Cox and Nortel announced a partnership that will allow their respective sales organizations to market each others products and services. The new product solutions which include Nortel’s Business Communication Manager platform, will be packaged under the Cox Business brand. Cox Business provides communications services to business customers in 18 markets across the U.S., including small businesses, multi-location enterprises, regional healthcare providers and federal, state and local government organizations.

It’s official. Pivot Wireless, the wireless joint venture between Sprint and the cable industry is dead. The three major cable partners, who included Comcast, Time Warner Cable, and Cox, have decided to move on. Sprint announced back in October that it would stop marketing Pivot. All existing Pivot wireless subscribers will migrate over to Sprint. There are no firm numbers on exactly how many subscribers the venture had obtained. All joint venture participants had previously complained about Pivot’s provisioning and integration complexities. It almost seems that it was doomed from the start.

The real question is what’s next for the cable industry in regards to wireless? They are sitting on a “boatload” of spectrum obtained from recent AWS and 700 MHz (Cox is the lone national cable provider with 700 MHz) auctions. In some regards, Pivot was almost a distraction. With it removed from the equation, the cable industry may start moving more aggressively on a true facilities based wireless platform. Gigaom.com is reporting that Comcast has hired a seasoned wireless executive to start building the framework for their own wireless launch. There has also been speculation that the cable industry was interested in investing in Sprint’s WiMAX play, Xohm. That seems highly unlikely now, given the Pivot blow up. Whatever the case, the cable industry needs to move fast on their wireless strategy. If they don’t, they may arrive to the wireless party too late (which may already be the case), and spend billions on building a nationwide wireless network, only to find out that subscribers are quite content with their current wireless provider.

The FCC released results from the 700 MHZ auction and it looks like the pre-release consensus was right. Verizon Wireless and AT&T were the big winners, with Verizon gaining a national 700 MHz footprint. They both bid a combined $16.3 billion, with AT&T bidding $6.64 billion for 227 B-block licenses and Verizon Wireless bidding $9.63 billion for the large C-block regional licenses. An additional 99 bidders won 754 licenses, including familiar names like Echostar (DISH Networks) and Cox. The outcome of the auction did not produce a viable national wireless competitor, as many had hoped, but there are some interesting twists.

Echostar bid $711 million for 168 E-block licenses, which covers a large portion of the U.S. Cox bid close to $305 million for 22 licenses in the A and B blocks. Their licenses will include areas of California, Virginia, Georgia, Florida, Louisiana, Arkansas, Kansas and Oklahoma. These two winners will probably be the most interesting to watch from a competitive angle. Echostar now has a conceivable way to offer broadband, although speculation is that they have their eyes on mobile video, which the E-block spectrum is much better suited for. Among smaller service providers, CenturyTel won 69 B-block licenses for $149 million, raising the potential for CenturyTel to launch its own wireless service. Several tier 3 carriers won licenses including Horry Telephone of South Carolina, Pioneer Telephone in Oklahoma, and PVT Networks in New Mexico. While the auction failed to bring a competitor to the national stage, and may have fallen somewhat short from an overall competitive standpoint, it did empower several entrants into the wireless space. Time will tell whether those entrants can actually have a competitive impact in their respective territories, but it will be interesting to observe over the coming months and years.

It’s no secret that the cable industry sees the small/medium business and enterprise sectors as their next big growth engine. Continuing to grow revenue generating units in the consumer triple play sector is nice, but the growth hungry cable industry realizes that won’t be enough to satisfy shareholders and Wall Street. So it’s no surprise to see collaborative efforts like the one announced by Charter and Cox concerning fiber connectivity links. The two large MSOs have agreed to connect each others markets through fiber rings in their Nevada markets of Reno and Las Vegas. Similar links are taking place in California, between Orange County and Los Angeles. Cox and Charter have previously relied on telecom carriers to establish connectivity between markets.

The collaborative effort will target enterprise customers who have multiple locations, with Ethernet and IP transport services. “This agreement brings a competitive choice to businesses that need to communicate with locations in other key commerce hubs in the western U.S.,” said Jim McGann, vice president and general manager, Charter Business. Cox has been quite active with their Ethernet solutions, and now ranks as the fourth largest provider of Ethernet services in the country. By partnering with Charter, they are able to expand services beyond their traditional footprint. Expect to see more collaborative efforts like this among cable MSOs, as they continue to try to compete with well entrenched telecom service providers, who have long viewed the business communications sector and the billions of revenue it generates as their own.

