Building a Sexy Four-Play

As cable operators contemplate the addition of mobile phones to their service offerings, it’s clear that a fatter bundle isn’t necessarily a better bundle in their minds. The move beyond the triple play of voice over Internet protocol, high-speed data and video has to give customers some unique opportunities.

Comcast Corp. chairman and CEO Brian Roberts made that clear when speaking with analysts earlier this month. “We are taking steps to try to have an integrated offering. Today, having a cell phone bundled with cable and high-speed data has not proved to be a marketing differentiator that we feel that we are concerned about,” he said.

At a minimum, any wireless alliance has to give consumers extra benefits, and marrying mobility to Comcast’s broadband platform is one solution. That could mean that a cell phone would skip over to cable’s VoIP network as the user enters the home. Consumers would find their cell phone messages on both their hand-held device and a Comcast Web site.

“There are ways to differentiate wireless offerings when you integrate it with the digital voice platform … and our high-speed data platform, where you are able to integrate a variety of features and services that will cross platforms,” Roberts told analysts.

Cox Communications Inc. is considering a move into mobile in slightly different terms. The Atlanta-based MSO’s vice president of strategy, Mimi Thigpen, says that while a dual-purpose phone is all well and good, Cox has bigger plans for wireless.

“Cable has a lot of great assets in relationships with our customers today,” Thigpen says. “As we think about the future, our customers want portability and mobility of a lot of services. From Cox’s perspective, we’re thinking of it in much broader terms — how can we give customers mobility and portability of the services we offer today in the home longer term?”

That, Thigpen says, could mean anything from connecting additional set-top outlets via wireless and creating hot-spots inside the home to enable wireless access to broadband and other features, to remote access via cell phone to video and broadband e-mail.

But Thigpen also acknowledges that telephone companies are exploiting cable’s void, driving home their point in marketing messages that by not offering wireless phone service there’s a deficiency in what cable offers customers.

In Cox territory, SBC Communications Inc. and BellSouth Corp. are already advertising the “quadruple play” of voice, video, data and wireless.

“We’re not having our customers tell us that because we don’t offer [wireless] today, it is a negative,” Thigpen says. “But we do realize that close to 60% of our customers have cell phones.”

So far, MSOs have taken small steps in the wireless arena:

  • Time Warner Cable began testing a wireless telephone service — reselling Sprint Corp.’s PCS — in Kansas City.
  • Cablevision Systems Corp. announced earlier this month that it will sell Sprint PCS service and phones on its Optimum Store, a shopping service exclusive to Optimum Online high-speed Internet customers.
  • Officials at Mediacom Communications Corp. say that they also may resell Sprint’s mobile service. That is an option that’s part of an agreement with Sprint to launch a VoIP offering via the cell-phone carrier later this year.

Too Early to Tell

Time Warner Cable Product Management Group executive vice president Peter Stern says that while it is still too early to gauge the success of the Kansas City test, the MSO is looking at all of its options.

“Ultimately consumers are going to demand mobility for the triple play,” Stern says. “We look at wireless phone as the first step along the path to offering seamless mobility. What you see us doing with voice with Sprint in Kansas City is beginning the process of learning how to operationalize the wireless business within the construct of a cable operator.”

Time Warner hopes to answer a number of questions with the Kansas City experiment, Stern says, like “how do you sell wireless phone if you’re a cable company? How do you fulfill it? How do you activate the number? What packages seem to work? How do you work with a third-party wireless carrier? What kind of demand can we generate?”

Time Warner is also part of a cable consortium — which includes Cox, Comcast, Charter Communications Inc. and Advance/Newhouse Communications — looking into possible alliances with wireless companies.

Stern says it’s too early in the process to provide a status report. “The consortium is exploring a wide range of models for cable operators to pursue wireless opportunities, including wireless phone service but not limited to wireless phone service.”

But not everyone is convinced that a wireless play is that important for cable.

“Count me as one of the skeptics,” says Sanford Bernstein & Co. cable and satellite analyst Craig Moffett. “There is a tendency to over-hype the value of the bundle.”

Moffett points to research that shows that consumers love bundled services when they include significant discounts. Take that discount away, or reduce it considerably, and the desire for bundled services wanes.

Moffett says that bundles make the most sense when there is a marginal cost to providing the service because it travels over an existing network and uses the same work force and customer service-platform, like VoIP, data and video.

“Once you try to add on ancillary services with no platform integration, you’re inviting discounts without any consequential cost reduction,” Moffett says. “Then it becomes nothing more than a function of billing convenience.”

Video’s a Factor

But Moffett adds that there could be strategic issues that make wireless critical to MSOs.

“If video delivery over wireless becomes a real issue, then suddenly there are more compelling strategic reasons to consider wireless as part of the bundle,” Moffett says. “Similarly, there are wireless broadband opportunities that could be delivered over Sprint’s bandwidth that could be either a friendly extension of the cable high-speed data footprint or a direct competitor. That strategic consideration bears analysis as well.”