Cable & Wireless Joining Forces; Prepare to Defend Your Rights-of-Way

Some of our readers may have read the exciting news that Sprint Nextel, the newest of now four national cell/PCS carriers, had signed a deal with four major cable companies to start a new joint venture.  It’s exciting, we are told, because of all the wonderful content we get on Cable TV can soon be viewed – and heard – on your cell phone.  But this joint venture, like one ten years ago, is not about entertainment, but rather how cellular networks can be brought into your neighborhood (see story at right).

How Much for What?

The four cable companies are Time-Warner, Cox, Comcast and Advance/Newhouse.  Together, as a group, the cable companies will invest $100 million in the joint venture.  Sprint Nextel, now a single carrier, will invest another $100 million.  For this $200 million, the joint venture will presumably start a marketing campaign, develop converged services (such as integrating cable telephone with wireless) and the technology needed to cross cable lines with wireless connections.

This is what carrier publicists call a “quadruple play:”

·       The joint venture will offer wireless voice and data.

·       The joint venture will offer video content.

·       The joint venture will offer wireline telephone (via cable).

·       The joint venture will offer internet access from anywhere (e.g., broadband).

All of this is rather underwhelming for anyone following the telecommunications sector.  A consumer can do each of the above via deals with individual companies today; however, the four services have yet to be integrated into one subscriber contract.

The Cable Companies Say It’s Really About Billing

The cable companies will offer services via their existing markets, approximately 41 million customers.  The combined package of services, commonly called “bundling,” will be billed by the cable companies in their respective market areas and they collect the revenue.  When Sprint Nextel signs a customer for the bundle of services, they either gain a new wireless customer or are increasing the bills of their 45 million existing customers.

The cable companies pay Sprint Nextel for each cable customer the wireless company generates and Sprint Nextel pays the cable company for each new wireless customer signed up.

Excuse Our Yawning, But …

All of this sounds very plausible, but there’s got to be something more to it than “bundling.”  And there is: the key word is “deployment.”  Cable companies can go into the right-of-way without much more than a franchise, which they already have.  Now, with the joint venture, the cable companies can add wireless facilities in the right-of-way as part of their business and who’s going to stop them?  Would your local government?

Sprint, on the other hand, has been suing local governments in California for the right to deploy wireless facilities in the right-of-way without obtaining zoning approvals from the local government.  The lawsuits have mixed results.  (PlanWireless readers will recall the discussion of Sprint’s win over San Diego County on this issue in the August/September 2005 issue.  That situation has changed as PlanWireless will report in the February/March 2006 issue.)  After paying hundreds of thousands of dollars in attorneys’ fees and not much to show for it, Sprint Nextel has got to be saying “there must be a better way.”

And there is.

The New Joint Venture Should be Called “Operation Trojan Horse”

It’s only a theory at this time, but who can deny the logic to it: create an entity which can enter the right-of-way with cable’s right of access and a wireless carrier partner may be able to deploy without local government permits or leases with landowners.  PlanWireless has been telling its readers over the last eight years:

·       Towers are dinosaurs.

·       The heights of wireless antennas are coming down.

·       The only way to penetrate largely residential areas with personal wireless service facilities is via the right-of-way.

·       Cable companies have unfettered access to the right-of-way; wireless carriers do not.

·       Build a bridge from the wireless carriers to the cable companies and the wireless carriers may have unfettered access to the right-of-way.

·       No permits, no leases, no municipal oversight.

And that may be the real reason for the new joint venture.

Will Cities & Counties Fall for It?

Local governments are a resourceful culture of minds and strategies.  They see technology like WiFi coming and they conjure up all kinds of mechanisms to make it happen.  The problem is, the rush to develop municipal broadband needs someone to pay for it.  The carriers and the cable companies are threatened by municipal WiFi, but they have the two necessary ingredients that most cities and counties lack: existing customers and ready capital.  The Trojan Horse appears and says “I’m just an extension of cable” and before you know it, you’ve got antennas in the right-of-way.  PlanWireless counsels its clients to prepare for the Trojan Horse before it comes to your community.  Once the joint venture gets into the right-of-way, it may be a rear guard fight in the courts for municipal control.  Local governments may lose a battle in which cable companies are exercising their right-of-way privileges through a joint venture.

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Kreines & Kreines, Inc.
58 Paseo Mirasol, Tiburon, CA 94920
Phone: (415) 435-9214
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