Let’s say it’s the year 2012 and you’re a Comcast customer who wants to settle in for an evening of home entertainment after a long day of telecommuting. You grab your mobile phone, as it’s become the most important tool for managing your entertainment and information needs—more than your personal computer or your television. You check the Comcast program guide on your phone to find that evening’s ballgame. Using the phone you get the game to pop up instantly on the 102-inch HDTV wall screen in your living room. The phone is nearly as thin as a credit card—in fact, it is your credit card. It’s also a TV remote, keyboard, Web portal, electronic wallet, video camera, video game controller, music player and personal digital assistant. It’s a veritable Swiss Army Knife of electronic gadgetry. You use the phone to access your local cable system’s on-demand content or to set up a recording of a favorite show, which you then can watch on your TV, PC or the mobile handset. You can send a music video from your TV to your teen daughter’s mobile phone, then use her phone’s GPS capability to verify that she is where she says she is. Oh, yes, you can make phone calls. You have one number for your home, business and personal needs, a digital identity that links all service capabilities into a single and secure bundle offered at an irresistible rate. All of these connected capabilities are brought to you by Comcast, which entered the mobile business through an MSO joint venture with Sprint Nextel and then took over Verizon after the telco’s colossal failure to provide television service. Does this vision of the future, though whimsically Comcastic, sound far-fetched? It shouldn’t. While there’s a mountain to climb before such a wireless apparition becomes reality, the initial pieces for cable-linked mobile phones are being put into place through the Sprint/cable joint venture (JV). Connecting cable and mobile technologies, operations and services is challenging work. Seven local cable pilot markets are going through the tedious prerequisites toward a basic initial service offering in the third quarter. But, if all goes well, it is not an exaggeration to think that within five to 10 years mobile video phones will emerge as the ultimate tool for managing cable services—or perhaps it will be a similar all-in-one portable device or wearable gadget that’s as-yet unfounded or unnamed (remember, less than three years ago most of us hadn’t heard the word “iPod”). An unwired device could become the ultimate centerpiece of cable’s wired nation. But how will that happen? Back in the real world of 2006, the $200 million, three-year JV of Comcast, Time Warner Cable, Cox Communications, Advance/Newhouse and Sprint Nextel is taking the first steps toward a marriage of cable and mobile capability. WALK BEFORE YOU SPRINT Target launch dates are set for the third week of August, sources say, though they caution about potential slippage. Initial markets include Raleigh, N.C. (Time Warner), Portland, Ore. (Comcast), Austin, Texas (Time Warner), a Bright House Florida division, a Comcast system in New England and two Cox markets. Before getting to the promised land of true convergence, local systems must focus on customer care operations, sales and marketing channels and an initial set of integrated services. The systems are learning to walk before they can run. “Admittedly it’s not the rock ’em, sock ’em exciting types of services, because we’re more focused on the fundamentals,” says John Garcia, president of the Sprint/cable JV. “But we will be offering the choice of a single voice mailbox, wireless access to your e-mail, an electronic programming guide, additional content that the cable companies are getting wireless access rights to and pricing mechanisms such as calls from your PCS phone to your voice phone being free.” The JV principals won’t tip their hand, but they indicate there are cool new applications to come, ones that may not be readily apparent. Garcia says: “We hope people don’t see our pilot markets and say, `Is that all you’ve got?’ Well, no, we’re just very focused on customer service.” WHAT’S IN A BRAND NAME? Consumers will see the marriage of cable and wireless in co-branded marketing campaigns. Brand names are being tested with consumers, sources say, although Garcia doesn’t acknowledge whether the service will have its own brand name. Sprint’s retail stores will sell cable services, including high-speed data and digital phone, while cable centers will sell the mobile service. Customers will see charges for mobile service on their cable bill. MSO personnel will handle about 80% of customer service calls, Garcia estimates. The Sprint service itself may have a uniform national price tag, but MSO prices and bundled discounts may vary. Antitrust laws prevent the MSO partners from conferring on pricing, Garcia notes. Other operators may join the JV. Among those publicly acknowledging that they’re reviewing the option are Bresnan Communications, Charter Communications, Insight Communications and the National Cable Television Cooperative. While JV leaders are tight-lipped, additional market launches are unlikely until a wider deployment phase next year, Garcia says. BEYOND `ME TOO’ SERVICE The immediate benefits of cable’s move into wireless—creating the quad play, enhancing the bundle, tethering the unconnected consumer—are widely acknowledged. But the JV’s ultimate mission goes beyond adding a “me too” cellular service to cable’s bundle. “The partners agree there is a very attractive market for converged services,” Garcia says. “One of the primary tools that the JV has is product innovation. We are able to bring new services to the marketplace by leveraging both the MSO network and Sprint wireless network,” he adds. Arthur Orduna, a former interactive TV executive who’s currently SVP, policy and product, for Advance/Newhouse, outlined potential service categories during a National Show session, including: *seamless communications (integrated voicemail, e-mail access; text messaging and IM); *entertainment