Cable provider Cox to build wireless network
By Dan Butcher
October 31, 2008
Cox is pursuing a three-screen, two-phone strategy
Cable TV provider Cox Communications plans to launch a wireless network as part of its three-screen strategy
In 2009, Cox Communications will add wireless offerings to its bundle of entertainment and communications services that already include digital cable, high-speed Internet and landline telephone offerings. This move ups the ante on the competition between cable companies and phone companies.
"We believe the next frontier of wireless is data and video, and no one knows that side of the business better than Cox," said Jill Ullman, spokeswoman for Cox Communications Inc., Atlanta, GA. "As customers seek greater integration, all of our services will be inter-dependent.
"Customers will look to Cox as their trusted provider for seamless communications across all platforms and devices," she said. "Wireless will be another component to the Cox bundle, giving us yet another opportunity to add greater value and enhance the Cox experience."
Cox will use the nationwide Sprint network to enter the market in 2009.
Tanya Masiello is director of client services for Nielsen Mobile
At the same time, Cox is concurrently building its own 3G wireless network for additional market launches in 2009, eventually using Sprint's network just for in-fill and roaming.
Cox will also test 4G technology using long-term evolution, or LTE. It eventually wants to build a 4G network to compete with major carriers such as AT&T and Verizon.
"To enter the market quickly, Cox will use the Sprint network in some markets in the short term, while managing every aspect of the service ourselves to ensure we own the customer experience," Ms. Ullman said. "At the same time, we are building out our own 3G network to launch wireless in other markets in 2009.
Charles S. Golvin is an analyst at Forrester Research
"In the long run, we believe LTE is the best way to build out a 4G network and we will trial 4G technology next year," she said. "Our 4G trials will ensure that we leverage the latest technologies, at the right point and time for Cox.
"As major carriers from around the world begin to embrace 4G LTE technology, we'll benefit greatly from the economies of scale and broad industry teachings."
Cox stresses that Sprint is a short-term solution that allows the company to get to market quicker in some U.S. markets.
"We have negotiated a broad-based relationship with Sprint that gives us better terms for our business, including full control of the customer, control of our brand, etcetera," Ms. Ullman said. "No matter the network, we are responsible for product development, care, support, billing, sales and the entire customer experience is Cox-controlled and delivered under the Cox brand."
Earlier this year, Cox joined CTIA, the international association for the wireless telecommunications industry, the Rural Cellular Association and CDMA Development Group, known as the CDG.
In recent years, Cox successfully acquired wireless spectrum in Federal Communications Commission auctions.
Cox has invested more than $500 million to acquire wireless spectrum and to develop the infrastructure and human resources needed to architect its own wireless service.
Cox's spectrum licenses include Atlanta, New Orleans, San Diego, Omaha and Las Vegas, as well as parts of Kansas and southern New Mexico. Those areas have about 23 million people.
Cox's goal is to leverage its content across the television, computer and mobile device platforms -- a three screen strategy that many players feel is vital for continued growth going forward.
Cox compares this strategy is to the company's successful entry into the landline telephone business more than 10 years ago.
When Cox launched telephone service in 1997, it claims that it was the first company to deliver digital video, high-speed Internet and telephone service via a single network -- that is, a voice, video and data bundle.
Today, more than 64 percent of Cox customers buy multiple services from Cox and one-third subscribe to all three products.
However, entering the more-or-less saturated wireless carrier industry at this time could prove much more challenging.
Cable going toe-to-toe with phone
As of now, Cox is the only major cable company that is building its own cellular network, but the cable industry does have a long history of getting involved in the wireless space.
Cox actually built and operated a cellular network covering the Southern California and Las Vegas markets in the 1990s, then sold it to Sprint in 1999.
Comcast Corp., the largest cable company in the U.S., also owned a wireless network in the '90s that had ties to Sprint.
According to the AP, the cable companies teamed up with Sprint again in 2005 to market wireless service to their video customers, but the project was abandoned this year.
Based on that experience Cox decided that the best way to enter the space was to go solo rather than participate in a joint venture.
Even though Cox can use its dense fiber network for its cell towers, the cost of building a wireless network will be at least hundreds of millions of dollars, according to analysts.
Cox will reportedly sell phones under its own brand, although no details have been released as to what handsets will be available, or what they will cost.
Other cable companies also have their eye on the wireless space.
Rather than building their own wireless networks, Comcast and Time Warner Cable Inc. are investing along with Sprint in a venture that is building a network based on WiMax, a new wireless data technology that recently launched in Baltimore (see story).
New York-area cable company Cablevision Systems Corp. is building its own wireless network, but it's using free airwaves and Wi-Fi technology to create a mesh of Internet hot spots over its cable service area, not building its own network.
Focused on mobile content
Cox research indicates that consumers want a simple and easy-to-use wireless service that will integrate easily with their lifestyle.
Management and delivery of converged content is at the core of Cox's wireless strategy.
"Our research shows that our customers trust us to integrate mobility into the Cox bundle," Ms. Ullman said. "With 64 percent of our customers already subscribing to a Cox bundle, we prove ourselves successful every day by delivering great video, voice and data services.
"The next frontier of wireless is data and video and no one knows that side of the business better than Cox," she said. "As wireless communications evolve, we will be ready to evolve our customers' communications and entertainment experience.
"Our wireless operations will be integrated into the core of our business, making it easier to manage the entire customer experience and integrate wireless with our current service portfolio."
Cox customers will be able to use their mobile phone to access their favorite television shows, program their DVR, access content saved on their home computer and get enhanced voice features.
