On Wednesday, Comcast, Time Warner, Cox Communications and Advance/Newhouse Communicationsto offer customers wireless telephone service.
Initially, the $200 million joint venture will operate like any other reseller arrangement. The cable providers will resell a co-branded Sprint Nextel wireless service to their customers, which could open new opportunities to market to customers they haven't previously reached. The cable companies will get access to Sprint Nextel's 46 million wireless subscribers, and Sprint Nextel will get access to the 75 million homes that the four cable companies have already passed.
Cable companies also believe that packaging wireless service with existing services such as high-speed Internet access, voice over Internet Protocol (VoIP) and television will make them more attractive to consumers compared to their telephone competitors. Many cable companies, like Time Warner Cable and Cablevision, have done well in their push to sell customers a package of services. In the last year, Time Warner has seen an especially huge increase in the number of VoIP customers it serves.
But experts say the really exciting part of the deal is what is expected to happen down the road, when the cable companies and Sprint integrate their services in ways in which wireline and wireless phone companies have not yet done.
"The problem with bundles is that you have to pay customers to take them by giving them a discount," said Craig Moffett, an equities analyst at Sanford C. Bernstein. "But if there is an opportunity to create unique products that aren't available on their own, there is potential for something interesting."
Some of the new product ideas that Sprint Nextel and the cable companies have talked about include a converged wireline-wireless voice mailbox, access to unique video content and the ability to remotely control digital video recorders, or DVRs. The details of these services haven't yet been worked out. But with services like mobile video, it's easy to see how cable companies such as Time Warner Cable and Comcast, which own some of their own content, could use Sprint Nextel's wireless network as a new sales channel.
At least one analyst wonders if the partnership between the cable companies and Sprint Nextel could actually help accelerate the nascent mobile TV market. In September, only 2.14 million people watched video on their phones, compared to 15.6 million people who downloaded ring tones, according to M:Metrics, a research firm that measures the mobile market. With 181 million wireless subscribers in the United States, mobile TV still has a lot of room for growth.
"It will be very interesting to see if a deal like this will be able to push usage and demand for video services on the phone," said Jim Penhune, an analyst at Strategy Analytics. "If you can get mobile into the bundle, maybe the cell phone will really become the third screen."
Cingular Wireless, which is owned by BellSouth Communications and SBC Communications, has dabbled in bundling services from its two parent companies. It has also tried integrating products from its parents with its own wireless service.
A few years ago, it introduced a cradle for Cingular cell phones that enabled customers who placed their cell phone in the cradle at home to accept cell calls on their landline phone. The idea was that people could reduce the number of cell minutes they used at home by having their cell phones ring on their wireline phones. The product never got much traction in the market. But a Cingular spokesman said the company hasn't given up