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New York: Top US cable companies could be facing big risks if they invest in a WiMax wireless venture as they will be putting money during tough economic times in an unproven technology with a long list of partners to satisfy.
Comcast and Time Warner Cable are in talks to invest $1.5 billion in the venture with Sprint Nextel and Clearwire that could also involve Intel and Google among others, sources familiar with the matter said.
Their goal is simple: cable wants to add wireless to their triple-play package of video, home phone and internet services for consumers, seeking to better compete against telecom rivals like AT&T and Verizon Communications, which also offer triple-play services and have wireless units.
But analysts, who have already watched an earlier cable joint venture with Sprint flounder, question the efficiency of another project with multiple partners with differing agendas.
The venture could also include smaller cable provider Bright House Networks.
Adamant
"Investors in Comcast and Time Warner Cable have become increasingly adamant about the immediate return of free cash flow and the attendant minimisation of capital spending," Craig Moffett, analyst at Bernstein Research, said in a client note.
"And this investment on a technology surrounded by very significant questions marks is not insignificant," he said, referring to worries that WiMax is an unproven technology.
According to the sources, Comcast is mulling a $1 billion investment in WiMax and Time Warner Cable is considering putting in about $500 million in the venture, which could attract funding of as much as $3 billion.
"I think that there are significant risks and high hurdles to clear to make a WiMax joint venture entailing a half a dozen or so entities successful," Stanford Group analyst Michael Nelson said.
Sprint and its cable partners already had difficulties with Pivot, their $200 million venture set up in November 2005. Sprint, which is grappling with steep customer losses, said last year the venture was too complicated and stopped promoting it in its stores and limited its market scope.
Consumers can still buy Sprint's wireless service through their cable operator in 33 US markets.
Nelson said the venture failed because "cable had virtually no control over the Pivot service and user experience," though he noted that the potential WiMax plan could give them more say as Sprint and Clearwire were more dependent on cable funding.
Sprint said late last year it would review its WiMax plans after sharp criticism of its target to spend $5 billion on WiMax by 2010.
"We remain sceptical of Sprint's ability to execute, as well as how much Comcast should be relying on third parties for what appears to be an increasingly important component of their long-term business strategy," said Richard Greenfield analyst at Pali Research.
AT&T and Verizon have started to win cable TV customers with new advanced digital TV services to add to their existing strength in home phones, mobile phones and wired and wireless internet access - the so-called quadruple play.
Cable providers could undercut existing wireless broadband charges with a WiMax service, but analysts do not see them as an immediate threat to incumbent phone providers.
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