One of the US' largest cable operators, Cox Communications has started testing mobile services in three of its markets (Hampton Roads in Virginia, Orange County in California and Omaha, Nebraska). The company is operating as a MVNO on Sprint Nextel's 3G (CDMA) network. A commercial launch is expected by mid-2010. At the same time, Cox is building its own LTE network, after acquiring rights to 700MHz spectrum in late 2008. In most areas in its cable footprint, the company has 12MHz. In February, Cox announced the agreement with Sprint and awarded contracts to Huawei and Starent (acquired by Cisco) to build the LTE network.
Cox's strategy shows that all roads lead to Rome. The big cable companies in the US, Comcast, Time Warner Cable and Brighthouse, decided to not build thier own networks and instead take a wholesale service from Sprint partner Clearwire, which is deploying a Wimax network. A wholesale service can work, if the network supplier is offering an attractive price. While normally that's the main question, price is only part of it with Clearwire, as the cable operators are also shareholders, alongside Sprint, Google and Intel.
Cox's choice of deploying its own network seems the expensive option, but the margins will be higher than at the other cable operators. In addition, Cox controls spectrum as well as network assets and a significant customer base. In theory, it's off to a flying start.
Cox is also choosing a different route than the Comcast, TWC and Brighthouse when it comes to technology: not Wimax, but LTE. Most mobile operators are choosing for LTE as this provides a smoother migration than Wimax, but for a newcomer like Cox this legacy argument doesn't hold. Clealry Cox has more confidence in the technology and related ecosystem.
Cox's nerve offers an interesting case for newcomers worldwide, now that so many spectrum auctions are on the calendar. Companies with the necessary network assers and customer base will be following the developments at Cox closely. In the Netherlands, Ziggo and Tele2 are candidates for a new mobile licence. If they, like Cox, start out as MVNOs, then possibly over time they'll find the financing to deploy a mobile network. Tele2 already has a mobile service, but Ziggo recently stopped its MVNO. However, Ziggo could consider a comeback as a data MVNO, to strengthen its Docsis 3.0 offer as a bundle with fixed and mobile broadband.
Given the limited cash flow at Tele2 and the high debt at Ziggo a wholesale model seems the better option in the Netherlands. But this will only work if they cooperate with another party bidding on the spectrum. Among the existing operators, T-Mobile seems the obvious choice. Otherwise, depending on the auction conditions, a financial party may have to be considered. With sufficient licences and limited coverage requirements, it could be interesting for a financial investor to bid in the upcoming 2.6GHz auction in the Netherlands. Ziggo and Tele2 would then be queuing up to be customers on a network deployed as 'wholesale-only'.
