Cablevision plans on rolling out Wi-Fi Network; DT Ponders Sprint Acquisition

Officials from Cablevision, Inc. recently announced a plan to roll out its own Wi-Fi network. In other news, Deutsche Telekom is publicly considering acquisitions with another company such as Sprint Nextel, while Sprint also finalized a deal with Clearwire Corp. to implement a nationwide WiMAX rollout.

Focal Points:

• Executives from Cablevision said that they were planning to invest over $300 million to implement its own Wi-Fi network over the next two years in the metropolitan New York area. This action is occurring as part of a battle with Verizon, Inc. to control broadband network access in one of the largest U.S. markets. Cablevision officials further said over half of its customers subscribe to Internet services, which it believes will give them sufficient density to justify rolling out its wireless Internet service. Cablevision plans on using its existing infrastructure to run its wireless broadband service, but will cost an additional $100 per subscriber to implement.
• The CEO of Deutsche Telecom (DT) recently told financial analysts during its earnings call that DT would not rule out any acquisitions that would make financial sense. Most analysts took this to mean that DT was seriously considering acquiring Sprint, to increase the penetration of DT's presence in the US wireless market. While DT's presence in the U.S. with T-Mobile currently puts it in a distant third place in size, the acquisition of Sprint would instantly put DT in the number one position in size in the U.S. wireless market, with a value at current market rates of up to $52 billion.
• Officials from Sprint and Clearwire recently stated that they plan on working together to form a joint venture WiMAX business. The company they will create will be based on an investment of $3.2 billion from BrightHouse Networks, Comcast Corp., Google, Inc., Intel Corp., and Trilogy Equity Partners. The new venture will be called Clearwire, including Sprint's WiMAX-based Xohm, its 2.5GHz spectrum. Sprint is contributing this to the partnership in exchange for equity in the new company. The company will be based in Kirkland, Washington, with research and development out of Herndon, Virginia. Comcast, Time Warner, BrightHouse, and Clearwire will sell Sprint 3G services, but under their own brands. Intel will coordinate the manufacture of chipsets that will embed WiMAX technology into various mobile devices. Google will develop an open business model that uses WiMAX to work through these channels, with its search and services being bundled with WiMAX services.

Experton Group believes Wi-Fi services will decrease in popularity over time, based on their low profitability, security vulnerabilities, and the emergence of higher bandwidth emergent WiMAX services. Experton Group believes it is likely that DT will make a move to acquire Sprint, and Sprint shareholders and board members will support this move. The move will increase competition with Verizon and AT&T, which should have a downward pressure on pricing. As WiMAX chipsets start to get embedded in devices, wireless markets will become even more competitive. IT executives should start planning for integrating mobile telephony with other wireless data services, paying attention to third party integration capabilities and security.