In a revealing presentation, Cox President Patrick Esser told the Progress and Freedom Foundation's annual tech policy summit in Aspen, Colorado that they intend to capture 20% market share for wireless service. Rather than join the Clearwire alliance like their other cable brethren, Cox is going it alone through its recent acquisition of 700 MHz spectrum. As reported by PC Magazine, Esser says he “…won't divulge too many secrets here, but we'll focus on providing simple calling plans, integrating all our services into one device with a consistent cross-platform interface; and making our content and applications mobile.”

Pretty bold comments considering the hyper-competitive marketplace for wireless. Achieving 20% penetration would be very impressive, especially for a company with no wireless experience. But Cox competitors shouldn’t take them lightly. They’ve been quite successful in capturing significant voice business from their telco competitors, and at one point, they had no experience with voice either. The pending move into wireless by the cable industry will be interesting to watch. They failed miserably with Pivot Wireless. But to their credit, they’re marching forward with a wireless act two. When and if they get it going, it will open up a new front in the bundling war between telco and cable. PC Magazine summed it up nicely with this Esser quote, “Frankly, we're in a street fight today for customers in every single aspect of our business – from the Bells and the satellite guys, to the wireless carriers.” Happy hunting.

Cox is apparently ignoring the recent Pew Internet research results which suggested that broadband pricing is still too high. According to BroadbandReports.com, Cox is raising their broadband pricing for many of their broadband tiers in several markets. Apparently, their "economy" tier will rise to $19.95 from $16.95 and their "value" tier to $29.95 from $26.95. Their “preferred” and “premiere” tiers are also rising to $44.95 and $59.95 respectively. These identified prices include bundle discounts for taking video. The Pew Research Center recently released their 2008 Home Broadband Adoption Study, in which one of the finding suggested that high prices for broadband is impeding higher broadband penetration rates for the U.S. The Pew results indicate growth in broadband penetration is relatively flat and “35% of dial-up users say that the price of broadband service would have to fall,” in order for them to give up dial up for broadband.

Of course that’s one opinion in the broadband pricing debate. Broadband carriers tend to have a different perspective, especially as the appetite for bandwidth continues to climb. Satisfying that growing subscriber appetite, while also holding the line on price is a challenge, they say. If the trend continues where broadband consumption continues to grow at a rapid pace, and there’s no indication it won’t, broadband carriers will continue to explore raising prices. Maybe even at the expense of slowing penetration growth. How are you coping with finding the right balance between price and penetration?

RCN is looking to wideband to keep up with its competitors, which include Comcast, Time Warner, and Verizon. RCN is a scrappy overbuilder, and is often the third triple play option in many Northeast markets including Boston, Philadelphia, and New York. Its competitors have announced the move to DOCSIS 3.0, or in Verizon’s case, utilize FTTH. Speaking from a bandwidth perspective, RCN CEO Peter Aquino is quoted in a Light Reading article as saying, “We'll go as high as anyone else." RCN's move to wideband is being facilitated by reclamation of analog spectrum, as they shift to an all digital cable platform. That reclamation will take some time and RCN says that DOCSIS 3.0 and the 50 Mbps speeds it will bring won’t happen until late 2009. Given that Comcast, Time Warner, and Verizon are moving considerably faster to that bogey, will RCN’s plan be too little, too late? Or is the broadband escalation strategy being pursued by all of these players overkill?

Cox and Nortel announced a partnership that will allow their respective sales organizations to market each others products and services. The new product solutions which include Nortel’s Business Communication Manager platform, will be packaged under the Cox Business brand. Cox Business provides communications services to business customers in 18 markets across the U.S., including small businesses, multi-location enterprises, regional healthcare providers and federal, state and local government organizations.

It’s official. Pivot Wireless, the wireless joint venture between Sprint and the cable industry is dead. The three major cable partners, who included Comcast, Time Warner Cable, and Cox, have decided to move on. Sprint announced back in October that it would stop marketing Pivot. All existing Pivot wireless subscribers will migrate over to Sprint. There are no firm numbers on exactly how many subscribers the venture had obtained. All joint venture participants had previously complained about Pivot’s provisioning and integration complexities. It almost seems that it was doomed from the start.

The real question is what’s next for the cable industry in regards to wireless? They are sitting on a “boatload” of spectrum obtained from recent AWS and 700 MHz (Cox is the lone national cable provider with 700 MHz) auctions. In some regards, Pivot was almost a distraction. With it removed from the equation, the cable industry may start moving more aggressively on a true facilities based wireless platform. Gigaom.com is reporting that Comcast has hired a seasoned wireless executive to start building the framework for their own wireless launch. There has also been speculation that the cable industry was interested in investing in Sprint’s WiMAX play, Xohm. That seems highly unlikely now, given the Pivot blow up. Whatever the case, the cable industry needs to move fast on their wireless strategy. If they don’t, they may arrive to the wireless party too late (which may already be the case), and spend billions on building a nationwide wireless network, only to find out that subscribers are quite content with their current wireless provider.

The FCC released results from the 700 MHZ auction and it looks like the pre-release consensus was right. Verizon Wireless and AT&T were the big winners, with Verizon gaining a national 700 MHz footprint. They both bid a combined $16.3 billion, with AT&T bidding $6.64 billion for 227 B-block licenses and Verizon Wireless bidding $9.63 billion for the large C-block regional licenses. An additional 99 bidders won 754 licenses, including familiar names like Echostar (DISH Networks) and Cox. The outcome of the auction did not produce a viable national wireless competitor, as many had hoped, but there are some interesting twists.