Cox Communications is a multi-service broadband communications and entertainment company with more than 6.2 million total residential and commercial customers.
The third-largest cable television company in the United States, Cox offers an array of advanced digital video, high-speed Internet and telephony services over its own nationwide IP network, as well as integrated wireless services.
Cox Business is a facilities-based provider of communications services ns for commercial customers, providing high-speed Internet, voice and long distance services, as well as data and video transport services for small to large-sized businesses.
Cox Media offers national and local cable advertising in traditional spot and new media formats, along with promotional opportunities and production services.
In addition, Cox Communications wholly owns and operates the Travel Channel.
Cox has served many mobile advertising clients and run various mobile marketing campaigns.
Cox Sports Television ran a mobile sweepstakes campaign that received a 47 percent opt-in rate of consumers interested in future marketing (see story).
Cox Media and the Pensacola Interstate fair used mobile to inform their target audience of all the exciting promotions and discounts taking place during the event (see story).
Mobile video on the rise
"Mobile media, including messaging, downloads, Internet and video, has been growing steadily over the last few years," said Tanya Masiello, Washington, DC-based director of client services for Nielsen Mobile. "In Q2 2008, $7 billion was spent on mobile content in the U.S. with 28 percent year-over-year growth.
"We are seeing service and content providers develop their strategies to get more share of this growing revenue," she said.
A recent Nielsen study found that, as of Q1 2008, 91 million people -- 36 percent of all mobile phone subscribers in the U.S. -- owned a video-capable mobile phone.
As more subscribers upgrade to phones capable of receiving mobile video, subscription cost, promotion and network speeds will be the primary challenges to the growth of mobile video consumption.
The Nielsen study also found that, as of Q1 2008, there were already 13.9 million persons -- 6 percent of U.S. mobile subscribers -- paying for a mobile video plan, up from 8.4 million -- 4 percent of all mobile subscribers -- in Q1 2007.
There were 4.4 million persons -- 2 percent of U.S. mobile subscribers or 31 percent of those who subscribe to mobile video -- who reported that they watched mobile video with a mobile video subscription.
In addition, 95 million persons -- 37 percent of U.S. mobile subscribers -- subscribed to mobile Internet as part of their mobile data plan in Q1 2008, a significant platform for mobile video consumption.
One of Nielsen Mobile's clients is Cox Communications.
"Most forward-looking providers have a three-screen strategy that addresses integrated content delivery for television, Internet and mobile," Ms. Masiello said. "While the mobile media audience size has not reached that of television or the Internet, consumers are looking more and more to their mobile device to get content.
"Providers that do not have mobile in their strategy could potentially fall behind with the advent of 4G technology," she said.
Many analysts agree with her.
Expanding into each other's territory
The competition between cable companies and telecommunications companies will only intensify in the coming years.
"From a longer-term strategic view, it's pretty clear that telecom companies need TV content for their mobile video services, and cable companies need wireless," said Charles Golvin, Santa Cruz, CA-based analyst for Forrester Research. "Companies like Cox are trying to build an integrated set of communications and content services that go across a variety of fixed and mobile networks.
"Cable companies have to be competitive with AT&T and Verizon as far as communications are concerned, and the carriers need TV content to be competitive on the mobile video front," he said.
The Forrester analyst understands Cox's play to build a wireless network, but is somewhat puzzled by their decision to run on Sprint's CDMA network at the outset.
"It is an interesting choice that they chose CDMA, which is a technology that's going away, so it's a bit of a surprise, although Verizon is following the same path from CDMA to LTE," Mr. Golvin said. "You can only go so far with the MVNO model, because if all you're doing is reselling someone else's services, you're not really well positioned to continue to innovate and build new services that take advantage of the relationship you've built up with your current subscribers.
"Cox is realizing that mobile is a place they need to be," he said. "Cox is aiming to differentiate its wireless services by focusing on the core content their subscribers consume, such as TV."
It would behoove Cox to focus on the development of its LTE network, and not get tripped up by the pitfalls encountered by failed content-oriented MVNO players such as Disney and ESPN.
"ESPN decided to build a mobile service more focused on content than communications, and it failed for a number of reasons," Mr. Golvin said. "If there comes a time when consumers care more about media and content than communications, maybe some will revisit that model, but ESPN showed that's well into the future."
In the short term, Cox may reap dividends from its mobile play by increasing the ARPU of its current subscriber base.
"It remains to be seen whether that'll be a successful long-term strategy, but initially Cox will focus on upselling their existing customers before they move their broader media strategy forward," Mr. Golvin said.
Still, many challenges lie ahead for Cox.
"It's going to be tough for them to compete with the major carriers, first of all, because consumers' wireless relationships are tough to dislodge," Mr. Golvin said. "Number portability helps, but consumers have fairly strong relationships with their wireless operator, and I think it's going to be a challenge for Cox to win those customers.
"Probably what can be successful strategy is to focus on their existing base, because they can use the fact that they already have communications and broadband services as a springboard and begin to develop some services that integrate seamlessly between their home and mobile lines, etcetera," he said. "If they have a service-oriented approach, they'll have an answer for the customer who asks, 'Why should I buy wireless service from you?'"
Related content: Television, Cable TV provider, Cox Communications, Cox, wireless carrier, three screen strategy, ATT, Verizon, Jill Ullman, long term evolution, Sprint, LTE, CDMA, CTIA, Comcast, Time Warner, Cablevision, mobile video, Nielsen, Nielsen Mobile, Tanya Masiello, Forrest
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