April 7, 2005 4:00 AM PDT

Cable girds for wireless fight

SAN FRANCISCO--For the first time in years, cable operators are playing catch-up to phone company rivals in the all-important battle of the bundle.

The Bells--SBC Communications, BellSouth, Qwest Communications International and Verizon Communications--are fighting cable for dominance in broadband and fending off new Internet phone services. They're risking billions of dollars on massive network upgrades to provide TV services and challenge cable providers on their home turf.

But in one regard they are unmatched: Cable providers can't yet easily offer mobile services. By contrast, all of the Bells but Qwest are big investors in national cell phone networks. As a result, cable is now girding for a fight over wireless services that it's ill-prepared to fight.

News.context

What's new:
As Bells scramble to build TV services into the ultimate telecom bundle, cable rivals face the equally daunting task of trying to jump into wireless.

Bottom line:
The eagerness of cable companies to embrace the unfamiliar world of cell phone services highlights the growing importance telecom executives attach to bundled services.

More stories on this topic

"Wireless is a logical extension of our bundle and has become an emerging competitive threat from the Bells," said Cox Vice President Greg Bicket. "The addition of mobility is a value add--we get it. We're all looking at relationships to include wireless into our bundle; just how we do it is the question now."

Having laid the groundwork for "triple play" bundles of video, data and voice services, cable operators are finally confronting the wireless void. Executives from Cox, Comcast and Cablevision attending a major cable show here say the operators are in various stages of selling cell phone services. Just last week, Time Warner Cable began testing cell phone services in partnership with Sprint.

The eagerness of cable companies to embrace the unfamiliar world of cell phone services highlights the growing importance telecom executives attach to bundled services, given their power to shape consumer spending habits. Bundled services offer the convenience of one-stop shopping and simplicity in billing. Companies can lure new customers with tantalizing, if sometimes temporary, discounts and teaser rates. Bundles also can make it more difficult for consumers to switch services. For example, because few people want to change phone numbers frequently, bundling phone services with video and data can help keep customers locked in to all three.

While bundling is an attractive business model for cable operators and the Bells, its power has made it a target of consumer advocacy groups. In one high-profile bundling dispute that's still unfolding, consumer groups are pressuring Congress to force cable operators to offer a la carte pricing for individual cable programs, rather than plans that require viewers to pay for multiple channels they may not want.

The Bells also face a bundling controversy over a typical industry practice: forcing broadband subscribers to pay for local phone service. Efforts to break apart the broadband phone bundles were set back last week, when the Federal Communications Commission overturned local rules that required BellSouth to provide DSL (Digital Subscriber Line) service independent of local phone service, an offering known in the industry as "naked DSL."

Cable operators were the first to bundle services as a way to keep customers from fleeing to rivals, and the strategy worked. At Cox, for instance, customers who have all three services are apt to change

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Cable vs. Wireless-Bundling is bad policy and bad economics
Ben Chaney discusses the current and pending fights between the Bells and the cable companies, and portrays their justification of "bundling" (offering multiple services like broadband, entertainment, communications and other services) as somehow beneficial to consumers. Nothing could be further from the truth. In fact, evidence suggests that cable monopolies of their infrastructre and signal delivery costs consumers over twenty Billion dollars a year (That's a "B" folks)in excess of what competitive choice would offer.
Forcing unbundled services is what a free market wants and needs. This leads to more choices at lower prices; it always has and always will. The FCC's reluctance to force competition by allowing competitive access to infrastructure at reasonable and justified rates diminishes the potential for competitors to offer the same monopoly-priced broadband at 40-50% LESS than cable; similarly for DSL, even more so for packaged channels of television and entertainment. It is politics and the political mother's milk of contributions that have delivered this terrible outcome; in the interest of free market conmpetion and capitalist principles we must make sure that monopolistic practices are deregulated out of existance.
Ask any consumer if they think their cable service is "fairly" priced or overpriced; penetration is only at current levels becuase there aren't competitive choices. Monopoly Cable forces subscribers to accept packages that cable then uses to justify the pricing; talk about circular logic!
Imagine if AOL/Time Warner could offer their own entre or a la carte services to cable company subscribers, like AOL offering Broadband services at DSL or true Broadband transmission rates at lower prices? They'd be an overnight success! As would others. The competition would force real "value" pricing at much lower costs than today.
Does anyone really think that the average forty dollar per month charge for Broadband over cable incurs substantial additional cost to the cable company since it is provided over the same cable that already exists and which has been depreciated to zero cost? The modem that is provided is another example(a case in court may determine whether cable can keep it's monopoly over the boxes) of "locking in" a cable customer, keeping out competitive products available at lower cost.
The reasons why bundling and cable, even telephone company, monopolies are such bad ideas, economically and from a marketplace perspective, are just overwhelming.
For the sake of free market competition, choice, and even the future of services we can only imagine today, I hope that we can force regulators and legislators to move forcefully and quickly to end monopolistic practices allowed today.
Posted by bdennis410 (175 comments )
Reply Link Flag
Cable vs. Wireless-Bundling is bad policy and bad economics
Ben Chaney discusses the current and pending fights between the Bells and the cable companies, and portrays their justification of "bundling" (offering multiple services like broadband, entertainment, communications and other services) as somehow beneficial to consumers. Nothing could be further from the truth. In fact, evidence suggests that cable monopolies of their infrastructre and signal delivery costs consumers over twenty Billion dollars a year (That's a "B" folks)in excess of what competitive choice would offer.
Forcing unbundled services is what a free market wants and needs. This leads to more choices at lower prices; it always has and always will. The FCC's reluctance to force competition by allowing competitive access to infrastructure at reasonable and justified rates diminishes the potential for competitors to offer the same monopoly-priced broadband at 40-50% LESS than cable; similarly for DSL, even more so for packaged channels of television and entertainment. It is politics and the political mother's milk of contributions that have delivered this terrible outcome; in the interest of free market conmpetion and capitalist principles we must make sure that monopolistic practices are deregulated out of existance.
Ask any consumer if they think their cable service is "fairly" priced or overpriced; penetration is only at current levels becuase there aren't competitive choices. Monopoly Cable forces subscribers to accept packages that cable then uses to justify the pricing; talk about circular logic!
Imagine if AOL/Time Warner could offer their own entre or a la carte services to cable company subscribers, like AOL offering Broadband services at DSL or true Broadband transmission rates at lower prices? They'd be an overnight success! As would others. The competition would force real "value" pricing at much lower costs than today.
Does anyone really think that the average forty dollar per month charge for Broadband over cable incurs substantial additional cost to the cable company since it is provided over the same cable that already exists and which has been depreciated to zero cost? The modem that is provided is another example(a case in court may determine whether cable can keep it's monopoly over the boxes) of "locking in" a cable customer, keeping out competitive products available at lower cost.
The reasons why bundling and cable, even telephone company, monopolies are such bad ideas, economically and from a marketplace perspective, are just overwhelming.
For the sake of free market competition, choice, and even the future of services we can only imagine today, I hope that we can force regulators and legislators to move forcefully and quickly to end monopolistic practices allowed today.
Posted by bdennis410 (175 comments )
Reply Link Flag
 

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