Cable companies Comcast and Charter Communications earlier this week announced they have entered into a partnership to jointly offer wireless communications services; the two are not effectively competitors as their service territories do not overlap. Further, each has agreed not to make a material merger or acquisition in wireless without the other's consent for one year. The big question is: Why would they want to jump in to what is already the fiercely competitive knife fight that is the wireless business?
The mobile operators are currently locked in a price war that seems to be hitting the big players, Verizon and AT&T, the hardest. However, the cable companies have long been envious of the wireless business and the appeal of upping the triple play (TV, Internet, and phone) to a quadruple play. And going forward, the cable companies are concerned that "cord cutters" could reduce their triple plays to double plays.
Of course, Comcast is already in the wireless business by way of a mobile virtual network operator (MVNO) agreement with Verizon. Also, Comcast did drop $1.7 billion on 600-MHz spectrum in the recent FCC auction, and back in 2008, it was part of a consortium with Time Warner Cable and Bright House Networks that jointly invested $2.37 billion in the 700-MHz auction. In 2011, those companies sold the 700-MHz spectrum to Verizon for $3.6 billion in return for the rights to resell Verizon's network under their own brands. Comcast plans to begin offering service as soon as this month.
Of course, you're not building much of a wireless network with a mere $1.7 billion worth of spectrum. However, Comcast has some 15 million Wi-Fi hot spots, and according to New Street Research cited by The Wall Street Journal, when those are combined with Charter's Wi-Fi holdings, it could cover about 80% of the country. Comcast is also part of the Cable WiFi Alliance along with Cablevision, Time Warner Cable, Bright House Networks, and Cox Communications; Charter acquired Time Warner Cable and Bright House Networks in 2016, potentially giving Comcast and Charter access to even more hot spots nationwide.
However, as I noted in this No Jitter post last September, dealing with Comcast's entry into the wireless business, despite a spate of WiFi-first or WiFi-only mobile offerings from Google, Republic Wireless, Scratch Wireless, and Cablevision, customers have not been swayed by the idea. Further, the traditional mobile operators are making use of Wi-Fi offloading to reduce network congestion.
As WSJ reporter Miriam Gottfried wrote, she is thinking that this might be the lead up to some merger or acquisition play. The Obama administration turned down Comcast's request to acquire Time Warner before Charter snatched it up, but maybe the Trump administration might look more favorably on a Comcast-Charter hook up and this partnership is a way of testing the waters. With the defeat of AT&T's bid to acquire T-Mobile back in 2011 and Sprint's more recent failed attempt at buying the company, mergers among wireless carriers look all but impossible. However, maybe Comcast or a combined Comcast-Charter, given the acquisition stipulation I mentioned above, would take a crack at T-Mobile. I doubt Masayoshi Son, CEO of Sprint’s parent SoftBank, is letting them go so soon.
While this flurry of activity in the once stable and predictable mobile business might make your head spin, it's just one more piece of evidence that the wireless business is continuing to evolve before our eyes. Certainly, the addition of yet another competitor into the mix will put further downward pressure on prices, but in the end, there has got to be a bottom in here somewhere. In the meantime, Accenture has predicted that the U.S. wireless carriers will have to invest $275 billion over seven years for their 5G rollouts.
In any event, consumers should be happy to watch their wireless bills continue to drop while all of this ruckus works its way out.
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