Cox announced that 62% of their customers subscribe to at least two bundled services, and 30% subscribe to at least three services. Compare that with AT&T, who by our estimation, has about a 45% penetration for at least two bundled services. Verizon is a little more difficult to compare with because they really have two classes of residential subscribers – those with FiOS access and those without. Here are Cox’s reported subscriber counts with corresponding year over year growth rates:

• 5.96 million total residential customer relationships; 1.6% growth
• 3.7 million bundled customers; 9.0% growth
• 2.38 million telephone subscribers; 17.7% growth
• 3.7 million high-speed Internet subscribers; 11.3% growth
• 3.1 million digital cable subscribers; 10.8% growth
• 557,000 “non-video” residential customers; 24.5% growth

Cox has always been seen as a leader in the MSO industry for bundling. They were bundling voice service using traditional circuit switched service (as opposed to today’s cable VoIP service) long before other cable companies got in on the act. Part of the reason they can brag about these impressive bundling penetration figures is because they have been at it longer than probably any other national MSO or telecom carrier. Cox is projecting over 4 million bundled customers in 2008.

Patent lawsuits have long been used as a competitive weapon in many industries. Telecom is now getting their fair share. Vonage suffered a series of patent lawsuits from competitors last year, and now Verizon is suing Cox Communications on similar grounds. Four of the same patents, which focus on technology used to complete IP calls, used as a suit basis against Vonage are also the focus of the Verizon suit against Cox. Verizon filed suit in the Eastern District Court of Virginia on January 11 alleging that Cox infringed on a total of eight patents.

Light Reading speculates that this patent suit may be a sign of things to come, as most cable companies using VoIP, use the same technology that Verizon names in the Cox patent suit. Verizon may be teeing up the suit with Cox to see if it has legs. Should it prove successful, we can probably expect to see a parade of lawsuits between Verizon (and other telecom carriers) and leading cable companies over VoIP technology. It’s doubtful this (and potentially future suits) will materially impact cable’s ability to compete with telecom carriers. But every patent lawsuit action is not designed to stop a competitor cold – just slow them down a little and make life in the competitive telecom landscape a little more complicated.

The FCC imposed a cable company cap on the amount of market share any one cable company can obtain. The cap prevents any MSO from serving more than 30 percent of subscription multi-channel video customers nationwide. As of today, the cap really only impacts Comcast as a stand alone company, with their existing subscriber base of 24 million. Although FCC chairman Kevin Martin also made a point of emphasizing these rules apply to a consortium of companies as well. The main rub from the cable industry is that their key competitors, namely big telcos, seem to have unfettered access to huge merger approvals from the FCC, while this new cap prevents them from doing the same in their industry. Companies like Comcast would like to reserve the option of growth through acquisition to more effectively compete with the AT&T and Verizon’s of the world.

In some regard, I can understand this argument. But this cap, should it hold up to court challenges, may be a blessing in disguise to the cable industry. It may force them to diversify their acquisition strategies and focus on acquisition targets other than just more MSOs. For example, wouldn’t it be a smarter move for Comcast to focus their next major acquisition on a wireless company, and not another cable company? Seems to me, they need diversification of talent and expertise in all areas of telecom in order to compete with telecom behemoths. I’m not sure buying another cable company will accomplish that. Would it be a smarter long term move for Comcast to buy Sprint, than say Cox? Maybe Cox would have an interest in buying XO Communications – after all they’ve been recently toting their success in growing their enterprise telecom business. I may be over simplifying a lot of complex issues here, and for all I know, there may be some obscure regulatory rule that prevents these type of mergers as well. But my fundamental point is the real growth opportunity for cable lies in acquiring more telecom market share, not more cable TV share. This new FCC cap may just help create such a scenario.

