5 Firms to Link Cable
and Cell Phones
By Yuki Noguchi, Staff Writer
Thursday, November 3, 2005
Sprint Nextel Corp. joined forces with four major cable companies yesterday to create a venture offering new services that combine cable entertainment with the mobility of the cell phone.
The joint effort will allow Reston-based Sprint and its cable partners to stream live broadcasts to a wireless phone, so a user could tune into MSNBC's "Hardball," for example, or watch National Football League highlights on ESPN. When the services become available in the first half of next year, subscribers will also be able to check home and work e-mail and voice mail messages from a cell phone, or use the phone to remotely control a home digital TV recorder.
Subscribers will be able to get such services by signing up for a full package of cable, phone, wireless and high-speed Internet offerings on one bill. Sprint's partners -- Comcast Corp., Time Warner Cable, Cox Communications Inc. and Advance/Newhouse Communications Inc. -- will bill customers for the services, while Sprint will help market cable subscriptions in its retail stores, the companies said.
The deal underscores that mobile technology is becoming central to accessing all things digital -- video, music and Internet. Sprint Nextel chief executive Gary D. Forsee said the idea is to make the cell phone into the "third screen," complementary to the television and computer and the tool that ties them all together.
By partnering, the companies hope cross-pollination between entertainment and wireless phones will persuade customers to pay more to use more services. The venture changes the competitive landscape for phone companies and customers alike, experts said.
It is a direct challenge to regional phone giants SBC Communications Inc. and Verizon Communications Inc., which already own the nation's two largest wireless companies but are still in the process of building new fiber-optic networks to carry television services. The ideal customer in both the cable and phone industries is one that subscribes to the "quadruple play" -- cable, phone, wireless and high-speed Internet services -- and now cable companies have a way to offer that nationally.
"This is not good news for the Baby Bells," said Richard P. Nespola, chief executive of TMNG, a technology consultancy. "It fills a gaping hole in cable's offerings with wireless," while the phone companies are still trying to establish their video franchise, he said.
Representatives from SBC and Verizon said yesterday that facing a Sprint-cable alliance would not change the overall competitive dynamic.
SBC is already integrating television features and remote programming, as well as e-mail and photo service with Cingular Wireless, and plans to launch it early next year, said Michael Coe, a spokesman for SBC. "Because we own the wireless company, it's going to be a smoother integration process for us."
While it may make business sense, some consumer advocates sounded alarms that Sprint's deal hurts competition, rather than fosters it.
"Sprint Nextel was going to be the big independent wireless broadband competitor to cable and phone providers," said Gene Kimmelman, director of the Washington office of Consumers Union. "What they've done here is instead of competing, they're teaming up with one of the giants. They're not a third competitor anymore."
"Every potential benefit they describe is exactly what monopolists always say: You can get new services, but you have to pay more," Kimmelman said.
For Sprint Nextel, however, aligning with the cable industry has been the plan for a long time. Sprint, which grew up as a local phone company, plans to spin off that division next year to become the largest independent wireless phone company. That, Sprint Nextel's Forsee has said, was designed in part to make it fit strategically with cable companies looking for partners to help them sell wireless, local and long-distance services.
The $200 million investment in the joint venture will be split between Sprint Nextel and the cable companies. The venture will establish uniform technology and billing standards, but each of the cable companies will independently set up deals and pricing plans in its own region. The companies' executives declined to discuss pricing plans.
The partnership is mutually exclusive for three years and has a 20-year term. The four cable companies have a total of 41 million customers, while Sprint, which merged with Nextel Communications Inc. earlier this year, serves 46 million mobile-phone subscribers.
Before yesterday's announcement, Sprint Nextel was already embracing an entertainment strategy. Earlier this week, the company announced it would sell music downloads over the air on two new models of phones.
Although the cable relationship gives Sprint Nextel greater access to Hollywood and the television studios, both sides have to perform well for their deal to pay off, TMNG's Nespola said.
"They've got to make this all work. Cable companies will have to offer customer care and billing, and Sprint cannot let their network fail or drop calls," he said. "There are a lot of players."