Cable company Cox Communications will add cell phone service to its service bundle starting in 2009.
The cable operator announced Monday that it will initially partner with Sprint Nextel to resell its wireless service to customers in its cable territory. Cox already bundles high speed Internet, telephony, and TV service. And soon it will add wireless service for a quadruple play offering.
"Wireless service will be a key driver to Cox's future growth," Cox President Pat Esser said in a statement.
But Cox isn't stopping with just reselling Sprint's wireless service. It also plans to build a 3G wireless network. And it will eventually build a 4G network using LTE technology. The company will use the nearly $550 million worth of spectrum it bought in the Federal Communication Commission's AWS and the 700 MHz wireless auctions.
As consumers become more mobile, wireless service is quickly becoming a must-have for cable operators. But getting into the wireless game won't be easy for Cox, which faces an already saturated and competitive wireless market and an expensive network build-out.
This isn't Cox's first foray into wireless. In 2005, Cox Communications, Comcast, Time Warner, and Advance/Newhouse Communications, formed a joint venture with Sprint Nextel called Pivot that was supposed to develop wireless services that the cable operators could bundle and resell to their customers. Nearly three years later, and the Pivot brand is essentially dead.
Earlier this year, all the companies involved pulled out of the partnership completely. Comcast and Time Warner are now. Comcast is fronting $1.05 billion and Time Warner Cable is putting in $500 million to help make a combined Sprint/Clearwire wireless network that uses a 4G wireless technology called WiMax a reality.
Cox and the other Pivot cable companies also formed a joint venture called Spectrum Co. that bid on and won significant amounts of spectrum in the FCC's AWS spectrum auction. Cox is now the only one of the four cable operators that formed Spectrum Co. to use the spectrum to build its own network to cover its existing cable footprint.
As for the failed effort with Sprint, Stephen Bye, vice president of wireless for Cox, said the company's latest strategy is very different from what it was doing with Pivot.
"The Pivot joint venture was offering a co-branded experience," he said. "Now we are building our own wireless network in our footprint and leasing capacity from Sprint nationwide to deliver an integrated service that we build and manage."
Specifically, Cox plans to use its existing voice switching technology and fiber within its network footprint to build the wireless network. The company will be building the service from the ground up as opposed to just bolting on a service from the outside, Bye said.
But it's unclear whether Cox's latest strategy will work considering that more than 85 percent of Americans already subscribe to cellular phone service.
What's more, in Cox's territory, consumers are likely to already have three if not four nationwide wireless operators offering them service. Cox hopes that bundling wireless with its existing services will help it get a piece of the market. But Bye also believes that Cox can integrate wireless into its existing services. For example, the company might extend its video offering to mobile devices using the mobile network.
"As we look to the future of wireless, it's about much more than just voice services," Bye said. "Wireless is undergoing a new wave of adoption around data and video. So we see a tremendous opportunity to take our existing services outside the home and make them mobile."
Still, building a wireless network from the ground up is expensive. Bye wouldn't say how expensive, but he acknowledged it will be a significant investment.
And because Cox only owns wireless spectrum in and around its existing cable footprint, it will always have to partner with other wireless carriers to provide nationwide coverage.
For now, Cox is partnering with Sprint to provide seamless 3G wireless coverage. The company claims this is not an exclusive deal, but no other operator has been named as a partner. The real problem for Cox comes when it starts deploying 4G wireless services. Sprint is building its 4G network using WiMax. And Cox plans to use a competing technology called LTE. This means that Cox will have to find another partner for 4G wireless, and the seamless integration between 3G and 4G might be difficult to iron out.
But Bye said that there is still a lot of life left in 3G services and that a 4G network is still a long ways away. When the time comes, the company will have a plan to deal with the migration, he said.