Cable operators insist they have the matter under control, even though they continue to haggle over how and where to access a national WiMax connection. With heightened forecasts for mobile information, entertainment and interactive services for portable compact devices outside the home, cable needs to make a national wireless play--fast. Instead, cable operators are virtually barricading themselves in the home and seemingly ignoring the importance of participating in the wireless explosion.
Comcast is still pondering "down the road, should we extend our services outside of the home, (and) integrate new features that are compelling to the consumer? We have hired some folks to help us in our wireless thinking and navigating," Comcast CEO Brian Roberts told analysts Thursday.
Clearly, Comcast exhibits no urgency about chasing wireless when it expects its bundled voice, data and video to rise 8% to 10% in its overall revenues and operating cash flow this year. But cable operators are under pressure to increase network capacity to compete with telco fiber to support many times existing high-speed broadband, on-demand, high-definition content, peer-file sharing and services. So far, cable operators' answer has been to try to limit heavy broadband users by charging them extra or curtailing their network access.
Comcast is gaining about 11 times as many phone subscribers and nine times as many broadband subscribers as it has lost in video subscribers--and both are higher-margin businesses than video. Strategically, Comcast and Time Warner will continue developing "portability" services that ultimately could be transferred to their own or other wireless networks. Comcast and Time Warner Cable have yet to acquire or partner with a wireless provider, which must eventually happen. Analysts say a significant investment in a wireless network would depress cable company free cash flow.
"In the future there may be a robust broadband wireless offering, but it will be in the form of hybrid networks that are wireless and wire line, not two separate things," Glenn Britt, Time Warner Cable president and CEO, told analysts Wednesday. "We have not seen a big demand for the quadruple play to date," he said.
Comcast, Time Warner Cable and Cox Cable recently broke ties with Sprint in what was a second failed attempt at a wireless joint venture. The problem was trying to bundle their own competitive services with a differentiated wireless service. The cable operators presently are in discussion with Clearwire, Intel, Sprint and others about how to utilize their hodgepodge of wireless spectrum to counter high-powered wireless and digital TV national programs from AT&T and Verizon--including new mobile wireless TV services and free Wi-Fi access for AT&T services on discounted Apple iPhones. Comcast also has hired David Williams, a European wireless executive, as its wireless tech guru.
The ultimate sweet spot is a quadruple play for digital interactive services that adds mobile phone to cable's traditional video, voice and data bundle. AT&T and Verizon are already there, and able to make a bundled play for the all digital interactive services and attendant advertising dollars going mobile.
One-sixth of the 533 million broadband households that will exist worldwide by 2012 will be in the U.S.--all will want to subscribe to bundled services, according to eMarketer. U.S. mobile media and entertainment will double to a $6.6 billion business by 2012. Global mobile media services will more than double to $102 billion by 2012. That will generate $7.6 billion in global mobile ad spending by 2013--up from $1 billion this year--and $700 million in U.S. advertising by 2012, according to eMarketer. Cell phones and mobile wireless devices far outnumber all other electronic devices, including televisions.
Given that robust mobile outlook, it is mind-boggling to many that cable executives continue to be glib about their lack of wireless strategy. More than a decade ago, cable operators were warned about the Internet bypass that would threaten their stranglehold on video and data delivery. Today, many of the same content and data choices can be found directly on the Internet, which has heartily embraced streaming video (think branded Web sites to services from Hulu.com to iTunes). Other new competing services are on the horizon, such as the proposed Sezmi, powered by the Web and thin air. Anticipation of a more crowded playing field has prompted cable operators to form Project Canoe, which uses set-top-box user data to sell targeted advertising nationally to counter Google and others.
What cable operators need is a giant, solid leap into wireless that despite their stockpiled piecemeal spectrum, will provide a platform for competing in a mobile interactive marketplace.
Time Warner, at least, is armed with a potent back-door strategy as a major branded content provider; its Turner Cable Networks, where ad revenues are growing nearly 10% annually in a depressed economy, will command attention from all wireless players that are desperate to feed the insatiable broadband beast--even if they are not cable operators.