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Will Big MSOs Disrupt the Wireless Market?

What that would mean for Wi-Fi First

By Dennis Jones

A certain MSO (multi-systems operator) has recently made huge waves, announcing plans to enter the wireless market by launching its own MVNO service sometime in 2017. Well, we can dispense with the mystery. Comcast reached a deal with Verizon way back in 2012. And this year, Comcast finally exercised the MVNO option of the agreement, meaning that it will be reselling Verizon’s mobile service to its existing customer base of 28 million subscribers.

First off, what will the service look like to subscribers? So far details are scarce. But it seems like the service will be a lot like Google’s Project Fi, meaning a mix of 4G LTE and Wi-Fi. The 4G LTE will come from Verizon. But Comcast is also planning to participate in the FCC’s 600 MHz incentive auction.  Comcast already has an extensive Wi-Fi footprint, branded XFINITY, of around 15 million hotspots in the U.S. Presumably, Comcast will rely heavily on Wi-Fi for data and phone calls when available to reduce network costs.

The bigger question, of course, is why. Why is the cable giant jumping into the wireless market? As is, the U.S. cellular market is already oversaturated; it’s been years since the number of cellular lines first exceeded the population. And popular enthusiasm for MVNOs tends to be tempered by the fact that they can only support certain Android models. Although that leaves MVNOs a pretty big addressable market, it does cut them off from iOS and Windows Phone customers. Comcast hasn’t yet publicized the device types its new MVNO will support.

But there are plenty of incentives for Comcast to jump into the wireless market. For one, the new MVNO could lead to impressive margins for Comcast, according to analysts. Comcast won’t be opening a nationwide wireless operation from scratch. They’ll be piggy backing on Verizon’s existing infrastructure and augmenting that coverage with their own Wi-Fi footprint. Building out that footprint has also been capital-lite. XFINITY hotspots are mostly homespots – Wi-Fi hotspots that broadcast home and public SSIDs. If the future of wireless is capital efficiency, and many believe it to be, then MSOs like Comcast already have a huge advantage (over smaller carriers).

Comcast also comes to the wireless market, after having expressed interest in the space for decades, even though the reason it’s launching its mobile division now might ironically have more to do with Comcast’s cable and internet businesses than the fundamentals in the wireless market. For instance, Comcast CFO, Mike Cavanagh, has gone on the record, saying that Comcast’s MVNO strategy is an attempt “to work on seeing if there’s a commercial product that can serve the purpose of satisfying a churn reducing offering for [its] existing businesses.”

Although cable cutting hasn’t driven a stake through the cable industry, television viewership is down, especially among highly coveted (for advertisers,) younger cohorts. Incumbents can’t be thrilled by the explosion of Netflix and other streaming services, even though many households subscribe to Netflix as a supplement to (not in place of) traditional cable packages.

With this latest MVNO move, Comcast is essentially creating a quadruple play bundle to lock in existing customers. Remember: since they won’t be building out infrastructure, they can offer their mobile services at lower prices. Reading the tea leaves, and public comment, it doesn’t seem like Comcast is looking for a huge revenue windfall but a smart way to improve the stickiness of its offer.