Sprint, 4 cable firms set alliance

Deal will let Comcast, others bundle cellular, more electronic services

November 03, 2005|By WILLIAM PATALON III | WILLIAM PATALON III,SUN REPORTER

Comcast Corp. and three other major U.S. cable TV firms said yesterday they will begin marketing cellular-telephone service through Sprint Nextel Corp. early next year, a move analysts say temporarily leapfrogs phone company rivals such as Verizon Communications Inc. in the battle to sell bundled services to consumers.

"The battle lines are drawn," said Raul Martynek, chief executive officer of Eureka/InfoHighway, a New York-based provider of telecom services for businesses.

Joining Comcast in the deal with Sprint are Time Warner Cable, Cox Communications and Advance/Newhouse Communications, which currently reach 41 million households. For the first time, the cable giants will be able to offer consumers a package deal that includes cell phone service as well as cable, high-speed Internet access and phone service for the home.

The alliance expects to offer consumers exclusive content as well as a range of new products and services. For example, subscribers will be able use their cell phones to program a home video recorder from a remote location. That service will be available sometime next year, although the timetable and pricing have yet to be worked out, Sprint and cable-company executives said during a conference call from New York yesterday.

Users also will be able to view programs stored on the digital recorder - or even live programming - on their cell phone screens.

Both cable and telephone companies are rushing to develop discounted bundles of telecom services designed to induce consumers to buy all their telecom services from one vendor. To make that happen, however, the cable firms needed to add wireless to their portfolio.

The largest of the former regional Bell firms - including Verizon and SBC Communications Inc. - have long offered residential and wireless phone service, and in recent years added broadband Internet access. Both are spending billions on fiber-optic networks that will enable them to offer super-fast Internet access, TV and video-on-demand services to go head to head with cable.

But the required franchise agreements must be negotiated town-by-town, or county-by-county, and industry analysts and the companies themselves say it will take time for these services to gain traction.

That lag time, coupled with yesterday's deal, gives Comcast and its allies a period during which they can pick off phone-company customers - using the discounted bundles as bait, industry experts say.

"It's a big deal," said Jeffrey Kagan, an Atlanta-based telecommunications industry consultant. "It's going to give [the cable companies] a competitive advantage."

The four cable companies will contribute $100 million and Sprint another $100 million to finance the development of new services, marketing and back-office integration, the members said during the conference call.

The alliance should benefit from its broad potential coverage, company executives said. Sprint has nearly 46 million wireless subscribers, and there are 75 million households in the regions served by the cable companies.

Comcast, the nation's No. 1 cable provider, has 21.4 million cable customers, including 1.1 million in Maryland.

Under the deal, Sprint keeps control of its subscribers as well as the revenue they generate, while the cable companies keep the bulk of the money generated by the services they sell. But both groups benefit, since the combination unlocks the potential for new services - and the more services a consumer subscribes to, the less likely he or she is to swap vendors, said Eureka/InfoHighway's Martynek.

Alliance members outlined the potential for new services that combine the utility of the cell phone with the ever-growing collection of content that's accessible over a cable network or the Internet.

Subscribers will be able to retrieve e-mail from cell phones or voice mail from wired and wireless phones seamlessly, said Gary Forsee, Sprint's chief executive. "Our vision is that in the first half of next year to allow a hand-held device to emulate what users see in their homes on the Internet or on their TV screens," he said.

And while this new viewing venue will likely require that new agreements be negotiated with content providers, the potential for added revenues and an increased audience can only mean "this is good for the content people," said Brian Roberts, chairman and CEO of Comcast.

Verizon spokesman Eric Rabe said the company had anticipated an announcement like yesterday's and called the venture more marketing hype than substance. He also said that while the alliance might be adding wireless subscribers, Verizon would be using its FiOS fiber-optic-based network to take away cable customers - a much-higher-margin business.

"When we look at the overall situation, we think that our approach makes the most sense," Rabe said.

bill.patalon@baltsun.com

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