Nov. 19 (Bloomberg) -- Cox Communications Inc. is becoming the first U.S. cable company to offer a mobile-phone service as it looks to challenge incumbents AT&T Inc. and Verizon Wireless by bundling wireless handsets with Web and TV.
Cox is starting its consumer mobile service in three markets today -- Orange County, California; Omaha, Nebraska; and Hampton Roads, Virginia, Stephen Bye, Cox’s vice president of wireless, said in an interview.
The third-biggest U.S. cable operator is taking on phone carriers AT&T and Verizon, which are expanding onto cable companies’ turf with TV services. Cox will market its mobile plans as “Unbelievably Fair,” giving money back for unused minutes and tying in free Cox TV, Internet, or landline upgrades. Cox said in May about 24 percent of its customers said they are willing to switch to its mobile service.
“We recognize that we have some very formidable competitors in this space,” Bye said. “Customers will be attracted to our service because they’ll get more value out of our bundled offering than they will with alternatives providers.”
Cox is looking to win over consumers by addressing some common complaints about the incumbent providers’ service, such as overage charges and paying for unused minutes, Bye said. The Atlanta-based company will offer alerts when a customer is approaching the maximum number of minutes, and give 5 cents back for every unused minute, up to savings of $20 a month.
Privately-held Cox is taking a different wireless approach than larger peers Comcast Corp. and Time Warner Cable Inc., which are using Clearwire Corp.’s so-called 4G network to sell data-only wireless service in select markets. Cox will use Sprint Nextel Corp.’s 3G network for its wireless service, and is also building its own network, Bye said.
Cox is the first U.S. cable operator to test if there is consumer demand for a so-called quadruple play -- a package of phone, TV, Web, and wireless service -- and if it makes economic sense for cable operators to offer mobile service, said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York.
“Cox has a steep mountain to climb in that they are late to the party in a crowded industry,” Moffett said. “What made the bundle of voice, video and data work in the cable business was their cost advantage -- they could do all three services on one network with one cost. Cox doesn’t have that advantage in the wireless business.”
Cox declined to comment on the cost of building its mobile network and what it pays Sprint to use its network. Bye also declined to comment on Cox’s wireless sales expectations for next year. The company doesn’t plan to sell its mobile service nationally, only in the areas where it operates, Bye said.
Small mobile carriers like MetroPCS Communications Inc. and Leap Wireless International Inc. have achieved market share of 8 percent to 13 percent in the areas where they’ve been offering service for at least five years, according to Romeo Reyes, an analyst at Jefferies & Co. in Stamford, Connecticut.
Cox will sell monthly mobile-service contracts starting at $39.99. Customers will receive free mobile-to-mobile calling between Cox cellphones and landline phones.
Google Inc.’s Android operating system will be available on the smartphones that Cox offers, including the HTC Desire, Motorola Milestone and LG Axis. Cox will expand and refine its handset selection based on customer demand, Bye said.
The devices will be available to purchase at newly opened Cox Solution Stores in all three regions where the service is available.
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