Answering David Pogue's Cable Puzzler

Last week David Pogue, The New York Times technology reporter, was perplexed (in a good way) that his local cable company, Cablevision, had been setting up free WiFi hotspots during the last year in the tri-state area (NY,NJ, CT).   Pogue’s been delighted that Optimum WiFi has been showing up with greater frequency on his menu bar for whatever gadget he’s currently holding.  He’s not sure why CableVision is doing this.

(Glad to hear it , David.  I’m not getting the same WiFi love from Comcast, my “information service” provider, who seems more reserved in dispensing her wireless gifts.)

But wait there’s more. Pogue said that Comcast, Cablevision, and Time Warner have formed a partnership that will begin letting subscribers roam between WiFi networks for free.

Wow.

Pogue asked his loyal readers (count me as one) to explain why three competitors have joined together.  I think I have a partial answer.

Content provider or broker is what these cable providers want to morph into.

As I was scanning through Comcast’s 2009 annual report, I learned that this cable provider has a stake (51%) in a new company formed with General Electric. GE will provide its entertainment content from the NBC Universal subsidiary, Comast its programming network.

Besides the GE deal, Comcast has minority interests in FEARnet (33%) , iNDEMAND (54%), MGM(20%), PBS KIDS Sprout (40%), and few other investments in media companies.

Comcast is clearly more than just its cable plant. It is a content provider or in the words of the web site “About” statement :  “…one of the nation’s leading providers of entertainment, information and communication products and services to residential and commercial customers.”

The expense of hooking up WiFi access points to  existing cable build-out is trivial in comparison to getting additional revenue from movie downloads, software apps, games, and other services  from the cable ISP behind the hot-spot.  In financial-speak, the ROI numbers are favorable.

As for the free roaming agreement,  I’m on less firm ground.  There’s the we-need-to-band-together to battle AT&T and other carriers.   The other possibility is that all the players will make out as this new extended network offers more opportunities to download content and gain revenue. And without annoying inter-carrier compensation bottlenecks, which you have in the voice world, this is just plain easy to implement as a data business.

No mystery, just a smart business move.

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• Comcast, TWC and Cablevision make friendly, team up for NYC-wide WiFi (engadget.com)
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