Revived cableco alliance could save Xohm...
Comment Former Sprint Nextel CEO Gary Forsee may have made a massively bad job of managing the carrier's merger and other operational challenges, but he left three major innovations as his positive legacy, which may still be the key to a Sprint turnaround.
One was his pioneering of the MVNO (multiple virtual network operator) model, which will be critical to Sprint's Xohm WiMAX-based business as well as its CDMA activities. The others were Xohm itself, and the deal with four major cablecos (Time Warner, Comcast, Bright House, and Cox) announced in 2005 and later dubbed Pivot.
Both Xohm and Pivot were ambitious in concept; both have had their wings severely clipped by Sprint's financial troubles and consequent shareholder nervousness, to the extent that Pivot is all but dead; but both could, if properly supported, turn Sprint into the disruptive carrier it aims to be, and do this more effectively if combined.
The failed cable dream
As Sprint casts around for investment partners to keep Xohm alive with less cost and risk to itself, there is the prospect that the vision Forsee conceived, even if he failed to execute, could be revived. Three of the Pivot partners are rumored to be mulling an investment in Xohm, or more probably in a joint venture between Xohm and Clearwire.
This venture – mooted last year and now on the cards again - would own nearly all the 2.5GHz mobile broadband spectrum in the US, with sufficient capacity to support a fully broadband fixed and mobile network that could propel the cablecos into the mobile and converged world, going head-to-head with AT&T and Verizon on geographic reach and range of advanced services.
While Pivot dwindled into little more than a cross-marketing agreement for cable and cellular services – and an unsuccessful one at that – at the outset it was intended to be something far more ambitious, with the five partners investing in creating a converged fixed/mobile broadband service using Sprint's CDMA and, later, WiMAX networks, and enabling the cablecos to match the convergence moves of the major DSL/fiber providers, and outdo the satellite TV operators.
This would have given Sprint an important position in US media and telecoms, in effect leveraging the cablecos' networks and customer bases to mount a challenge to Verizon and AT&T that would be impossible on its own.
For this vision to materialize, Xohm needs to be part of the deal, because it can deliver the kind of advanced services and true "broadband anywhere" that will be essential for cablecos to stay abreast of the major telcos.
It will also have the potential to carry the cable operators' TV content wirelessly, reaching mobile or nomadic devices and new geographic regions. This will be the great hope for NextWave, which recently announced a WiMAX implementation of its mobile TV technology for TDD spectrum, called MXtv.
At last week's CTIA wireless industry conference in San Francisco, NextWave talked up this development and demonstrated prototypes, dropping heavy hints that it would be of interest to Xohm and possibly to the cable operators.
Certainly, it would allow the cablecos to respond to another move by Verizon and AT&T – the move towards mobile TV, with both the major carriers currently using Qualcomm's MediaFLO system.
Interest in Xohm
For Sprint, cableco interest in Xohm would have short term as well as strategic benefits. As well as boosting its potential position in the telecoms balance of power, and possibly putting new life into Pivot, the cable operators could provide the hard dollars needed to resurrect the eminently sensible idea of joining forces with Clearwire to create a united front and a network genuinely capable of challenging the majors' LTE and convergence plans.
Since the original joint venture deal foundered amid Sprint's decline, the departure of Forsee and the crisis of confidence in Xohm at the Sprint board, both sides have made it clear they are still interested in the alliance – but it needs external funding, with both Sprint and Clearwire being forced to cut back their own capex intentions because of market and competitive conditions.
Intel was widely rumored to be interested, but its history suggests that - while it has a strong motivation for keeping Xohm and Clearwire, and therefore the hopes for WiMAX in the US, alive – it will balk at investing more than a token few million dollars.
Google has also been a popular focus of speculation but, like Intel, prefers to be a kingmaker than a sugar daddy, lending marketing and software weight rather than hard cash.
By contrast, recent reports in the Wall Street Journal suggest the three cablecos are willing to invest a collective $1.6bn in the wireless venture, close to the $2bn Sprint is said to be targeting (Comcast is said to be the lead investor in the proposal, offering about $1bn, followed by Time Warner on $500m and privately held Bright House on $200m, with Intel and possibly Google also putting in smaller amounts).
For the cablecos, this would be only a modest capital commitment to gain an advanced national wireless network and a measure of control and ownership in that – better than just a wholesale deal, but stopping short of full investment in individual or shared new networks, something the operators have considered, but which has met with negative response from nervous shareholders.
The only one of the four original Sprint cable partners that may go it alone and build its own network is Cox, having won 22 licenses in the 700MHz auction. Time Warner and Comcast led a group called SpectrumCo in buying licenses in the AWS band in the 2006 auction, but have since seemed to go cold on using these for direct build-out, Comcast in particular focusing more on partnerships and access-agnostic services.
However, the cablecos have been getting increasingly vocal about the need to offer a quad play in competition with the telcos, with shareholders nervous that they miss this boat. In December Time Warner Cable CEO Glenn Britt said his company had "no intention of building the fifth cellular network," but said it would view partnerships and investments in 4G-related systems favorably, though only "as an offensive move".
Copyright © 2008, Wireless Watch
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