Cable's wireless option: Sprint to the finish
Before there was Verizon (NYSE: VZ) FiOS and AT&T (NYSE: T) U-verse, USWest gobbled up Continental Cablevision and named it MediaOne. On an even bigger scale, AT&T bought TCI and renamed it AT&T Broadband.
Both proved to be futile efforts by the telephone industry to enter the entertainment portion of the cable television business. That futility led cable engineers and marketers to scoff that the buttoned down, blue-suited telephone types couldn't run a cable business.
FiOS and U-verse have quieted, but not silenced those critics, by proving that getting into the cable business is tough, but if you spend enough money you can do it. Staying in the cable business, however, is tougher, and flourishing is the toughest of all so it will be interesting to see how the FiOS/U-verse thing works out.
Telcos do know how to run telephone companies. Better yet, they know how to run wireless companies, which they have cleverly bundled as a fourth leg of a pretty attractive package--whether it includes FiOS and U-verse, or DSL and DirecTV (Nasdaq: DTV).
Cable, as it has moved away from entertainment delivery into broadband data delivery with entertainment as a side package, has always been a dime short of a quarter when it comes to wireless. It's not as if the industry has ignored wireless--even stubborn cable execs don't wear blinders--it's just that it can't seem to do what comes naturally to the telcos: start with voice service and add the entertainment on top.
Cable tried with Pivot, a rancorous joint venture among its top players and Sprint (NYSE: S). Some in the industry are trying now with Clearwire (Nasdaq: CLWR)--not quite a joint venture, but again with Sprint. And, at least until last week, Cox Communications was trying on its own; now it, too, is trying with Sprint.
When it comes to wireless, cable is chewing around the edges ... while the telcos are chomping down on the good meat closer to the bone.
It's becoming pretty apparent that when it comes to wireless, cable is like Microsoft (Nasdaq: MSFT) TV: What should be easy never leaves the whiteboard.
Cable has tried its own direction with WiFi and WiMAX, and Comcast (Nasdaq: CMCSA) and Cablevision Systems (NYSE: CVC) have some very nice WiFi offerings. But they're not 3G and they're certainly not 4G--at least to the people buying and using wireless phones. When it comes to wireless, cable is chewing around the edges, nibbling and spitting out the fat and cartilage while the telcos are chomping down on the good meat closer to the bone. In the end, wireless, along with a rudimentary understanding of how to deliver quality television, could help telcos eat cable's lunch.
Unless cable somehow gets into the mobile business as more than Sprint's partner or customer. The answer to cable's wireless dilemma has been suggested multiple times by multiple sources over multiple years: Buy Sprint.
As early as November 2006 a Citigroup research report suggested that Comcast might add a mobile company to its portfolio and "Sprint Nextel (is) the most likely target." The idea refused to die and in 2009 Business Insider suggested "there's no guarantee WiMAX or Clearwire will work. So then what? It would probably be easier for Comcast to buy its way into the wireless industry than build its way there."
Of course Comcast is stretched a little thin these days following its NBCUniversal merger. Really, though, it's always been pretty obvious that no one cable operator can step in and buy a wireless carrier.
The most likely wireless model would be built in the image of CableLabs. Like it or hate it, CableLabs has been a roaring success for the technology faction of the cable industry. Vendors and service providers alike bow to the power of the Labs, and that's produced DOCSIS and interoperability among a feudal system of me-first operators and vendors. DOCSIS has helped cable morph from a one-way entertainment delivery medium into a broadband behemoth where entertainment and voice are but applications on the broader stream.
Wireless would probably be too much for CableLabs. It would need its own umbrella organization to nurture and shield it, and eventually wield it as a weapon to bring the industry into wireless lockstep. The first step is to stop fooling around and buy Sprint; the second is to set up the organization to make wireless a viable play for the cable industry; and the third is to actually compete with the telcos in voice, video, data and wireless.--Jim