Should Cable Operators Offer Wireless? - At least one Wall Street stock jock thinks it's a dumb idea...At least one Wall Street stock jock thinks it's a dumb idea...
(old news - 09:25AM Tuesday Dec 09 2008)
tags: Video · competition · business · wireless · cable · telco · VoIP · bundles · TVIP · cellular
If you remember, Comcast CEO Brian Roberts was never really sold on offering wireless, aka the fourth component on top of TV, data and VOIP in a "quadruple play" offering to consumers. That's despite participating in a group that paid $2.4 billion for broadband wireless spectrum, and now doling out more than a billion to help Clearwire deploy Mobile WiMax. At least one Wall Street analyst agrees with Roberts; Craig "network upgrades are for ninnies" Moffett making a lot of noise this week about how the quadruple play is an idiotic and unnecessary move for cable operators:
"The power of bundles, after all, has little if anything to do with what customers want,” Moffett wrote today in a research report. "And it has nothing whatsoever to do with what competitors are offering. Bundles are about the network. Bundles are about supply, not demand. The power of the bundle arises from the marginal costs of delivery. In other words, it's the network, stupid."Moffett does seem really keen on Cablevision's plan to spend $300 million on a combination project that involves upgrading to DOCSIS 3.0 -- but also offering free Wi-Fi to all of their customers.
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"Their model is to pay for the WiFi network by, well, giving it away," Moffett said. "The $300 million of capital spending required to build it, and the modest operating costs to run it, can be paid for with just a small uplift in market share – either gained or retained – in their wired broadband service. At a an ARPU of $35 per month and 80% contribution margins for wired broadband, it would take only 160,000 incremental subscribers – just 3.6% share of their cable footprint – to earn a 10% return on investment."
Of course, this is the same guy who thinks FiOS is doomed to failure and Qwest's plan to milk copper is the pinnacle of telecom achievement, both driven by a lack of vision and lust for immediate returns. Other analysts aren't quite as quick to poo-poo cable operators bundling wireless, noting that operations like Pivot failed because they simply weren't very good. Cox apparently doesn't agree with Moffett -- the now private cable operator recently announcing they plan to become an EVDO (and potentially LTE) wireless carrier sometime within the next few years.