Sprint Nextel Corp. and four cable operators still have some talking to do about a number of details of their new joint venture, particularly surrounding pricing of the proposed bundle of voice, video, high-speed data and wireless telephone services.
Sprint Nextel chief operating officer Len Lauer brought the pricing question into the spotlight at the Nov. 15 UBS Warburg Communications conference in New York, where he said the wireless giant would prefer a national pricing scheme for the quadruple-play bundle.
“We’d like to get — we don’t know if we can pull it off — but the more national consistency we can get the better,” Lauer said. “Especially for us, because we’re going to sell a lot of this through our 1,600 company stores and also through RadioShack stores, so the more national the pricing is the better.”
Sprint Nextel on Nov. 2 outlined an agreement with Comcast Corp., Time Warner Cable, Cox Communications Inc. and Advance/Newhouse Communications to form a joint venture to offer a quadruple play bundle of voice, video, high-speed Internet and wireless communications services. Rather than just add cell-phone service to cable’s existing triple play, the wireless deal would encompass a range of products, including the ability to integrate cellphone and cable-phone voice mail, the ability for customers to remotely program their digital video recorders and, eventually, the ability for customers to view video programming from their wireless handsets.
Other features — like a dual-mode phone that transmits calls via cable while inside the home and can access the wireless network elsewhere, as well as the possibility of wireless networking — are to be added later.
Although Sprint Nextel’s comfortable with it, uniform national pricing is a foreign concept to cable companies, which can vary pricing market by market, especially for video. For one thing, MSOs must negotiate individually with municipalities for franchises and are typically restricted as to how much they can charge for basic-video service. Individual markets also make varied judgments on promotional pricing.
Sprint Nextel spokesman Nick Sweers said that while the wireless giant would prefer to have a uniform bundled price, that is still a negotiable point.
“We announced the opportunity to now go ahead and develop a joint venture,” Sweers said. “That’s now being developed. That said, such things like pricing, whether it be national or geographic, are going to be worked out.”
Cox spokesman David Grabert said working out a single national price for the four-play bundle would be extremely difficult, and Cox wouldn’t favor it.
“We support national scale, in terms of product branding and advertising and things that emphasize the commonalities of the services across the MSOs,” Grabert said. “But some of the details, including pricing, are most likely going to be probably best worked out at the system level.”
Grabert said video pricing can vary across markets by a few dollars a month, although the gap between promotional and everyday pricing can be $10 per month or more.
While Sprint Nextel’s motivation for pushing a uniform national price for the bundle could be in providing a consistent national marketing message, Grabert said that the company could advertise nationally without revealing the price, or customize its advertising across the various markets.
“It’s a little more cumbersome for sure, but in this day and age, it’s certainly something that can be done.”
Grabert said Cox is committed to the deal. “There’s just a lot of detail to be worked out. I think the different companies are going to come to the table and work through some of these things. The No. 1 thing that everyone is committed to is doing this offer.”
REASONS FOR VARYING
Time Warner Cable spokesman Mark Harrad also said implementing a national pricing program for the bundle could be virtually impossible, at least early on.
While digital phone and high-speed Internet prices are generally consistent across Time Warner Cable’s footprint, Harrad said video pricing varies, primarily because of the different franchise deals operators must reach. In addition, rates also vary between systems that were acquired from other companies that might have had a different rate structure and because of restrictions imposed during periods when the federal government imposed caps on charges.
“Standard tiers are not uniform because of the legacy nature of rate regulation,” Harrad said.
Comcast spokesman Tim Fitzpatrick declined to comment beyond the Nov. 2 press release announcing the deal, which stated, “In each market, the price of the integrated offering will be agreed to by Sprint and the cable company serving that market.”