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Rupert Murdoch, News Corp’s chairman and chief executive, let slip this week that the group’s satellite TV arm was close to deciding on a strategy to enter the wireless broadband market.

Mr Murdoch said DirecTV could spend $1bn to develop a high-speed data product so it could better compete with the cable and telephone companies and offer a full bundle of video, voice and data services. While the News Corp chairman provided no further details, the options for entering the wireless broadband market appear somewhat limited.

One option identified by telecommunications analysts such as Dominic Endicott of the Adventis management and consultancy group, would be to “cut a deal” with one of the established 3G wireless operators in the US and launch a mobile virtual network operator. Such a move, using spectrum owned and operated by one of the big carriers like Sprint Nextel or Verizon Wireless, would enable DirectTV to offer a full range of wireless voice and data services to its subscriber base. Mr Endicott estimates that it costs about $500m to launch an MVNO – well within the parameters set by Mr Murdoch.

It would also enable DirectTV to respond directly to the agreement struck late last year between a consortium of the biggest cable network operators and Sprint Nextel, the third-largest US mobile carrier, to develop new services.

But one alternative, which would enable DirecTV to provide a faster and more robust broadband service – at least to homes and businesses in major urban areas – would be to deploy a wireless broadband service based on the emerging WiMax technology standard.

WiMax, developed and promoted by a consortium of technology companies led by Intel and Motorola, and its proponents believe it will provide a low-cost wireless alternative to cable and DSL for last-mile broadband access.

In technology terms, WiMax represents a natural evolution of the 802.11 or Wi-Fi wireless networking standard now widely deployed in homes and public hotspots. But WiMax offers much greater range and capacity and is relatively cheap to deploy.

Analysts at InStat/MDR, the technology consultancy, estimate that it costs between $300 and $500 per home to provide a cable or DSL connection to a residential neighbourhood. In contrast, the cost to provide a WiMax broadband connection could be as low as $50 or $80 per home, making it feasible for new competitors to enter the broadband market.

In theory, WiMax provides up to 50km of linear service area range and allows connectivity between users without a direct line of sight. In practice, however, tests suggest “real world” ranges between 5km and 8km.

Equally importantly, the technology will enable operators to offer broadband-style connectivity to about 1,000 homes simultaneously at
1Mbps. Such a service would allow DirectTV, or others, to offer its subscribers a real alternative to existing cable and telecoms broadband services.

“That would enable DirectTV to have full control,” says Mr Endicott, “but it would take a bigger investment.” As a result, some analysts believe DirectTV might enter into an agreement with an existing WiMax service provider like Craig McCaw’s Clearwire.

Clearwire has launched WiMax services in a handful of US cities and signed a partnership agreement with three Canadian telecoms groups to launch a WiMax network across Canada.

Regardless of the final decision, offering an alternative to the bundle of services provided by cable and telecoms players will be difficult for all satellite players, which do not have the two-way capacity of cable and other wire connections.

In addition, Mr Murdoch indicated DirecTV was looking at providing connection speeds of 5 megabites per second, saying faster speeds were not needed. “We will withhold judgment pending further details on structure and technology, but spending $1bn to reach only 5 Mbps to overbuild wired providers that have all of the customers using 10-50 Mbps speeds seems questionable to us,” says Doug Mitchelson, analyst at Deutsche Bank.

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