Sprint Nextel has pulled out of the venture it formed with its cable partners to acquire spectrum last year, but is looking to extend its quad play activities to include other cablecos.
Sprint teamed with its main cable partners ‘ Comcast, Time Warner Cable, Cox and Advance/Newhouse – on a venture called SpectrumCo, set up to bid for licenses in the AWS auction last year. The move does not affect the Pivot venture with the same companies, under which the cablecos are using the Sprint CDMA network to add mobile functionality to their service bundles, and which is expected to be extended in future to advanced quad play offerings using the planned WiMAX network. Pivot is now available in 19 markets and should reach about 40 this year, with Sprint also providing the VoIP services for its partners.
Sprint was always a minor partner in SpectrumCo, holding only a 5% non-voting stake, and had the right to withdraw from the venture. However, the unit was the third largest bidder in the auction, gaining 137 licenses for almost $2.4 billion, and covering nearly 270 million potential customers. It is unclear what the cablecos (mainly Comcast, which owns half of the venture, and Time Warner, which holds one-third) will now do with the licenses. They could form a back-up plan should the operators back away from using the WiMAX network ‘ especially as, since Sprint’s agreement to share the build-out with Clearwire, they would be coexisting on this with their satellite broadcast rivals Echostar and DirecTV, Clearwire’s major partners. However, the Sprint-Clearwire network will have unparalleled capacity, with up to 100MHz of spectrum in many markets, and is attracting the attentions of innovative device makers and other ecosystem members that could be very useful in helping the cablecos differentiate their future offerings from those of Verizon and AT&T.
Meanwhile, Sprint Nextel ‘ the pioneer in the US of the MVNO system in CDMA – moves ever closer to a wholesale model in its 2.5GHz WiMAX spectrum, and is already in discussions with cablecos outside the Pivot venture. The National Cable Television Cooperative said it held “exploratory discussions” with the telco in a bid to help small and mid-sized cable operators offer mobile services, using CDMA and/or WiMAX.
According to Scott Abbott, executive vice president of programming at the NCTC, if a wholesale deal were to be reached with Sprint, the two sides would likely focus on markets where Sprint has limited penetration in its own right. Such a deal would probably be a simple wholesale or MVNO arrangement rather than a far-reaching strategic venture like Pivot.
The NCTC represents 1,200 independent cable operators in 50 states but does not expect a deal to be imminent. Abbott cautioned that independents would be unlikely to act until the large cablecos have progressed further with their own quad play roll-outs and so proven the market. It is also possible that the NCTC could negotiate an umbrella deal for its members directly with Pivot. The smaller cablecos will be eager to gain the bargaining power of a collective approach, and Sprint is the most promising option for partnership, especially as it has based its own growth plans so firmly on teaming with the cable sector to steal a march on the top two telcos in quad play. MVNO deals with Verizon Wireless or AT&T Mobility would create branding confusion and conflicts of interest when competing in television with those cellcos’ parents, while T-Mobile’s network is the least advanced in moving towards 3G.
Among the small cablecos, a few are striking out on their own, such as Comporium in two counties of North Carolina. It is using what was BellSouth’s PCS network, and promises a ‘quintuple play’ of home security, television, internet, voice and mobile services. Other cablecos will just resell another operator’s mobile services, as Eagle Communications is doing, in partnership with Wavelink, in Kansas.