Cox to Build Wireless Foundation to Ensure Future Competitiveness

| Oct 28, 2008 | Wireless Services - U.S. | Competitive Intelligence Report

| Analyst: Bill Ho

Current Perspective: Positive/Neutral
Vendor Importance: High
Market Impact: Low

Event Summary

October 27, 2008 -- Cox Communications announced it will launch wireless services in 2009 while concurrently building a 3G wireless network for additional market launches. The cable provider hopes to expand its voice and data bundles with a fourth wireless component. Cox stated that it will also test 4G LTE technology.

Analytical Summary

• Current Perspective: Slightly positive on Cox Communications’ move to build a wireless foundation to ensure future revenue and competitiveness. It is well known that a wireless component is an essential ingredient for any wireline incumbent to bring about converged services that create customer stickiness and value. As larger competitors such as Verizon and AT&T already have wireless arms, it will be a race for Cox to stay in the game. While Cox’s entrée into wireless is a strategic imperative, the cable provider has scant experience and will need to spend substantial capital to build out a wireless network, acquire wireless technical and marketing staff and expand retail distribution to make its case.

• Vendor Importance: High to Cox because the cable provider needed to put to work and monetize its AWS and 700 MHz spectrum assets in which it has already sunk over $500 million. The testing of LTE for 4G signals a technology break with its cable consortium brethren (Time Warner, Comcast and Advance Newhouse) who have thrown their support for WiMAX under the new Clearwire. Still the ties with Sprint are intact as the wireless carrier provides Cox with the network with which to quickly go to market and for national roaming.

• Market Impact: Low on the wireless services segment because Cox is in essence starting almost from scratch with minimal wireless sales expertise and retail channels. Cox will have to do some heavy lifting to differentiate its wireless offering against entrenched wireless providers. High on the wireline services segment, however, because if all goes as planned, Cox will have a quadruple play story again to counter wireline service providers not only in the traditional consumer segment but also in the small and medium business sector. In a broader view, Cox’s entrance into wireless services bodes well for the infrastructure and device community since Cox is a traditional cable player with no wireless sales history, and so represents a Greenfield opportunity, which is hard to come by these days.

Recommended Competitor Actions

• Verizon and AT&T (as combined wireless-wireline providers) need to bring comparable capabilities controlling the DVR or accessing DVR content features to market ahead of Cox or any other cable provider. Moreover, these carriers should be looking into pricing models in which full unlimited wireless calling can be delivered for its quadruple play customers unlike for example select unlimited calling between all AT&T numbers in an AT&T Unity plan.

• Although T-Mobile is focused on its own 3G network buildout in the next two years, it needs to jump on the LTE bandwagon and advocate LTE support in bands outside of 700 MHz bands.

• MetroPCS and Leap Wireless should explore LTE capabilities in the AWS bands. Although MetroPCS already declared LTE as its 4G path, its 700 MHz assets are limited and not even part of its current core footprint. For its part, Leap has no 700 MHz assets to speak of.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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