One school of thought says that most consumers will end up buying their communications and entertainment in a bundle from one company. This belief apparently is spurring the $ multi-billion buildouts of fiber to the neighborhood or home by Verizon, AT&T, and BellSouth. Without these assets, the Big Bells struggle to compete with the Cable companies in delivering both very high speed Internet (above DSL speeds) and a package of television services.
Of course, the cable companies haven’t always been an obvious threat to the Big Bells’ monopoly positions. Over the past 10 years, $billions have been spent by the cable companies to upgrade their plant to support digital television services to compete effectively against the direct-to-home satellite companies and to support two-way high-speed (very high speed) Internet services. Those upgrades also positioned them well to offer “digital voice” services – local and long distance telephone service (directly positioned against the Big Bells’ cash cow) using Voice over IP technology. And, those efforts have been very successful; Cable established a strong lead over the Big Bells in broadband Internet that only price wars have been able to erode, and the Cable Cos. are rapidly taking share in telephone service.
But, the one area where the Big Bells have a clear, almost insurmountable lead, is in mobile services. In case you haven’t figured it out, in my opinion, mobility is a big deal. In fact, I’d argue that we’re entering an era where the value of mobility (driven by availability and contextual relevance) trumps the value of more commodity bandwidth and HD channel lineups anyday.
So, it was real news and big news at the end of 2005 when the Cable companies, with the stroke of a pen, eliminated their mobile deficiency through a partnership with Sprint (obvious disclosure: Sprint is my employer). Sprint similarly sees the Big Bells as an entrenched enemy. Sprint is #3 in wireless voice services behind Verizon’s Verizon Wireless division and AT&T and BellSouth’s Cingular joint venture. Sprint is also #3 in business long distance IP services behind AT&T and Verizon Business (formerly MCI). But unlike the Big Bells, Sprint lacks wires into the home (or most businesses) to offer the full bundle that many believe will drive consumer decisions moving forward. The partnership between Sprint and the big Cable companies is a natural matching of strength with strength to neutralize a mutual competitor’s advantage.
It was even bigger and more real news when word started leaking out this November, that those Cable companies had actually started offering wireless as part of a quadruple play. So, as the Big Bells spend years and $billions to perform huge market-by-market infrastructure upgrades, the Cable companies can pick and choose in which markets they want to launch some promotions, some catchy ads, and start taking share from the Big Bells in yet another of their core areas.
With better technology, more attractive offers, and positive momentum on all fronts, all the Cable/Sprint partnership has to fear is irrational price wars from the Big Bells (unfortunately we’ve seen it before). Keep an eye on this one. Things could get very interesting!