Cable companies seem to be content with sitting the upcoming 700 Mhz auction out. With the exception of Cox, most large MSOs have announced they have no plans to participate in this latest wireless spectrum auction. Perhaps they think the spectrum acquired at last year’s AWS spectrum auction gives them adequate wireless assets. Or maybe their Pivot experience has left a bad wireless taste in their mouth. Regardless, you have to wonder how/why cable MSOs have decided to pass on perhaps the best broadband wireless opportunity available to date.

Apparently, some heavyweight cable MSOs are not convinced that a wireless play is necessary to compete. Glenn Britt, CEO of Time Warner Cable was quoted at a recent UBS Securities Media & Entertainment conference as saying, “I don’t think the quad play is a big deal.” It remains to be seen whether Britt’s prediction is true. But I wonder whether he is missing the point. While it’s true that some customers may not place a ton of value on receiving mobile wireless, broadband, voice, and video from a single provider (at least not yet), the real point here is “broadband beyond the home.” As the technology matures, customers will see huge value in taking a true broadband experience with them when they leave the home. Broadband everywhere will soon be just as important as voice everywhere is today. The only way that’s accomplished is through a robust broadband wireless infrastructure. Service providers who are able to provide a broadband experience everywhere will have competitive advantage. All things being equal, it’s probably a safe bet to assume that a customer who is weighing options between two service providers may lean towards the one that can provide a broadband everywhere experience. I think Cox understands that, just as they understood the importance of offering voice service long before it was “en vogue” by cable companies.

There are reports surfacing that the consortium of large MSOs that make up Pivot Wireless have begun strategizing their next move. That move probably does not involve Sprint, which recently announced they were halting Pivot deployments. This has to be considered a real blow to the likes of Comcast, Time Warner, Cox, and Advance/Newhouse, the Pivot consortium members. The AP is reporting that the consortium has assembled a group of wireless business strategists to map out their wireless future, and they may decide to go it alone.

This has to be considered a serious competitive fumble for cable. The Pivot consortium realized long ago that a wireless component is necessary to effectively battle their telco competitors. Pivot, if not the answer, was at least seen as stemming the tide until such time that a longer term solution was unveiled. Sprint was seen as a good partner – Sprint already provides the lion’s share of VoIP expertise for cable landline telephony. No one could have predicted the troubles Sprint now faces and their obvious distractions are impacting both the Pivot and Xohm projects. Every day that the cable industry misses in getting their wireless act together is a day that the telecom industry grows their wireless lead. Cable is not without options. They are sitting on a boat load of spectrum themselves, acquired in the last AWS spectrum auction. The upcoming 700 Mhz auction also offers a window of opportunity. Or they may decide to just go ahead and buy Sprint. Neither of those options can be done quickly and therefore continues to put the cable industry at a disadvantage. Look for the telecom industry to continue to seize on their wireless advantage.

Both Cox and Comcast made major announcements this week outlining new products targeting the small business sector. Cable companies see the lucrative small business market, estimated to be worth somewhere in the neighborhood of $130 - $150 billion (including voice, video, and data services), as their next big growth frontier. Residential triple play is a nice business as well, but large cable companies have anxious stakeholder and shareholder expectations to meet, that residential triple play may not meet alone. Competition for residential triple play is accelerating as well, and its impact is beginning to affect the stock price of publicly traded cable MSO's. Comcast recently hit a 52 week low on their stock price, due in large part to concerns that Verizon and AT&T are beginning to erode Comcast's growth. The small business sector is the next frontier for which we will see pitched battles between cable and telecom. Telecom carriers are not about to concede this lucrative business and will compete aggressively.

Cox's latest salvo is branded Cox Business Voice Manager. It offers a "telephony platform that integrates the desktop phone, PC and wireless devices." The platform appears to offer a rich suite of features including elements of fixed mobile convergence and unified messaging. The platform is built on Cox's IP enabled telephony network. In Comcast's case, they have decided to partner with Microsoft to deliver a hosted version of Microsoft's Communication Server platform. The service provides corporate-class e-mail, calendaring and document sharing, and 24/7 tech support. Comcast will make the service available free of charge to their business broadband accounts. Both of these announcements demonstrate that cable views the small business market with great anticipation. These moves are but a few of many to come, and they will challenge the incumbent telcos who currently own this space to respond.