As the dust settles from the recent double-header, pre-auction alliance ballgame, another Mighty Casey is in position to crack the bat at December’s auction of broadband personal communications services licenses.
Sprint Corp. recently announced a grand slam alliance with three cable companies-Tele-Communications Inc., Comcast Corp. and Cox Cable Communications Inc.
The news came on the heels of another new coalition-Bell Atlantic Corp. and Nynex Corp. teaming up with U.S. West Inc. and AirTouch Communications.
“This investment goes beyond PCS bidding,” said John Malone, president and chief executive officer of TCI. “We have a big edge over anyone else because we have the infrastructure in place, so we don’t have to go for the biggest frequency.”
Bidding for broadband PCS licenses begins Dec. 5. The alliances were announced in order to meet the Oct. 28 players’ registration deadline set by the Federal Communications Commission.
Sprint will own 40 percent of the new, unnamed company, TCI will have 30 percent, and Comcast and Cox will each own 15 percent. Collectively, the cable operators have 290,000 cable miles in place, serving a third of the nation’s homes.
Digital wireless telephone service is an important component of the Sprint package, the group said.
Cellular properties owned by Sprint and Comcast are not included in the alliance, but will continue as separate businesses.
“It is unclear to us, at this time, how cellular will relate with PCS…whether there will be handoffs between PCS and cellular or bi-modal or multi-frequency,” said Al Kurtze, senior vice president of operations for Sprint’s local telecommunications division. “We thought it was inappropriate to affiliate our cellular with that question still open. It depends how PCS evolves,” he said.
Sprint Cellular Co. operates in 88 markets-Las Vegas being the largest-and has approximately 652,000 subscribers. Comcast, the nation’s fourth-largest cable operator, holds cellular licenses in six markets in northern New Jersey and Delaware, as well as Philadelphia.
Cox Cable pooled 40 percent of its pioneer’s preference PCS license into the alliance. The Cox Enterprises Inc. license allows the company to build a PCS system in San Diego.
Cox’s new partner, Comcast, holds a 17 percent interest in Nextel Communications Inc., the specialized mobile radio operator that recently rolled out digital wireless services in Los Angeles, Sacramento and Oakland.
Nextel, which plans to build a nationwide wireless network using SMR technology, could compete against the Sprint-cable PCS alliance.
“Actually, there is surprisingly little overlap considering the size of the parties involved,” said Bill Dordelman, Comcast director of finance.
With cellular aside and cable playing a major role in Sprint’s PCS endeavor, wireless technology developed by Cable Television Laboratories Inc., or CableLabs, of Louisville, Colo., may play an important role in the wireless connection. The company has developed a system of antenna drivers that can be associated with one signal processor, forming a distributed antenna configuration and diminishing the need for complex hand-off protocols.
As part of a field test, Cablevision Systems Corp. sent an 800 MHz signal to a signal processor, which converted the signal to a cable frequency. Remote Antenna Drivers at the cable plant received the signal and re-converted it to the 800 MHz band where it was received by a PCS handset.
Cellular RADs use the cable infrastructure as an economical way of providing microcells for cell extenders, drop-in cells, points of high traffic and residential needs, CableLabs said.
One of the strongest forces drawing Sprint into this deal is the opportunity to create a competitive, nationwide local phone service, Kurtze said. That would keep Sprint from having to pay expensive tariffs to local exchange operators for long-distance calls coming into the local loop. Some sources have put that cost for long-distance providers at $25 billion a year.
Tariffs will likely be lower through Teleport Communications Group, a cable-owned competitive access provider that is a member of the venture. Teleport not only is experienced in competing against local exchange companies, but already has fiber optic networks in 19 major markets, such as Boston, Chicago, Dallas, San Diego, Seattle, St. Louis, New York and Detroit.
“Sprint has used Teleport in Manhattan for several years and that has reduced the expense,” Kurtze said.
Initially, the venture will offer Sprint’s branded long-distance service to independent cable operators that qualify for affiliation. The independent cable company can bundle the Sprint service into its cable packages, creating a new revenue stream.
Sprint service could be offered in cable packages as early as next year, depending on federal regulatory changes. But those regulatory hurdles could be a difficult obstacle. Only six states today allow cable operators to offer local telephone service. However, some of those states-California, New York and Illinois-are big-market areas.
“We need national, pre-emptive regulatory relief through legislation to break the monopoly,” held by local exchange carriers, Malone said. “We’re optimistic that it could happen next year or the year after, and we’re also working on a state-by-state basis.”
Gradually, PCS operations will be brought on line, integrating wireless and wired services through a single handset.
“We expect competition, but we have a good start and the Sprint brand name,
which has great value,” said William Esry, Sprint chairman and chief executive officer. “Our studies show the regional Bell companies have little brand recognition outside their regional territories.”