Cable's Next Crusade
Sparked by the recent landmark joint venture between Sprint Nextel and four of the U.S. cable industry's top MSOs (Advance/Newhouse, Comcast, Cox, and Time Warner), the addition of a wireless service that would join video, voice and data to comprise the much coveted quadruple play is not only a reality, but considered by many to be a must-have, natural extension of the cable service bundle.
Albeit in its infancy, the integration of wireless technology into the cable quad-play bundle and the mobility it will bring to service providers is an evolving model, and a top-of-mind strategy for MSOs of all sizes.
"Cable operators have a great opportunity to bundle and offer wireless as a package to consumers. They can do cross-platform applications like gaming TV, mobile phone or computer, and tie-in interactive advertising with wireless. If cable wants to compete, it must offer the quadruple play," says Deepa Iyer, research analyst for Parks Associates, a leading market research and consulting firm.
And, judging by recent forecasts, consumers are more than ready for it.
By 2010, 55 percent of U.S. broadband households will subscribe to a triple-play or quadruple-play bundle, should the right strategies be adopted, Parks Associates predicts. And, revenues from bundled services, most notably the quad-play, are expected to reach nearly $120 billion.
Consumers are willing to pay for multiple applications and services linked to quad-play.
U.S. businesses are also expected to spend more on wireless services, reports In-Stat. Spending on wireless data services, for example, will outpace all other categories in the SOHO (Small Office/Home Office) segment, growing to nearly $2.2 billion in 2009. In addition, small business spending on Internet access will grow to $8.2 billion by 2009. And, mid-sized firms will spend $33 billion on telecom services by 2009.
Voice-over-Wireless LAN (VoWLAN) will also be a factor, reports InfoTech, a provider of market intelligence for the telecommunications industry. It predicts annual U.S. enterprise VoWLAN revenues will reach $1.1 billion by 2010, with dual-mode cellular/WiFi devices accounting for the bulk of those revenues.
Despite those lofty predictions, integrating wireless technology into an existing network designed to carry one or two pieces of the quadruple play, and bonding several crucial back office disciplines such as billing and OSS into a living, breathing, revenue-generating organism represents a difficult road ahead for operators.
"There's lots of experimentation and the players know they must integrate wireless into their services, and that could mean being a partner in future ventures. That's the tricky part," says John Barrett, director of research for Parks Associates.Need and necessity
Tricky or not, the strategy of adding the wireless piece to complete the quadruple play is pushing large and small cable operators alike headlong into trials, partnerships and soon, deployments.
"We will need the quad-play to compete, because, at the end of the day, it will be broadband capacity and superior service that will win. We are tightening our wireless strategy as an MVNO (Mobile Virtual Network Operator) play or other strategy, and clearly looking at WiMAX on the data side. The wireless piece is not a must-have today, but certainly is for the near future. There's lots of momentum in the phone business," maintains Sean O'Donnell, regional vice president for Bresnan Communications, a cable operator serving 300,000 customers today with a triple-play of voice, video and data services.
The quad-play momentum is touching smaller service providers such as Millennium Digital Media, which senses that the addition of wireless mobility is paramount to future growth.
"Customers increasingly want the bundle of services from a single source, at a discount. Dual-device functions such as VoIP in the home and wireless outside the home are very interesting, so we have a very strong interest in the quad-play and [we] will participate. It's not practical for us to develop our own wireless network, so we are looking for partners, who may be competitors in one business and partners in another. I guess you could call it 'coopetition.' But partners make a lot of sense, and we are in discussions with potential wireless partners now," says Peter Smith, senior vice president of programming and product development for Millennium, which serves 130,000 subscribers in parts of Washington, Oregon, Michigan and Maryland.
Millennium's quad-play strategy of partnering with existing wireless carriers and integrating wireless technology and operations into its infrastructure is the model du jour for most of the small to mid-sized companies, simply because they don't have the resources of their bigger MSO brethren.
"We're cutting our teeth with integration issues for wireless billing on the VoIP side, and with partners we can share the risk. Our end game is a wireless product," Smith says.
The end-game of a wireless offering is also being led by top MSOs such as Cox Communications, a key contributor to the Sprint JV. With the cable and telecommunications industries keeping a sharp eye on the JV, Cox is approaching its wireless strategy with both eyes wide open.
"Wireless is the last leg of Cox's strategy. We're staying close to new wireless standards and want to be an active participant. There are no [U.S. ] MSOs who are wireless carriers, so we want to test and evolve wireless. But it's a significant technology and we want to deliver it in our footprint," says Mimi Thigpen, vice president of strategy for Cox Communications.
Growing the wireless footprint to include providers beyond the J.V. partners, and integrating key operational functions into an existing network that will seamlessly allow the addition of mobile wireless services, are top priorities.
Yet for organizations such as the National Cable Television Cooperative (NCTC), whose membership of small to mid-size cable operators serves about 8 million subscribers, the wireless strategy is not only in play, but driving a different set of priorities and mandates for a group of cable systems historically lacking the operational and financial resources to invest in new technologies such as wireless.
And just what is NCTC's wireless mission? To help take smaller cable operators to a new universe: the quad-play.
"We have a basket of members that totals 8 million subscribers. Those operators are plowing money back into their infrastructures with triple play services and some sort of quad-play. There are lots of different economic models, but they are looking for a wireless play," says Jeff Abbas, president and CEO of the NCTC.
His organization anticipates eventually playing a role in the Sprint JV.
