WiMAX in the Cable Market by Tom Buttermore, GM of Global Cable Solutions 3/16/2007

Over the past 10 years, consumers have grown to depend on their cellular networks to provide them with anytime, anywhere access. These consumers are now looking to push the envelope further to have an even better, more bandwidth-intense connection to their handset or PDA, forcing cellular network operators to step up their service offerings. For example, today旧 consumers want MySpace on their cell phones, an instant and super-fast internet connection to their laptop, and streaming videos to their PDA. Experts are calling this type of connectivity 戦nternet everywhere.� But, the following question remains unanswered: can cellular operators continue to meet these new demands? Cable operators, who don急 want to lose revenue or any subscribers, are looking to fill the gap cellular operators may leave behind. The answer cable companies are looking at to do this: Wireless spectrum and WiMAX (Worldwide Interoperability for Microwave Access). Why WiMAX? How Does it Work? WiMAX is designed to deliver broadband and multimedia data ubiquitously over wireless links at several times the speed of traditional circuit-switched wireless systems, and over a far greater coverage area than today旧 proprietary wireless local network (WLAN) access solutions based on 802.11 (Wi-Fi) technology. Wi-Fi enables affordable broadband Internet access within short-range 滞ot spots,� at distances measured in tens of meters. WiMAX, on the other hand, is designed to deliver the same access at similar costs, but across tens of kilometers and ultimately, with greater performance and higher speeds. In short, Wi-Fi provides high bandwidth but not distance, and cellular operators provide distance, but not high bandwidth. WiMAX provides both. WiMAX will give users uninterrupted and unfettered access to a rich variety of high-bandwidth services � not only around offices, homes, coffee shops, airports, and hotels, but also, as users roam in rural, suburban, and metropolitan areas. What 旧 more, with WiMAX, users will no longer perceive wireless Internet access as being inferior in quality compared with today旧 fixed DSL and cable access offers. Instead, WiMAX is expected to bring long-sought-after performance parity between wireless and wired Internet access. But, how do cable operators, who traditionally do not have wireless offerings, get access to this promising technology? The answer is with spectrum. Spectrum Frenzy In August 2006, the FCC held a Wireless Spectrum auction, putting 1,122 licenses in the 1710-1755 MHz and 2110-2155 MHz (AWS) bands up for bid. Spectrum in this band can be used by licensees, including cable operators, to deploy WiMAX. After an intense bidding process, SpectrumCo., a consortium of cable operators including Comcast, Time Warner Cable, Cox, Advance/Newhouse, CableOne and Bend Broadband, along with Sprint/Nextel, won licenses in the auction. Comcast emerged as the majority stakeholder in the consortium with a 52% stake, and Sprint/Nextel emerged as the minority stakeholder with a 5% stake and no voting rights. SpectrumCo. 旧 participation in the auction was significant because this marked the first time cable operators aggressively pursued wireless assets with bids totaling $2.4 billion. In fact, SpectrumCo.旧 bid was the third highest behind T-Mobile at $4.2 billion and Verizon at $2.8 billion. T-Mobile currently has no 3G network in place, placing it at a disadvantage versus the competition. Verizon, on the other hand, has a 3G network, but only bid on spectrum that was only of key strategic value, and it paid the second-highest dollar amount for only 13 licenses. Other cable operators, including Cablevision Systems and Dolan Family Holdings LLC, also participated aggressively in the auction's early rounds, but needed to drop out of the bidding in mid-August after competitors such as Verizon, T-Mobile, and SpectrumCo. topped its offers for market licenses in the New York metro area. However, experts predict Cablevision could bounce back from this setback by striking a deal with SpectrumCo. to share the New York spectrum with Time Warner. Time will only tell. CableOne won licenses in 30 metro or regional markets at a price of about $22 million and Bend Broadband won two licenses in Oregon for approximately $540 thousand. As cable operators evaluate the range of technologies available to them to deliver broadband services to their customers, WiMAX is gaining support because it offers cable operators an evolutionary step in wireless access and can be used for a number of applications, including 濯ast mile� broadband connections, hotspots, backhaul and high-speed connectivity. So, what exactly are these cable giants, who account for 58% of the cable customers in the U.S, planning to do with this new wireless spectrum? Compete more aggressively against the telcos. Spectrum Speculation Cable companies are continuing to face stiff