Cable companies are at a disadvantage. Their telecom rivals can offer wireless service along with home broadband and TV. This "bundling" helps marketing to customers and keeping them once they sign up.
The big companies in the cable business are aiming to change that. Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) are working on a plan to fund a national WiMax service to be run by startup Clearwire (NASDAQ: CLWR) and Sprint (NYSE: S).
According to The Wall Street Journal, "Under the plan the parties are reviewing, Comcast -- the largest cable operator with 24 million subscribers -- would put as much as $1 billion into the venture, with No. 2 operator Time Warner Cable adding $500 million." Intel (NASDAQ: INTC) and Motorola (NYSE: MOT) have already invested in Clearwire.
The deal may be cable's only way out of a bind that has telecom companies putting fiber in homes to offer a direct competition to cable TV. The fiber also provides for fast broadband.
If the deal goes through, it will usher in an entirely new generation of competition where the consumer may have several more choices for getting wireless voice and data services. With more players, there is usually active price competition. This will be good for customers, but could cut telecom company wireless margins.
Douglas A. McIntyre is an editor at 247wallst..com.
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