Cablevision's New Wireless Bid: Wi-Fi Hotspots

The New York area's biggest cable service provider is strategically deploying lots of local wireless access to fend off the telecom carriers

By Olga Kharif

Rich Tehrani buys wireless calling from AT&T, but lately he's been surfing the mobile Web thanks to another provider—his cable company. In parts of Connecticut, where he lives, Tehrani logs onto the Internet by way of Wi-Fi hotspots managed by Cablevision Systems (CVC). "I was at a diner one weekend and it popped up," says Tehrani, who runs Technology Marketing, a publishing and trade show company. "I am pretty much hooked on it."

The same may be said for a growing number of customers of Cablevision, the largest cable provider in the New York metropolitan area. Usage of Optimum Wi-Fi—offered free to Cablevision's 2.4 million in-home Internet-access subscribers—has risen 50% a month since autumn 2008. In early April, Cablevision reported that consumers have used its Wi-Fi hotspots 1 million times in the past year.

Wi-Fi provides high-speed Internet access over a finite area, such as a home or hotel lobby. A group of strategically located hotspots can provide ubiquitous access over a larger region. Cablevision is using the technology in such commercial areas as malls and train stations so it can include mobile-Web surfing in a lineup that already includes TV, calling, and high-speed Internet access. It's a way to combat the encroachment of telecom carriers that in recent years have begun offering TV alongside their other services. Wi-Fi is by no means a substitute for the costly, coast-to-coast wireless networks maintained by AT&T (T) and such other wireless carriers as Verizon Wireless and Sprint Nextel (S). And the viability of Wi-Fi over large areas has been called into question of late, as cities across the country have shelved or abandoned plans to use the technology to blanket neighborhoods with free or cheap Internet access.

Wireless Partnerships Have Flopped

Depending on Cablevision's experience, however, Wi-Fi could present itself as one of the most effective and low-cost ways for cable companies to confront the telecom threat, at least in the near term. Other cable companies, including Comcast (CMCSA) and Time Warner Cable (TWC) may even be forced to rethink their own wireless strategies. Consultant Dell'Oro Group expects the global market for Wi-Fi access points installed by service providers to increase to 150,000 units in 2013, from 58,000 units last year. The market's pace of annual growth is expected to increase to 21% in the coming years, from the high single digits in 2008, in part because of cable company interest.

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