"Some operators are heading down the MVNO path to the quad-play, while others are waiting on the JV and what the final product looks like. Both Sprint and the MSOs have welcomed us into the JV, so we have to make sure we have the tools in place to make it manageable. We've met with the JV team and built a bridge to understand the JV development. Now, we need a think piece about the quad-play. Our task is to bridge the information divide," Abbas says.
There are other divides that will require bridging before a workable wireless model becomes part of the service mix. Admits Smith of Millennium: "We have some hurdles with wireless like marketing, customer service, awareness, education, call centers and distribution challenges of getting handsets into the hands of consumers. But the largest is probably integration of the billing and back office systems."
Integration, indeed. With the vast majority of service providers needing some sort of wireless partner, the challenge of threading together crucial back office functions such as billing, provisioning and customer care is not an easy one to meet.
"Trying to take subscribers known a certain way on one network and recognizing them on another network is a challenge. More than 40 percent of mobile phone usage is in the home, not mobile, so what's the identity of the handset; mobile or in the home? Cable operators need a system to recognize customers. There's been a whole cultural shift with cable to voice, and it must be continued with cellular," says Kerbey Altmann, director of voice architecture for OSS specialist Sigma Systems.
He points to "fallout" as one example of the complicated shift to wireless service in the quad-play. "To port a number, customer street addresses must be provided. If they aren't correct, they're not processed. That's a fallout. Currently, more than 40 percent of all orders end up in fallout. A good design and work with the wireless providers can significantly reduce that," he maintains.
The JV is meant to be that first step, says John Garcia, the newly-elected president of the cable-Sprint venture. "One objective is learning to work with each other. There are lots of assets among the JV partners and we can't afford to make billing and customer service mistakes and [we] must execute the fundamentals. Cable sees the wireless play as a must-have strategy, so we must get it right; [we] can't afford a disparate effort."
The JV, he adds, is recruiting new members from the cable community, and this summer will launch its next-generation wireless phone service, which will feed off of Sprint's nationwide high-speed EV-DO (Evolution Data Optimized) network, and integrate products from each partnering cable company.
The converged services, featuring the wireless component, will allow customers to interface between e-mail, home and mobile voicemail, digital video recorders (DVRs) and photo programs. "Customers want entertainment and data wherever they are, so cable operators realize wireless is a major strategy that needs to be pursued," Garcia adds.
Yet for many smaller cable operators, generally those with fewer than 50,000 customers, pursuing a wireless play is a real stretch. "Some are intensely interested in the quad-play, while others are just not ready. The biggest issue is access to capital, but when the data business takes off and shows subscriber gains, and VoIP is launched, that could generate more subscribers. Nevertheless, for some smaller operators, the wireless and the quad-play is beyond their means," admits Abbas.
Pastor concurs. "Smaller operators will be hard pressed to make the quad-play work. It could happen if there's a better customer model, but it's probably out of their reach."
But it is within reach of some, including Sunflower Broadband, a small Lawrence, Kan.-based operator that initially approached Sprint five years ago with a wireless proposition. "We wanted to partner with them for cellular service and wanted to do what the JV is doing now, but it didn't get traction," says Patrick Knorr, Sunflower's general manager.
Sunflower is offering a quad-play of sorts, Knorr maintains. It resells Sprint service over its call center, "but we can't bundle or integrate it into a billing bundle, so it's not a smashing success. Customers want a compelling package of bundled services, so there's no direct tie-in with cable service, which is critical," he says.
Knorr is hopeful the JV will facilitate a workable business model for Sunflower and the community of smaller cable operators. "We absolutely want to participate in the JV and [are] optimistic that we will. The key is for the big MSOs to keep the independent operators in mind going forward in the wireless space. The hope is that the JV will solve the problems that prevented us from advancing our initial Sprint partnership, like back office integration. And the solutions will filter down to smaller operators," he concludes.
Yet even the bigger MSOs such as Cox share similar concerns about adding wireless into a quad-play model, and have no illusions about integration issues, partnerships and just how they'll all fit together.
"How do we make it work with engineers, billing, customer service and retail and what unique skills and talents are needed? That's all on-going within the JV. For Cox, prioritization is the issue. With wireless in the mix, which products go first and how we integrate wireless into the billing system and deliver cell phones to customers are high on our radar screen," Thigpen says.
And they should be, maintains Mike Clement, director of marketing management for Siemens. "With any technology, there are tactical and integration issues, and for the cable industry, the wireless and quad-play integration is crucial. But they're well prepared for it."
Just as important is timing. Concludes Bresnan's O'Donnell: "We don't want to do too much out of the gate. A dual-mode phone and outside WiFi network is a good strategy, but we can't shoot too high, so we want to continue developing the technology. Wireless is one component our competitors have that we don't, so we're waiting to see the results from the JV. It's a great supplement to our existing product base."
And an enhancement that most experts agree is nearing no-brainer status for the cable industry, despite the integration, operational and relationship hurdles that lie ahead.
Concludes Iyer: "Cable is trying to get consumers into the habit of watching VOD, then [charging] for content. They need to do that with wireless. It won't be overnight, and cable needs to add more attractive bundles, but there's a great opportunity for them."
The opportunity may present itself this summer when the JV is expected to debut its wireless device, and report on the integration issues. "It (the JV) is a great idea and we're dealing with lots of innovations and opportunities," Garcia says.
Just how those innovations and opportunities are spread among companies eager to add wireless into a quad-play, particularly the smaller service providers functioning outside the JV, will likely determine who the players will be and what the developing partnerships will look like.
In the meantime, all eyes are being cast on the Sprint JV and its impact on cable's quest for the quad-play.
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|Source: Parks Associates|
Mobile video is rapidly becoming a key feature in the wireless play.