Cable Systems Plan
Advanced Cellular Service

Cable-TV companies are preparing to launch cellular-phone service with features they hope will top those offered by traditional wireless carriers -- a move that could further roil the telecommunications industry.

A consortium of the country's largest cable operators -- including Comcast Corp., Time Warner Inc.'s cable division and Cox Communications Inc. -- announced it will sell cellphone service that runs over the wireless network of Sprint Nextel Corp.

But the alliance is likely to go beyond the kinds of resale agreements that Sprint has worked out with companies including ESPN and Virgin Mobile, which use Sprint's network to deliver cellphone service under their brands, people familiar with the situation say. Sprint and the cable companies are discussing the development of cutting-edge features combining cellphone service with the television, land-line phone and high-speed Internet services the cable giants already offer.

For example, they have discussed developing a handset that works as a cellphone outside the home but offers nearly the sound quality of a wired phone inside by linking wirelessly to a high-speed Internet connection. That would mean customers would need only one phone number and wouldn't suffer from weak cellphone signals while in their houses, a common problem.

The cable venture also has discussed developing features that would allow customers to stream or download TV and Internet content into their phones wirelessly and to use the phones to program their digital-video recorders to tape certain shows, according to people familiar with the matter.

The alliance opens yet another front in the expanding contest between cable and phone companies, which are vying to offer consumers the most attractive package of phone, TV and high-speed Internet service. Until recently, phone companies weren't able to offer their own TV service and cable companies didn't have a cellphone component. But phone companies have begun to offer TV and, now, cable is moving into wireless.

"If the cable bundle offers nothing more than a discount [on cellphone service] that doesn't amount to much," says Craig Moffett, a cable analyst with investment firm Sanford C. Bernstein & Co. "But if the bundle can be something more than a standalone product, they potentially might be on to something."

Details of the pricing and exact features of the new service couldn't be learned. The service, which isn't expected to be launched until next year, will be marketed by the cable companies and carry the brand of both Sprint and the cable operators, according to people familiar with the offering.

Analysts caution that many of the new wireless features being considered may face insufficient demand or have limited profitability. Cable and phone companies are developing some gee-whiz applications just to ensure that they don't get leapfrogged by the competition. "At this stage everyone is trying to keep their fingers in all the pies," Mr. Moffett says. "It's not clear what services have a future and which ones don't."

Some of the cable companies will likely roll out some form of cellphone service first and then add new features as they become available. Time Warner Cable already has started to test Sprint's cellphone service in Kansas City.

Cable companies are moving into the wireless business at a time of rapid change in wireless technology. Some handsets today have as much processing capability as home computers sold in 2000. Network speeds also have greatly increased. Five years ago, wireless companies offered Internet access on cellphones for emailing and web browsing but the speed of the connection was so slow that demand was limited. Today major wireless companies provide service at speeds comparable to slower broadband connections, making gaming, sending photos, downloading music and other applications more attractive.

Cable company executives also are intrigued by the ubiquity and mobility of cellphones. Currently, all the services cable sells are anchored to fixed home devices like phones, TVs and computers. By offering wireless service, operators would be able to maintain their connection to their customers even when they're away from home. "Other than your keys and your wallet, what do you make sure you have when you walk out the door?" notes Josh Bernoff, an analyst at Forrester Research in Cambridge, Mass.

Executives at established wireless companies say they doubt cable operators will be able to offer better wireless services. In January, for example, Verizon Wireless launched Vcast, a service that costs $15 a month extra and delivers video-on-demand, games, news, sports, music and other features to cellphones. Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, also is developing a device that doubles as a cellphone and a land-line phone, says spokesman Jim Gerace. "These aren't new breakthrough ideas that the cable guys are thinking about," he says. "If anything, we have a leg up on them and they don't have a product yet."

At the same time, some cable companies have begun to explore wireless Internet service. Time Warner Cable, for example, provides wireless Wi-Fi Internet access in Houston's Minute Maid Park. Baseball fans who buy high-speed Internet service from Time Warner can bring their laptops to the stadium and hook up at no extra charge.

Comcast, meantime, plans to test wireless broadband technology provided by BelAir Networks, of Kanata, Ontario, with an eye partly toward using it to provide mobile high-speed Internet service to hotels. Last week, Comcast's venture-capital arm, Comcast Interactive Capital, made an investment in BelAir as part of its latest funding round. The amount was not disclosed.

Write to Peter Grant at peter.grant@wsj.com and Sara Silver at sara.silver@wsj.com