IPhone network congestion opens market for Time Warner Cable

Time Warner Cable Inc., the biggest pay-television provider in New York City, is pitching phone companies including AT&T and Verizon Wireless on a service that uses its underground cables to carry mobile calls and Web downloads — easing the congestion spurred by data-hungry users of smartphones like the iPhone.

The service, known in the industry as wireless backhaul, has become Time Warner Cable's fastest-growing business after revenue tripled last year, said Craig Collins, senior vice president of business services. Across the cable industry, sales from wireless carriers may reach about US$3.6 billion in 2012, according to researcher GeoResults Inc. “Backhaul is a growth play that we are pursuing aggressively,” Collins said. “These mobile players want to get the bandwidth they need at a cost-effective price and our structure allows them to get that pretty seamlessly.”

U.S. smartphone use has grown almost 700 percent in four years, according to the U.S. Federal Communications Commission. Mobile-data volume is more than doubling annually as people use devices like the iPhone, BlackBerry and Google Inc.'s new Nexus One to send photos, watch videos and surf the Web. When networks jam, consumers face dropped calls and may find they can't access Web pages or TV, analysts said. “Backhaul is the first line of defense in addressing the capacity pressures on wireless networks,” said Craig Moffett, a Sanford C. Bernstein & Co. analyst in New York who has followed the telecommunications industry for more than two decades.

Apple's iPhone eats twice the capacity of other smartphones, straining AT&T's network, according to Bernstein. Network clogs are particularly heavy in major cities and AT&T wireless chief Ralph de la Vega mentioned in December that New York and San Francisco are particular trouble spots.

Time Warner Cable has backhaul lines in place to serve New York, and Comcast is the major cable company in the Bay Area. Philadelphia-based Comcast, the largest U.S. cable operator, expects backhaul to become a US$1 billion business over time, according to a Feb. 3 conference call.

Charlie Douglas, a Comcast spokesman, declined to comment. AT&T spokesman Michael Coe declined to comment on its backhaul providers. Comcast has risen 3.4 percent in Nasdaq Stock Market trading in 2010. Time Warner Cable has gained 17 percent on the New York Stock Exchange.

While Time Warner Cable declined to specify if AT&T, the lone U.S. carrier for the iPhone, is a customer, the New York- based cable company says it wants to sign carriers large and small. Chief Executive Officer Glenn Britt alluded to AT&T's extra iPhone traffic in a December conference call.

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