TELECOM Digest OnLine - Sorted: Cable Companies, Sprint Join Forces

Cable Companies, Sprint Join Forces

John C. Roper (houstonchron@telecom-digest.org)
Fri, 4 Nov 2005 10:39:55 -0600

TV, telephone services are ready for strategic fight to sign customers
By JOHN C. ROPER
Copyright 2005 Houston Chronicle

The nation's leading cable TV companies have banded with Sprint-Nextel
to offer cell phone service and in doing so upped the ante in their
heated competition with the traditional phone companies.

The cable companies -- Time Warner Cable, which serves the Houston
area, Comcast, Cox Communications and Advance/Newhouse Communications
-- say the deal will allow them to package television, Internet and
wireless services to consumers by early 2006.

Doing so will allow them to keep pace with telephone companies like
SBC and Verizon, which have Internet, telephone and cellular offerings
and plan to sell advanced television services in the near future. SBC,
along with BellSouth, owns Cingular Wireless.

"Both the telephone companies and the cable industry are gearing up to
go to battle with each other," said Jeff Kagan, an independent telecom
analyst based in Atlanta.

Kagan said the move signals the beginning of a major transformation of
the industry where the phone and cable companies will be truly
competitive in selling multiple services packaged together at discount
prices.

The cable companies are already well entrenched into a technology that
provides telephone service through the Internet called Voice over
Internet Protocol, or VoIP.

The long-expected deal requires the cable companies to invest a
combined $100 million in the joint venture, with Sprint pitching in
$100 million as well. The investments will be used to converge
telecommunications services.

The companies say they will be able to reach 75 million homes.

"Cable is fundamentally a local business and our competitors are much
larger in geographic scope," said Glenn Britt, chairman and CEO of
Time Warner Cable. "Many of them are national, and our ability to work
together with Sprint is really important to enable us to compete."

Services converge

The move goes well beyond simply tying traditional cell phone service to the
other offerings of the cable companies.

The plan is to converge the cell phone with the services offered by
the cable companies. For example, consumers could use a cell phone to
easily program digital video recorders while away from home or even
use it to watch television programing.

Gary Forsee, president and CEO of Sprint-Nextel, said doing so will
make its cell phones "an indispensable third screen in customer's
lives."

Market still a question

Analysts said it was unclear whether most consumers would be ready or
even interested in using their cell phones for things other than
carrying on conversations.

"At the end of the day, most people still just want to talk on their
cell phone," said Julie Ask, who follows the wireless industry for
Jupiter Research. "There are very few people who want to download
music or do these types of broadband-type activities." Ask said
consumers choose their cell phone provider in standard ways.

"The way people make decisions about cell phones is still about cheap
minutes, good coverage at home and a free handset," Ask said.

Still, the partnership gives Sprint-Nextel more opportunities to sell
its services.

Starting early next year, consumers will be able to go to Sprint
retail stores, RadioShack and to outlets operated by the cable
companies to sign up for any of the services.

The cable companies, including Time Warner, plan to have all of the
services on a single bill if they are purchased along with some of
their own services. Bills would remain the same for customers who only
subscribe to Sprint-Nextel services.

Too early to talk prices

The companies said it was too early to discuss pricing, other than to
say discounts would be offered for bundling services.

Both the phone and cable companies believe consumers will be reluctant
to switch companies -- called "churn" -- if they are tied down to
multiple services.

"The more products and services you add to the bundle, the lower the
churn rate is," said Jim Robbins, president and CEO of Cox
Communications, adding that the Sprint-Nextel deal will mean that
"more of them are going to stay with us."

john.roper@chron.com

This article is: http://www.chron.com/cs/CDA/ssistory.mpl/business/3434695

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