Nextel to provide a quad-play cable TV, high-speed data, landline and wireless service to their customers. But the quad-play idea never panned out and Pivot never grew beyond the initial 33 markets Sprint launched in November 2007. Sprint said that Pivot was being hindered by provisioning issues. Time Warner later said that demand for Pivot services was "tepid." Pivot users eventually were given the option of switching to Sprint's regular service.

2008: Sprint and Clearwire announced that they would combine their WiMAX businesses and create a new company that would include a $3.2 billion investment from Intel, Google, Comcast, Time Warner Cable, Bright House Networks and Trilogy Equity Partners. The new company was named Clearwire and Comcast, Time Warner, and Sprint decided to operate as MVNOs selling Clearwire's WiMAX service. Clearwire announced Aug. 3 that it will deploy TDD-LTE equipment in addition to its WiMAX network but the company admitted it needs $600 million more in capital to do that.

This timeline clearly shows that cable companies have continually underestimated the challenges of delivering wireless services. Recon's Entner says that that cable companies are experts in bundling different products into packages. They know they need a wireless solution in their portfolio, but have not yet figured out how to do it. If there is a lesson to learn from cable's tangled history in wireless, it's that wireless is a complicated business -- one that requires commitment and focus. After three attempts and lackluster response, let's hope that the cable industry is able to learn from its past and make some smart decisions about wireless in the future.

This article originally published here. Get your wireless industry briefing here.

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