Four cable companies announced plans last week to get into the wireless broadband business — and one of them is not like the other. Cablevision (NYSE: CVC) said it will pay $350 million, or $100 per subscriber, to build a WiFi network in New York City. Three other cable companies — Comcast (NSDQ: CMCSA), Time Warner (NYSE: TWX) Cable and Bright House Cable — agreed to pay a combined $1.7 billion to be part of a JV between Clearwire (NSDQ: CLWR) and Sprint (NYSE: S), which plans to build a nationwide wireless broadband network using WiMax.
There’s so much to be said about these two different strategies, and not much to be said about how Cablevision’s decision makes sense. Here’s some perspective:
– WiFi vs. WiMax: There have been so many attempts to build metro-scale Wi-Fi networks, and most of them have failed. Getting coverage indoors, interference issues and the business models have been the key problems. WiFi uses unlicensed spectrum, which many people believe make it less predictable and WiMax generally uses licensed airwaves, as Clearwire plans to do. The one difference between Cablevision’s network and other large-scale WiFi network is that it will not have a public/private component to it, Wi-FiNetNews.com reports. When the city is a partner, typically it offers up resources like access to fiber cables and light poles to hang equipment on. WiFiNetNews says that Cablevision will likely already have these resources within the company.
– Costs and coverage: Cablevision will get one market (albeit a large one) for $350 million to be completed around 2010, it says. Under the Clearwire-Sprint JV, Comcast will pay $1.05 billion; Time Warner will pay $550 million and Bright House will contribute a mere $100 million for a network that aspires to cover 140 million people by 2010. Or course, Clearwire’s network will cost billions in the end, and even with this week’s infusion of $3.2 billion, it will be short another $2.3 billion to reach its goals — so it will not be cheap. However, the cost of doing it alone for Cablevision seems high. To put that into perspective, Leap Wireless just announced it will be expanding its cellular markets, and that capital expenditures for the build-out are expected to run about $26 per person. However, Cablevision has one big advantage over the other cable operators — it covers only a small footprint in the New York, New Jersey and Connecticut. Still, it won’t be offering wireless services outside its immediate market, unlike the other operators who will be able to allow their customers to connect in many markets.
— WiFi details: In its earnings call, via a transcript on Seeking Alpha, Thomas Rutledge, COO, said when the network is done any of its high-speed Internet customers will have free access to WiFi within its service area at speeds of up to 1.5 megabits (which is much slower than its landline customers, and slower than what Clearwire wants to offer at 5 megabits).
– Cablevision’s rationale: Rutledge: “As more and more devices become WiFi-enabled, whether they be laptops, iPhones, BlackBerries or other portable devices, we believe we can create a compelling broadband wireless network throughout our footprint for our Optimum Online high speed data service customers. This network is being built using our existing infrastructure overlaying a wireless mesh network…I should point out that WiFi exists today and we already have launched in numerous communities a WiFi zone inside our footprint. It