services (video clips, live TV, music and a home cable guide on the phone); *mobilization of broadband information (Internet access, picture mail); *management services (remotely managing a digital video recorder); *and handset functionality (multimedia capability, camera). INCENTIVES FOR NEW SERVICES The Sprint JV has an economic incentive to launch new mobile applications. Each company receives the revenue from its respective customer and a commission if they cross-sell another company’s service. Garcia describes the JV’s economics: “Sprint owns the wireless customer and converged service and gets full economic benefit. The cable companies own the cable customer and get full economic benefit there. [So] the joint venture and the partners are only successful if we create new services that generate new revenue or increase our share of [buying] decisions or reduce churn.” The revenue split and costs among the partners when those services are tied into bundles are “discussions still to be had,” Garcia says. “But we’re not keeping our simple approach to the economics from getting in the way of our innovation and how we think consumers may want to do business with us.” YOUR CABLE-BASED MOBILE DEVICE For a cable operator, Ordu�a says, the path to convergence starts with “thinking about my UI [user interface] and navigation, then thinking about merging my UI in terms of common elements, so that I’m presenting cable services, whether it’s making a call or calling up a movie, in sort of the same way across three different screens—the TV, the PC and the mobile screen.” Another major step will be ingesting content and sending it to multiple devices through IP technology, Ordu�a says. The business rules need to be in place too, so that a person who bought The Sopranos on HBO and recorded it on a DVR can access it remotely and legally. Ordu�a foresees mobility becoming central to a cable customer’s relationship with local cable services. Each customer could end up with what Ordu�a calls “a unique digital identity” based around his or her cable-based mobile device—an identity that will be secured within the cable system in case the customer misplaces that device. Garcia notes that CableLabs and others are eyeing the merger of technologies such as CDMA (code division multiple access), VoIP (voice over Internet protocol), cable modems and perhaps Wi-Fi or WiMAX and spurring a new wave of multimedia mobile devices. “The phone can become the remote control for your life or your remote access device to your entertainment or your third screen. The companies really see that type of vision out there. The aspirations are pretty high,” Garcia says. VIDEO GOES MOBILE While a limited amount of live TV and video clips are available on cell phones today, the JV leaders say they’re taking a fresh approach to thinking about what type of programming makes sense for a mobile consumer with a small screen. But taking cable video services mobile is challenging, largely due to technical issues, content rights and cultural differences. One of the questions with the Sprint-MSO service is which cable programmers will be along for the ride. Sprint offers a Sprint Live TV service (for $9.95/mo.) that includes broadcast streams of more than 20 channels aggregated by MobiTV, including Fox Sports, The Weather Channel, C-SPAN, an ESPN mobile sports news service and networks owned by Discovery Networks and NBC Universal. But in the interest of speed-to-market, sources say, the JV is considering content from MSO-owned local news channels, regional sports networks, video-on-demand libraries and even self-made videos—all content where rights may be easier and quicker to acquire. “The economics of video delivery is an expensive proposition,” a JV official says. “First, we have to figure out what’s the right package.” The JV could draw from major networks, including ABC, CBS, NBC, Fox, HBO and MTV, that are creating short-form show recaps or bonus material for mobile distribution. Or it could embrace a technology like Slingbox, which enables a user to view his/her entire local cable lineup on a mobile phone, although that could provoke rights challenges. A senior MSO programming negotiator says that, beyond extending any of the programming currently cleared for Sprint, mobile rights probably won’t be addressed in earnest until the next rounds of network carriage deals. TECHNICAL HURDLES Technologically, ingesting video from cable to wireless is critical, and beyond that, transcoding processes are required so that video can appear in different formats, handsets and screens. Mobile devices may use different types of video processing software. For example, to have a phone interact with a DVR, the video content needs to be transcoded from MPEG2, cable’s current digital format, to MPEG4, a preferred compression format for mobile devices. So far, cable operators are not pushing set-top manufacturers to include MPEG4 transcoding in DVR set-top boxes, according to set-top makers. Mobile carriers are embracing new delivery technologies, including 3G, DVB-H (digital video broadcasting-handheld) and Qualcomm’s MediaFLO, and the industry is debating which one is the best for video. Sprint relies on its Power Vision EV-DO (evolution data optimized) network, which so far has rolled out to about half the country. Sprint is ramping up a higher-speed version called Revision A and is exploring 4G delivery capabilities in the 2.5 GHz spectrum, which is regarded as robust enough for video. Moreover, the five partner companies have signaled an intention to bid in an auction of Advanced Wireless Services (AWS) spectrum. The spectrum could be used for JV services. In a JV that is separate from the mobile phone venture, the companies filed with the Federal Communications Commission to participate in the auction of 90 MHz in the 1.7-2.1 GHz band, slated to begin August 9. So the exact means of getting video and other mobile services from point A to point B could change over time. Garcia and others say there are plenty of emerging delivery avenues. Tasks