competition from telcos like Verizon and AT&T, who already have wireless offerings, but are building out their networks to offer video and IPTV. With wireless spectrum, cable operators will have more options for bundling voice, broadband, TV and wireless/mobile services into a "quadruple play� offering for consumers. Some cable operators within the consortium already have wireless offerings through a partnership with Sprint/Nextel. This partnership allows them to add wireless service to their existing triple-play bundles. But, despite bidding with Sprint/Nextel on this spectrum, many think this is a move by cable operators to hedge their bets in case their partnership with Sprint/Nextel does not pan out. With spectrum, cable operators could offer their own cell phone service outside of the Sprint/Nextel partnership if needed. This is like having an insurance policy on their joint venture. Market consensus is the consortium will use spectrum cautiously, while continuing to make the most of their ties to Sprint/Nextel, as these cable operators will not want to forsake their current cash flow for a rush into the unknown territory of direct wireless deployments. The wireless world is very different from the wired world, and a transition for them could be difficult. This way, cable operators will move to quadruple play, while maintaining a focus on creating shareholder value. The addition of wireless services, along with the roll-out of business services for the small and medium size business market, will provide both a growth avenue and a better defense against the aspirations of telecom rivals. Additional possible uses for the spectrum include: High speed wireless access to the home: Some analysts see this move as an effort by the cable operators to expand high-speed Internet access. Despite touting their near-endless bandwidth capabilities, cable operators are lacking wireless capabilities to the home. With spectrum, cable operators will have this capability for the residential user. For example, customers will be able to program their DVRs via their cell phones. Imagine being at the mall and realizing you forgot to tape your favorite show? With spectrum and the easy press of a button, this problem is resolved. This is an example of a service that is the next evolutionary step that consumers want, giving cable companies a leg up in the battle against telcos. Consumer devices: What if every portable electronic device a consumer purchased such as an iPod, ultramobile PC, mobile phone, MP3 player, DVD player, or global positioning system (GPS) contained a WiMAX chipset enabling a simple registration back to the cable operator旧 mobile broadband service? This would allow end users with many access devices to condense the number of operators they have to one. This operator would, then, become the broadband service provider with one common IP service delivery platform to generate a host of new 対ollow me� voice, video and data services, all delivered over a combined WiMAX/wired network. This possibility is not far off. Experts predict consumers will be able to purchase the latest and greatest WiMAX-enabled products off the shelf at their local consumer electronics store, and service activation will be controlled via a registration process with the WiMAX service provider. Several of the largest chip and device manufacturers have now committed to making consumer-ready WiMax devices available in 2007. Business Services: Cable operators are recognizing that business services are a significant market opportunity. Estimates show the commercial sector spends about $120 billion to $130 billion a year on telecom services alone. With WiMAX, cable operators could expand into new service areas such as offering VPN services, which were previously cost-prohibitive in rural regions. With WiMAX cable operators could make it easier for businesses to enable teleworkers to connect to the corporate network cost-effectively with improved quality of service. WiMAX: Delivering a Truly Mobile, 戦nternet Everywhere� Lifestyle WiMAX skeptics contend the technology has a long way to go and isn急 really necessary given the wireless networks already in place. While it is true WiMAX won急 change the market overnight or have all of the capabilities that come with a mature technology, WiMax will change the economics of networks and the race between cable operators and telcos in the quest for consumers. Getting to an 戦nternet everywhere� point will take time. The world experienced a similar evolution with cellular technology. The difference now is that expectations are higher. We挙e already become accustomed to using our mobile phones at any moment, anywhere. That旧 the norm. The next phase of this evolution is coming even faster than it did before. One thing is certain: SpectrumCo will spread the wealth and these new WiMAX-enabled services are sure to heat up the competition between cable operators and telcos for the foreseeable future.