Converged services between wireless and wireline networks are finally emerging in the U.S. as cable operators begin to see results of their joint venture with Sprint and as rival AT&T takes control of Cingular. Recently, the first services-unified voicemail boxes and wired/wireline calling plans-have popped up, as well as the first links between the mobile phone and the cable and satellite TV services that for so long have been isolated to the set-top box.

But considering the hype around fixed/mobile convergence, these first services are relatively modest. After two years in the Sprint joint venture cocoon, the cable operators' initial applications are far more moth-like than butterfly. Comcast has done little more than offer a single phone bill in its two trial markets. Time Warner Cable and Cox Communications have launched single voice mailbox services between their cable voice-over-IP (VoIP) phones and the Sprint handset, unlimited calling between home and cell phone, remote e-mail access and the ability to wirelessly access cable programming guides. The one highly touted application developed by the joint venture-the ability to program a digital video recorder (DVR) from the handset-was delayed for later this year.

Despite the slow start, though, industry sources are expecting 2007 to be full of convergence applications. Sprint has said it will launch 40 more markets with its cable partners and add to its menu of shared network applications. AT&T now has 100% control of Cingular and is not only rapidly folding the Cingular brand into AT&T but also tying the wireless network much more closely to its wireline empire, as part of its three-screens strategy. And even though Verizon may still have its overseas partner Vodafone to contend with, it signaled its intent to dabble in convergence at the Consumer Electronics Show in January when it tied its new Vcast TV service to its FiOS fiber-to-the-home initiative.

“How do we integrate this wireless?” asked Tyler Wallis, assistant vice president for wireless convergence for AT&T. “That's what we're thinking about across the board.”

In fact, much of what drives convergence applications in 2007 may come from the increasingly heated competition between the cable companies and AT&T. Just as AT&T is increasing pressure on the cable providers with its U-verse service and its Homezone set-top box service — which integrates broadband streaming content, PC-stored multimedia and Dish Network TV into a unified connected-home offering — Advance-Newhouse, Comcast, Cox and Time Warner are hoping to bring pressure on AT&T with their new wireless services. So far, AT&T seems to be maintaining the upper hand. Shortly after the cable companies launched quadruple play in their first markets, AT&T launched remote DVR programming on Homezone, the one application the cable companies failed to deliver.

Don't count the cable operators out just yet, said Bruce McGregor, senior analyst of digital home services for Current Analysis. They are still in the experimental phase, each of them having launched a few test markets. While they are feeling the pressure from AT&T and the other incumbent telcos, the converged services available through either the multiple systems operators or the former Bells are not market-breaking applications by any means, he said.

“The wow factor is still not there yet,” McGregor said. “These features are nice to have, but they're not need-to-have. What's important is they're starting to create a bridge between services in the home and on the phone.”

In fact, the cable companies may not need to be aggressive about converged services until something commercially appealing is available, said Seamus McAteer, chief product architect and a senior analyst for M:Metrics.

“Cable operators deal in mass markets,” McAteer said. “Look at the people actually dealing with mobile data. It's a relatively small number.”

McAteer said cable may be holding out for interactive mobile TV services, an application which can extend its dominance in the home video market onto the handset. Even here, the Bells may seem to have the advantage. Verizon Wireless has launched Qualcomm's MediaFLO service, and AT&T plans to by the end of 2007. But Sprint has said it won't pursue any multicast TV offering. McAteer said the cable operators may be holding out for video-on-demand or place-shifting and time-shifting services over Sprint's 4G WiMAX network, which would allow it to extend its entire menu of digital TV to the mobile phone rather than just a handful of channels. Such capabilities, however, wouldn't be available until 2009 at the earliest, he said.

“When we're talking about application integration for the cable operators, we're talking about video,” McAteer said. “Between now and then, it's just a way to get into the business of selling wireless.”

If the cable operators are saving their big guns for future network capabilities, then AT&T is likely to take plenty of pot shots at them while waiting. Wallis said AT&T plans to roll out numerous integrated services on the broadband, TV and wireless fronts to help it eat away at cable's dominance in the home entertainment arena. He expects the cable operators to try to keep pace, but in this respect — and though it may sound oxymoronic — he believes AT&T will be nimbler.

AT&T may be a massive company with several networks to integrate, but it is also now a single company. The cable/Sprint joint venture is a venture of five companies all trying to optimize the cable platform for their own benefit, Wallis said. There was a reason why AT&T was able to launch its Unity unlimited wireless/wireline calling plan and other converged services right after its acquisition of BellSouth, Wallis said — Cingular was no longer serving two masters.

“I think it's going to be a tough slog for a five-party consortium to keep up,” Wallis said.

MARKETS WHERE THE SPRINT/CABLE JOINT VENTURE HAS LAUNCHED

Comcast:
Portland, Ore. Boston

Time Warner Cable:
Raleigh, N.C. Cincinnati and Dayton, Ohio Austin, Texas

Cox Communications:
Phoenix San Diego