Sharing the Airwaves, WiFi Style
Having a pipe into customers’ homes used to be something that cable companies benefited from. At first, that pipe allowed cable to provide static free access to local content and, more important, premium content, such as HBO, that simply wasn’t available over the airwaves. These were the big items that led to widespread acceptance and adoption of the cable companies’ offerings, despite premium pricing. In fact, in the beginning, the competition (rabbit ears on a television set) was free.
Then, the Internet came in and started to make life more difficult for the cable companies. Phone lines were being used to transfer information and customers were jumping on game-changing technologies offered by such companies as AOL (AOL) and a host of other now defunct Internet access providers. To combat this, cable companies started to offer Internet access over their cable lines. Phone companies started providing such services, too, leading to an arms race of sorts to provide the fastest service speeds. To better compete with the phone companies, which had their own pipes into customers’ homes, the cable companies started to offer phone service, too.
Now, however, mobile access is all the rage and having a pipe into a person’s home is starting to look like a disadvantage. Moreover, people are increasingly consuming content, video and otherwise, on the go. Combating such a shift in consumer choice is hard if a company is tied to a house with a cable. Thus, cable companies began to provide so-called WiFi hot spots for their customers. This network of wireless locations uses the same technology that individuals use in their homes to connect wirelessly to their networks. Such hot spots were set up in locations that cable customers might find themselves, such as train stations, parks, beaches, coffee houses, and shopping areas, such as malls.
The systems work well, but access can seem idiosyncratic and limited (why one mall and not another, for example). Comcast (CMCSA), Cablevision (CVC), and Time Warner Cable (TWC) attempted to link up their networks earlier, but the connections weren’t collected under a single brand, making the experience confusing, at best, for the end user. Now, with the addition of privately held Cox Communications and Bright House Networks, a single, unified brand is being presented. The “CableWiFi” brand allows subscribers to know instantly that they can access, without concern, a WiFi network for free. The coverage, while still huddled around prime areas like train stations and malls, is broader now that all of the cable companies have joined forces. There are expected to be more than 50,000 connection points, known as hotspots, across major cities like New York, Los Angeles, Tampa, Orlando, and Philadelphia.
This isn’t a make or break deal for the cable companies, but it is an important strategic initiative. Wireless device users have, for years, used WiFi at local coffee shops or McDonald’s (MCD – Free McDonald’s Stock Report) locations as a way to keep monthly cell phone costs down. While cable still has many benefits, including the stickiness of an existing relationship, providing such WiFi access gives customers a reason to stick around an old technology even longer. After all, in cities such as New York, people typically go from home to office and office to home the same way every day. Customers won’t get rid of their cell phones, but many mobile devices can use WiFi or cellular networks which is likely to lead customers preferring to stay attached to their cable-company-provided WiFi so they can skip the higher bills that data usage (streaming movies, reading emails, video chatting) can bring about.
This deal will likely increase the longevity of the cable business model for a time, at least until new technological challenges come about, but it does nothing to combat the issue of changing viewing tastes. The cable providers have largely taken that one too, however, by providing their content over the Internet, as well as through a cable hook-up. Cable is far from a dying business, but it is clearly under attack from the combination of the Internet and wireless connectivity. So far, the cable providers have been up to the challenge, but it is only so long before the ties that bind are the ties that strangle.
For an example of this, consider the growing number of young and old who have chosen to use only a cell phone—dispensing with the phone line altogether. This is one of the major reasons why large telecommunications operators, like Verizon (VZ – Free Verizon Stock Report) and AT&T (T – Free AT&T Stock Report), are now more cell phone focused than land line focused. How cable companies will jump on this bandwagon is harder to gauge. So while this group effort is a good near-term decision, the long-term wireless connectivity problem isn’t over for the cable companies.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