Echostar bid $711 million for 168 E-block licenses, which covers a large portion of the U.S. Cox bid close to $305 million for 22 licenses in the A and B blocks. Their licenses will include areas of California, Virginia, Georgia, Florida, Louisiana, Arkansas, Kansas and Oklahoma. These two winners will probably be the most interesting to watch from a competitive angle. Echostar now has a conceivable way to offer broadband, although speculation is that they have their eyes on mobile video, which the E-block spectrum is much better suited for. Among smaller service providers, CenturyTel won 69 B-block licenses for $149 million, raising the potential for CenturyTel to launch its own wireless service. Several tier 3 carriers won licenses including Horry Telephone of South Carolina, Pioneer Telephone in Oklahoma, and PVT Networks in New Mexico. While the auction failed to bring a competitor to the national stage, and may have fallen somewhat short from an overall competitive standpoint, it did empower several entrants into the wireless space. Time will tell whether those entrants can actually have a competitive impact in their respective territories, but it will be interesting to observe over the coming months and years.

It’s no secret that the cable industry sees the small/medium business and enterprise sectors as their next big growth engine. Continuing to grow revenue generating units in the consumer triple play sector is nice, but the growth hungry cable industry realizes that won’t be enough to satisfy shareholders and Wall Street. So it’s no surprise to see collaborative efforts like the one announced by Charter and Cox concerning fiber connectivity links. The two large MSOs have agreed to connect each others markets through fiber rings in their Nevada markets of Reno and Las Vegas. Similar links are taking place in California, between Orange County and Los Angeles. Cox and Charter have previously relied on telecom carriers to establish connectivity between markets.

The collaborative effort will target enterprise customers who have multiple locations, with Ethernet and IP transport services. “This agreement brings a competitive choice to businesses that need to communicate with locations in other key commerce hubs in the western U.S.,” said Jim McGann, vice president and general manager, Charter Business. Cox has been quite active with their Ethernet solutions, and now ranks as the fourth largest provider of Ethernet services in the country. By partnering with Charter, they are able to expand services beyond their traditional footprint. Expect to see more collaborative efforts like this among cable MSOs, as they continue to try to compete with well entrenched telecom service providers, who have long viewed the business communications sector and the billions of revenue it generates as their own.

Cox announced that 62% of their customers subscribe to at least two bundled services, and 30% subscribe to at least three services. Compare that with AT&T, who by our estimation, has about a 45% penetration for at least two bundled services. Verizon is a little more difficult to compare with because they really have two classes of residential subscribers – those with FiOS access and those without. Here are Cox’s reported subscriber counts with corresponding year over year growth rates:

• 5.96 million total residential customer relationships; 1.6% growth
• 3.7 million bundled customers; 9.0% growth
• 2.38 million telephone subscribers; 17.7% growth
• 3.7 million high-speed Internet subscribers; 11.3% growth
• 3.1 million digital cable subscribers; 10.8% growth
• 557,000 “non-video” residential customers; 24.5% growth

Cox has always been seen as a leader in the MSO industry for bundling. They were bundling voice service using traditional circuit switched service (as opposed to today’s cable VoIP service) long before other cable companies got in on the act. Part of the reason they can brag about these impressive bundling penetration figures is because they have been at it longer than probably any other national MSO or telecom carrier. Cox is projecting over 4 million bundled customers in 2008.

Patent lawsuits have long been used as a competitive weapon in many industries. Telecom is now getting their fair share. Vonage suffered a series of patent lawsuits from competitors last year, and now Verizon is suing Cox Communications on similar grounds. Four of the same patents, which focus on technology used to complete IP calls, used as a suit basis against Vonage are also the focus of the Verizon suit against Cox. Verizon filed suit in the Eastern District Court of Virginia on January 11 alleging that Cox infringed on a total of eight patents.

Light Reading speculates that this patent suit may be a sign of things to come, as most cable companies using VoIP, use the same technology that Verizon names in the Cox patent suit. Verizon may be teeing up the suit with Cox to see if it has legs. Should it prove successful, we can probably expect to see a parade of lawsuits between Verizon (and other telecom carriers) and leading cable companies over VoIP technology. It’s doubtful this (and potentially future suits) will materially impact cable’s ability to compete with telecom carriers. But every patent lawsuit action is not designed to stop a competitor cold – just slow them down a little and make life in the competitive telecom landscape a little more complicated.

The FCC imposed a cable company cap on the amount of market share any one cable company can obtain. The cap prevents any MSO from serving more than 30 percent of subscription multi-channel video customers nationwide. As of today, the cap really only impacts Comcast as a stand alone company, with their existing subscriber base of 24 million. Although FCC chairman Kevin Martin also made a point of emphasizing these rules apply to a consortium of companies as well. The main rub from the cable industry is that their key competitors, namely big telcos, seem to have unfettered access to huge merger approvals from the FCC, while this new cap prevents them from doing the same in their industry. Companies like Comcast would like to reserve the option of growth through acquisition to more effectively compete with the AT&T and Verizon’s of the world.

In some regard, I can understand this argument. But this cap, should it hold up to court challenges, may be a blessing in disguise to the cable industry. It may force them to diversify their acquisition strategies and focus on acquisition targets other than just more MSOs. For example, wouldn’t it be a smarter move for Comcast to focus their next major acquisition on a wireless company, and not another cable company? Seems to me, they need diversification of talent and expertise in all areas of telecom in order to compete with telecom behemoths. I’m not sure buying another cable company will accomplish that. Would it be a smarter long term move for Comcast to buy Sprint, than say Cox? Maybe Cox would have an interest in buying XO Communications – after all they’ve been recently toting their success in growing their enterprise telecom business. I may be over simplifying a lot of complex issues here, and for all I know, there may be some obscure regulatory rule that prevents these type of mergers as well. But my fundamental point is the real growth opportunity for cable lies in acquiring more telecom market share, not more cable TV share. This new FCC cap may just help create such a scenario.