such as ingestion and transcoding can be handled in the process—it’s mainly a question of where, they say. “Technical issues really don’t bother me,” he says. “There is a wealth of technology capabilities within the cable industry and within the wireless capability on the Sprint side. “Everything’s going packet. We can leverage networks as opposed to duplicating networks, which is a much more cost effective way to do things.” MERGING CULTURES Perhaps the question asked most often about the JV is whether the five partners can stick together. The industry has a checkered history of joint ventures, marked most recently by the collapse of the @Home broadband consortium. Tom Nagel, SVP, wireless services, Comcast Cable Communications, who’s on his fourth joint venture, figures the Sprint JV’s math this way: five parents, five networks, five processes, two cultures, two industries and one JV. “We tackle each other once in a while,” he admits, “but then we have to stand back and focus on what we want to accomplish.” Still, he feels this JV accomplished more in its first 100 days than any other he’s worked on. Another JV leader, Mimi Thigpen, VP, strategy, Cox Communications, explains the difference in cable and mobile cultures: “Cable operators think locally. Sprint thinks nationally.” Garcia, one of Sprint Wireless’ first employees in 1995, says he was asked so many times about how the five partners will stick together that he became “fairly paranoid.” But he’s been “pleasantly surprised” by the companies’ cooperation and expertise. Cable is rising to the challenges of marketing wireless, he says, but he suggests it will need to speed up its ability to deploy competitive features. “The wireless market has become highly, highly competitive and reactions happen very quickly. New feature development is a real high priority, a way to differentiate yourself. That level of competition is not prevalent yet in the cable industry. I think that it’s coming, especially if the RBOCs continue with their plans to get into the video business,” he says. Since 43% of Americans replace their mobile phones about every two years, according to a study by GfK NOP, by 2012 many Americans could have capabilities that are three generations beyond what they have today. But the JV partners insist they will stick to the basics at the outset. “We want to get the fundamentals right so we can build a foundation for other things,” Garcia says. “Those are things that will be driven by our technological know-how, whether we believe there’s money to be made and if it fits with the overall strategy of the partners.” Road to Convergence The Sprint/cable JV and local cable systems must take many steps for cable to go mobile, including: Local operations: Integrate billing systems, call centers and customer care Marketing: Set co-branding, pricing, bundling, national/local campaigns Sales channels: Prepare Sprint stores to sell cable services and cable centers to sell wireless Technical integration: Determine means of ingesting video and transcoding diverse formats Content acquisition: Make rights deals, design user interface Convergence: Enable content and functionality across cable and mobile platforms and devices Will Cable Subs Go Mobile? Mobile TV usage is low. About 9% of cell phone users have video capability with their phone, but only 4% subscribe to it, according to an online survey conducted in January by Points North Group and Horowitz Associates Inc. Similarly, The NPD Group found that only 1% of mobile users with video capability actually watched it in February. Mobile video subscribers pay an average of $10.70 per month on top of additional costs for cell services and multimedia phones, NPD says. Survey research shows significant levels of early interest in mobile TV concepts, especially among younger consumers. Mobile services such as Sprint Live TV and Verizon’s VCast, and mobile virtual network operators (MVNOs), including ESPN Mobile, Disney Mobile, Amp’d Mobile and Helio, are seeking to make mobile TV the next big thing. Media companies are exploring various long-form and short-form content options. Issues such as battery life and small video screens (larger screens are being developed) are a concern, but analysts say the key to stimulating the market is for prices of multimedia phones and services to come down. CL Convergence Caper: The Case of the Stolen Phone A new mobile application that’s getting a lot of attention is the ability to use the Global Positioning System to track a phone’s whereabouts. This got a real-world workout when someone stole a GPS-enabled phone from a Sprint Nextel facility in early April and traveled around the Kansas City, Mo., area. The thief’s exploits were well timed for the National Show in Atlanta. In exhibit booths showing demos of the GPS application, exhibitors plotted the phone’s progress on maps on TV. There are various accounts as to whether the thief was apprehended or whether the phone’s battery simply wore out. Jaspal Bhasin, COO of itaas, one of the exhibitors tracking the phone, said the caper “provided so much comic relief and contributed to the demo storyline so well, it probably was well worth the cost of the phone.” CL The JV at a Glance Partners: Sprint Nextel, Comcast, Time Warner Cable, Cox, Advance/Newhouse
Investment: $100 million commitment from Sprint, $100 million from MSOs, for national marketing, converged sevices, back-office integration
Governance Council: JV President john Garcia reports to a council of Sprint reps and Dave Watson (Comcast), Carl Rossetti (Time Warner Cable), Dallas Clement (Cox) and Nomi Miron Bergman (Advance/Newhouse)
Business Lead Council: Includes Tom Nagel (Comcast), Mike Roudi (Time Warner), Mimi Thigpen (Cox), Arthur Ordu�a (Advance/Newhouse), David Bottoms (Sprint) On Target? Like most of the details surrounding the JV, the initial markets for mobile services are not set in stone. The target date for launch is the third week of August, sources say, but they warn of slippage.

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