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Comcast pursuit of wireless deal signals biz change

Wireless eyed

Diane Mermigas
PHILADELPHIA -- Comcast Corp. officials say an imminent alliance with a telephone partner is designed to allow the cable giant to pursue a wireless strategy that will be central to a broader long-term effort to transport its branded video, high-speed and telephony services outside of the home.

In seeking a partnership with a major telco, Comcast aims to offer its cable TV subscribers the ability to check their Comcast e-mail, voicemail, on-demand video selections and conduct personalized product and service searches on a branded Comcast cellular phone, high-level Comcast executives said.

The dominant cable operator is negotiating with the recently merged Sprint-Nextel Communications and with T-Mobile USA Inc. on its own behalf and as part of a consortium that includes Time Warner Cable, Cox Cable and Charter Communications to secure a wireless partnership. Such an arrangement would be an important stepping stone to a flurry of new Internet-based, digital broadband products and revenue, sources close to the talks said.

The particulars of a deal expected "very soon" remain fluid, sources said. Comcast, which could opt to go off on its own, and the other cable companies involved in the talks declined comment.

Comcast's pursuit of such a deal also makes it clear that the nation's top cable operators have reconciled themselves to the need for a wireless strategy that only months ago was being shrugged off as discretionary.

"I think we will be able to get outside the home," Comcast chief operating officer Steve Burke said in an interview. "I think wireless is a piece of it. I also think there is portable video, whether it is Sony's PlayStation or some kind of portable device that allows you to take some of our programming on a downloaded and secure basis."

"I think that's all important, and I think people are going to ask for it. I am skeptical that it ever replaces the in-home viewing experience, but I'm positive it is a complement to it. And since it is a complement to it, we have to be there," said Burke, who declined to comment on the details of its telco negotiations.

However, sources close to the situation said the parties have been considering several scenarios, including Comcast's straightforward resale of Sprint or T-Mobile wireless service, which would be reciprocal, or the cable operator's purchase of wireless minutes, which it would resell and repackage as part of its branded service bundle. It could mirror a similar arrangement between its satellite TV rival DirecTV and Verizon Communications.

At the other end of the spectrum of possibilities, a wireless phone provider's operations could be more closely integrated with Comcast's, resulting in a variety of personalized services across multiple media platforms, sources said. Comcast appears to prefer the latter -- more complex but potentially more lucrative -- arrangement, sources said.

"Structuring the arrangement is what is taking so long," a source said. "It's really a matter of who is prepared to be the most creative in doing the deal."

One idea being discussed is the sale of a Comcast-branded cell phone that would share a telephony subscriber's phone number and would be a conduit for a subscriber's online email and voicemail as well as customized broadband video clips. This form of wireless service essentially could be integrated in all of Comcast's core businesses and embrace the company's recent calls for differentiation and personalization. Such a deal also would more closely align the country's largest cable operator with personal computer and online products and services.

"It would be taking the bundle to a whole new level," a cable industry executive close to the talks said.

A similar wireless template could be adopted by other consortium cable operators such as Time Warner and Cox and could be launched as early as 2006, sources said. Time Warner and Cablevision Systems are testing wireless service with telecos like Sprint.

The concept of cable operators offering wireless services is so new that it is hard to find industry research or forecasts on the subject. Bernstein Research projects the consumer bundle of voice, data and video is valued at about $120 billion across all platforms. The multichannel video business alone is about $55 billion with more than 80% penetration of all U.S. households, three-quarters of which are cable subscribers.

Cable's entry into the wireless market would give it reach into the expanding out-of-home market that enables consumers to access personalized communications, entertainment and information from various hand-held and broadband-based devices. Bernstein estimates out-of-home viewing alone could generate $4 billion in subscription revenue and $1 billion from hand-held-related advertising.

"We want to find a way to participate in the growth that is going to be spurred by wireless. We are looking at a variety of wireless alternatives," Comcast CEO Brian Roberts said.

"Our emphasis on personalizing entertainment and communications will take us beyond the television. As media grows beyond the home, so will Comcast," Roberts said. "Customers will want their 'My Comcast' phone number and their 'My Comcast' e-mail and their on-demand selections wherever they go. We are working with Cable Labs to develop the right tools to make that happen."

Added Roberts: "We're merging video, voice and data through technology that makes content more easily accessible and personalized. Our engineering department is changing the model from individual product silos to a cross-product platform to give consumers all the products they want, when and how they want them."

While Comcast is in a unique position of having inherited many experienced executives from AT&T Wireless when it acquired AT&T Broadband in late 2002 for $47.5 billion, the company has been cautious about moving too quickly into the wireless space despite a dwindling number of consolidating telephone companies' ardent embrace of video and other content.

Comcast and other major cable operators have been fighting phone companies such as SBC Communications and Verizon Communications in places like Texas over the their right to roll out regional TV service that would compete with cable. BellSouth will start to offer Internet Protocol TV over its fiber optic cable just as cable operators are beginning to offer Internet Protocol telephony.

Even as cable operators and telephone companies run the risk of entering disruptive price wars for their similar services, they both face increased competition from alternative broadband providers such as Wi-Max, Wi-Fi, power line and direct broadcast satellites.

As Banc of America analyst Douglas Shapiro observed in a recent report, "These are two (former) monopolists getting into each other's businesses, and they both have enormous amounts to lose."

Comcast and other cable operators insist a majority of video viewing -- which is, by far, their largest segment and expense -- will remain inside the home years from now despite the proliferation of new portable interactive devices and platforms. They consider wireless to be more of a commodity.

Still, Comcast has been rigorously forging new computer-related alliances to facilitate a more creative, easy interface between television, online and telephone content and services.

During the past year, Comcast has announced key alliances with Motorola, Liberate, TiVo, Gemstar TV Guide, DigiCipher, Visible World and others -- each of them representing a different piece of the digital broadband puzzle the cable giant is constructing.

All of Comcast's new partnerships are focused on various aspects of going all digital, the timetable for which is being accelerated by Comcast as it will make its ambitious VOD service and hopes for network DVR ubiquitous for all subscribers by decade's end, further enhancing its wireless capabilities.

"In Brian parlance," Roberts said, "that is the personalization of television. It's viewer-controlled television. ... That's when computer functionality is the winner."
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