MCI, Sprint Wireless Plans Downplay Video -- for Now
New Orleans -- Influential newcomers MCI WorldCom Inc. and
Sprint Corp. plan to preserve the video businesses of their new wireless cable properties
for now, but the longer-term picture is fuzzy.
If anything, remarks by top executives from the two telcos
at last week's Wireless Communications Association International (WCA) convention
here underlined multichannel-multipoint-distribution-system operators' ongoing trend
of edging away from the unprofitable video business in favor of booming high-speed-data
"We clearly are in the process of acquiring companies
to satisfy bandwidth-access demand," said Kevin Brauer, Sprint's president of
national integrated services. "To the extent that video can coexist with our need for
bandwidth, we will look into it."
Sprint had indicated earlier that it would use the spectrum
that it planned to acquire through buyouts of People's Choice TV Corp. (PCTV),
American Telecasting Inc. and Videotron USA as one of the access platforms for its
Integrated On-Demand Network (ION) broadband voice and data product.
In its first detailed public discussion about MMDS strategy
since beginning buyouts of CAI Wireless Systems Inc. and Prime One, MCI told the WCA
gathering that its new spectrum complemented its planned patchwork of local-network
platforms -- POTS (plain old telephone service), digital subscriber line, wireless and,
eventually, cable and direct-broadcast satellite -- to provide high-speed-data links to
businesses and consumers.
Along those lines, MCI noted last week that it had become
the first DSL provider to deploy 1,000 points of presence, encompassing 850 U.S. cities
five months ahead of schedule.
MCI also announced a deal to team up with Internet-service
provider Earthlink Network Inc. to offer a nationwide consumer-oriented DSL service, with
market tests already under way in Los Angeles and Boston.
For MMDS, MCI will use a point-to-multipoint architecture,
probably breaking up existing networks into many smaller cell sites so that it can reuse
frequency over a metropolitan market.
As data-centric strategies, the MMDS deals echoed
MCI's $300 million investment last month in wireless Internet-access provider
Metricom Inc. -- backed by Paul Allen's Vulcan Ventures Inc. -- and its earlier
announced buyout of nationwide two-way messaging carrier SkyTel Communications Inc.
For now, MCI sees enough promise in video to at least
maintain the status quo for MMDS systems such as Prime One's digital setup in Los
Angeles and adjacent Orange County, Calif.
"We think the line between television and the Internet
is not going to be so obvious a few years from now," said Robert Finch, MCI's
vice president of strategic development and architect of the MMDS deals.
Finch disclosed that MCI had completed its long-rumored
acquisition of Prime One's operating entity, and that it would finalize the purchase
pending Federal Communications Commission approval of license transfers.
MCI owns about 62 percent of CAI, for which it has agreed
to pay some $476 million, and it hopes to win shareholder approval and to complete the
deal within months
"Prime One is a good system," Finch said.
"Clearly, we want to preserve and expand the existing MMDS customer base. It's
almost exclusively video: Beyond that, it's just been trials."
MCI, like Sprint, said the data-market potential of its
MMDS holdings will determine how much bandwidth is left for offering video.
Finch noted, for example, that Prime One had begun actively
marketing its digital-TV service in Los Angeles before it agreed to merge with MCI, but it
will now scale that down until the companies determine how they want to use its network
"It's a terrific system, but they only have 200
megahertz at the high end," Finch said.
Brauer separately touted to a WCA audience PCTV's
recently launched "SpeedChoice" digital interactive-video and data offering in
Phoenix as an indication of MMDS' video potential for Sprint.
But he, too, speculated that bandwidth limitations might
make it a more viable product mainly in smaller or secondary markets, where the data
demands on the system would be light enough to leave enough bandwidth free to support a
competitive digital-wireless-TV offering.
Finch said MCI actually began looking at MMDS about two
years ago, but it was put off by the same factors that caused many investors to shun it --
fragmented spectrum holdings, line-of-sight signal requirements and bandwidth that limited
Now, booming demand for broadband-access platforms and the
pending final FCC approval for two-way MMDS service has created sufficient financial
incentive for cobbling together major market footprints, he added.
Although he would not comment on such rumored targets as
Wireless One Inc. and CAI's sometimes-partner, Nucentrix Broadband Networks Inc.,
Finch said MCI would make more MMDS acquisitions if the price were right.
That prospect may have diminished for the near term, since
the buying binge by MCI and Sprint drove valuations sharply higher.
"We've spent a lot more to buy capacity than we
originally expected," Finch said.
Not all major MMDS operators are eyeing data over video,
BellSouth Corp. -- which recently added Jacksonville and
Daytona Beach, Fla., to its New Orleans, Atlanta and Orlando, Fla., digital-MMDS video
markets -- is indicating that the business will remain TV-centric as the telco focuses its
two-way-data efforts on fiber optic and DSL platforms.
Bob Frame, president of BellSouth Entertainment, said the
company was on target with its business plan and, at times, it had topped $60 per month in
average subscriber revenue due to strong cable and pay-per-view buys.
"We think we've broken the code on some things
and, operationally, we are doing some things that others couldn't quite figure out
how to do," he said. "I think we're going to make money at this. As long as
we've got another path -- a wireline path to get a data service to it -- we're
not forced to look at this as a data-delivery platform."
Frame added that there were no current plans to launch new
MMDS markets, although it was possible that BellSouth could migrate its three analog
systems -- in Louisville, Ky., and Fort Myers and Lakeland, Fla. -- to digital.
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