Verizon Wireless anticipates bundling wireline services from three key cable companies with its own offerings as the result of a spectrum sale agreement announced this morning, a Verizon Wireless spokesman told Telecompetitor today. The cable companies, in turn, will have the ability to resell Verizon Wireless services and have formed an innovation technology joint venture with Verizon Wireless for “the development of technology to better integrate wireline and wireless products and services,” the companies said in today’s announcement. Quite an interesting development, to say the least.

The agreement, which requires FCC approval, calls for the three cable companies—Comcast, Time Warner Cable and Bright House Networks—to sell spectrum holdings in the advanced wireless services spectrum band to Verizon Wireless for $3.6 billion. The licenses cover more than half of the U.S. measured by population—a total of 122 licenses potentially reaching 259 million people.

Verizon Wireless President and CEO Dan Mead said in today’s announcement that the company expects “to bring even better 4G LTE products and services to our customers,” as a result of the new spectrum holdings.

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The cable companies acquired the AWS spectrum through a joint venture but had not yet begun to offer wireless services. The Verizon Wireless deal gives them the ability to offer wireless services without the cost of building their own network—and although wireless resale is a notoriously low-margin business, it is likely that the cable companies negotiated better than usual resale terms as part of the agreement. And by bundling the wireless service with their own wireline offerings, the cable companies should see a further margin boost.

In today’s announcement, cable company execs clearly positioned wireless as another element of an integrated service bundle.

“These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services,” said Neil Smit, president of Comcast Cable.

Bright House Networks CEO Steve Miron added, “We are always looking for ways to provide new and exciting product offerings for our customers. We look forward to working with our partners through these agreements toward achieving that end goal and to add additional value for our customers.”

The integration of wireline and wireless services will become increasingly critical as video service providers seek to give end users the ability to watch content on a range of devices, including mobile ones.  And today’s announcement raises some interesting questions as those initiatives take on increased importance.

Among the many questions and scenarios this development brings to mind is how Verizon Wireless will balance efforts to develop integrated wireline-wireless offerings with its parent company Verizon Communications on the one hand and with the cable companies on the other hand.

It also will be interesting to see whether Verizon Wireless offers the bundled offerings with the cable companies in areas where its parent company is the incumbent local telco. The Verizon Wireless spokesman did not answer that question in time for today’s deadline, but I’m guessing the answer is no—at least not in FiOS markets.

Lastly, what does this development mean for the long time partnership between these cable companies and Sprint/Clearwire? All of the cable companies subject to this deal are also investors in Clearwire, and both Comcast and TWC have begun marketing 4G WiMAX services. One would have to presume that relationship is now less important if not irrelevant.

 

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