Cox Communications Inc. will have the tough job of trying to differentiate itself from competitors as the cable operator prepares to start a wireless service this year in an already crowded U.S. market.
The Atlanta-based operator is building its own cellular network, a strategy that contrasts sharply with that of its peers. Comcast Corp. and Time Warner Cable Inc. are among a group backing wireless start-up Clearwire Corp., but are still ambivalent about how aggressively to push into cellphone service themselves.
"Wireless is a conundrum for the cable industry in how we take that first step," Comcast Chief Executive Brian Roberts said at an industry event last week.
Cox decided to strike out on its own after a failed attempt to offer cellphone service along with Comcast, Time Warner and other cable providers through a partnership with wireless carrier Sprint Nextel Corp. That joint venture, called Pivot, dissolved last year when the companies couldn't agree on pricing and marketing strategy, according to people familiar with the matter.
Stephen Bye, vice president of wireless at Cox, declined to say how much Cox has spent to build its wireless service, but said the closely held company won't slow down its wireless plans during the recession.
Romeo Reyes, a telecom analyst at Jefferies & Co., estimates Cox would need to invest about $300 million before breaking even on an operating basis. The company declined to comment on those projections.
Mr. Bye said providing cellphone service will allow Cox to offer a bundle of TV, broadband and wireless service. Beyond that, Mr. Bye said he hopes the company can use its TV experience to exploit the nascent mobile video market. Only about 4.5% of U.S. cellphone users watch video on the small screen, generally in the form of two-minute streaming clips, according to comScore Inc. Mr. Bye said that market is poised to grow as smart phones get more advanced.
Skeptics said that may be wishful thinking. Mark Donovan, a mobile analyst at comScore, questioned whether mobile video will ever gain significant traction in the U.S. market. "Video alone isn't any kind of key differentiator" as Cox seeks to attract wireless subscribers, he said.
Mr. Bye said Cox is also considering a mobile-software store along the lines of Apple Inc.'s store for the iPhone and similar initiatives launched by Google Inc. and others. "We don't want to be at a comparative disadvantage with what's already out there," Mr. Bye said. Cox is working with a vendor, mPortal Inc., to develop the application store, according to a person familiar with the matter.
With six million subscribers, Cox is the third-largest cable operator in the U.S., offering service mainly in the South and Southwest. Cox plans to offer cellphone service as well as wireless broadband access for laptops in its home markets. It will use roaming deals with national wireless providers so users can get service elsewhere.
Cox declined to provide specific revenue or customer projections for its wireless business. Mr. Reyes, of Jefferies, said small cellphone companies like MetroPCS Communications Inc. and Leap Wireless International Ltd. have achieved market penetration of anywhere from 8% to 13% in the areas where they've been offering service for at least five years.
Mr. Bye said the company will offer monthly cellphone-service contracts and prepaid phones, to Cox TV customers and non-TV customers, but declined to discuss pricing. Cox's network will use its portion of the $2.4 billion in radio spectrum it purchased alongside other cable companies in 2006.
