Birth of a Wireless Venture

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It took several months to hammer out an agreement among Sprint Nextel Corp. and four major cable operators to jointly develop wireless communications services as the elusive fourth offering in a quad-play of voice, video, data and wireless telephony.

That work was done by last November. What’s happened since then isn’t apparent to the consumer yet, as the venture partners — cable firms Comcast Corp., Time Warner Cable, Cox Communications Inc. and Bright House Networks — won’t have products on store shelves until late this year, a bit later than the late second-quarter, early third-quarter target Sprint Nextel chairman Gary Forsee set at an industry conference in January.

But in joint ventures — especially ones in which the respective companies “own” their respective customers — there are a lot of operational details to work out, and those details are starting to come into place.

<p>The Cable-Sprint Venture</p>

Governing Council:

Len Lauer, chief operating officer, Sprint Nextel

Tim Kelly, president, consumer solutions, Sprint Nextel

Oliver Valente, senior vice president, development, Sprint Nextel

Dave Watson, executive vice president, operations, Comcast Cable

Carl Rossetti, executive vice president, corporate development, Time Warner Cable

Dallas Clement, senior vice president, strategy and development, Cox Communications

Financing:

Funding: Three-year deal calls for $100 million from Sprint, $100 million combined from the three cable companies

Revenue Share: There will be no revenue sharing within the joint venture. Each entity “owns” their respective “cable” or “wireless” subscriber. Companies earn a one-time commission for cross selling a service.

Customer Base:

Cable Subscribers: 41 million

Sprint Wireless Subscribers: 46 million

Cable Homes Passed: 75 million

GARCIA’S HIRING

In January, the consortium named senior vice president of strategic partners for Sprint Consumer Solutions John Garcia president of the venture. At the cable companies, Comcast vice president of business development Tom Nagel, Cox vice president of strategy Mimi Thigpen, Time Warner Cable executive vice president of corporate development, voice Carl Rossetti and Bright House vice president of strategic initiatives Arthur Orduna lead their respective teams. Time Warner Cable hired Mike Roudi in February as vice president of wireless operations, to help with the joint venture: he reports to Rossetti.

Garcia’s tasks include hiring 50 or so employees who will be based in Kansas City, Mo., Sprint’s headquarters and the site of a joint cable-wireless lab that will be involved in certifying and testing new products as they are developed. That’s still ongoing.

But teams at each of the cable partners are already in place and are meeting regularly to hammer out details of what the Sprint-cable wireless products will be.

“We’re bringing a high level of talent into the organization,” Garcia said. “And we’ll focus the effort to innovate in places where the wireless and wireless networks intersect. It will be converged services, converged content and converged applications.”

A lot of foundation work also still needs to be done, such as billing, customer service and back office activation, he said. “That’s a pretty daunting task, and as large of a task as we’ll ever take on,” Garcia said.

The joint venture has a six-member governing council, made up of three Sprint executives and one executive each from Comcast, Time Warner and Cox.

“I was a bit skeptical how this might work,” Garcia, who was Sprint’s lead negotiator during the joint venture talks, conceded in a recent interview. “But to my great delight, I found quickly at the senior levels an amazing level of consistent enthusiasm for convergent services, and the complement of assets between the partners.”

ADVANTAGES SEEN

Once the new products are out — beginning with integrated voice mail and e-mail, then moving to additional video content and a program-your-digital-video-recorder-from-your-cell phone feature — the joint venture expects to have some distinct edges.

“We expect to have a price advantage,” Garcia said, as cable operators offer subscribers ways to save money by bundling cell phone service with digital video, data and phone offerings. “Sprint believes if you put a customer in a bundle, they are likely to stay longer.”

While Sprint Nextel executives at one point seemed to be pushing for a national pricing scheme, Garcia said that was misunderstood. There was never any plan for national pricing for cable services — but there could be some standard Sprint pricing as part of existing cable bundles.

“You will see some flexibility on the wireless piece,” Garcia said.

Thigpen said the partners decided the best approach to developing a converged product would be to split the work into 11 different streams — the first four being voice, video, data and wireless; and the rest to include integrating billing, marketing, customer care, sales and service activation.

Venture partner executives meet weekly in Sprint Nextel headquarters in Reston, Va., and by telephone as warranted. Garcia’s team members in Kansas City also are regularly in touch.

RACKING UP MILES

“The Atlanta to Dulles [International Airport] Delta [Airlines] flight knows me pretty well,” Thigpen said.

At any given time there could be eight to 15 people from Cox working on various aspects of the joint venture (not counting Cox employees in other units doing work on the project), with the operator supplying marketing, product development, information technology, engineering, finance and public affairs resources.

“It’s almost touching every part of our business,” Thigpen said.

Thigpen said initial offerings likely will be the same across all the operators.

“I think that you will likely see divergence at some point in the future,” she added.

“Think about the approach that all three of us took with VOD, or interactive TV, or even DVR,” she said of the cable firms. “We all kind of get to the same place, but we have a little bit different approach. I don’t think wireless will be any different. We’ll have flavors of it that will be a very common core of services that we all offer.”

The partners are working toward a goal of regularly rolling out new wireless products and features, similar to the way wireless companies introduce new handsets and applications.

“We will obviously time that with new features and functionalities and new product offerings that the cable companies offer on their own,” Thigpen said.

DUAL PHONE PUSHED BACK

The dual-purpose phone — a VoIP phone inside the home and a wireless phone outside the house — is still a goal, as the parties said last November. But it won’t likely be the first product out of the box.

“As we think about it, that’s not something a consumer is saying they have to have today,” Thigpen said.

The main priority, Thigpen said, is to develop and release products that offer cable customers something they can’t get anywhere else, including possibly some unique content. (That’s above and beyond the blunt priorities Garcia noted the various parties brought to the venture: “Cable wants to sell more VoIP. Sprint wants to sell more wireless data.”)

Thigpen also said, though, “In general, I think that all of us are going to have to listen to, what does the audience want and how do they use this.”

The groundwork she and others involved in the venture are doing now will make that kind of listening possible in future.

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