Unclear Picture on Tier-2 Cable Operators With Wireless

While Comcast and Charter Communications move toward launching mobile offerings, wireless and cable experts and observers are mixed on whether other operators will follow suit, with some seeing the possibility of smaller operators collectively creating a mobile network. Meanwhile, those major operators likely will feel pressure quickly to divert as much traffic as possible from a wireless carrier's mobile virtual network operator (MVNO), which could mean either big cable ISP investments in their own back ends or acquisitions of wireless companies themselves, we were told.

Mobile offerings by smaller cable ISPs could be years off, if they ever materialize. While small and mid-sized cable operators are discussing wireless options and often follow the lead of larger companies, American Cable Association President Matt Polka said, "I don't know that our members see it as essential and vital [competitively]." Polka said smaller cable operators "already live in an environment that is already pretty competitive; some will say, 'Let's stick to our bread and butter.' I don't think there is a sense that unless they have a wireless play that somehow they will not be successful." Technology analyst/consultant Jeff Kagan told us small cable operators are likely to be resellers rather than operating their own networks.

Smaller cable operators might lack the footprint that would make sense for a mobile offering, Mobile Experts analyst Kyung Mun said. The fixed costs -- including operational and marketing costs -- involved also could be a deterrent, he said. "The marketing is a huge thing -- wireless is a very competitive market." However, a large number of smaller players could create a consortium to negotiate for MVNO terms with mobile operators, he said.

CableLabs' Kyrio subsidiary moving into wireless technologies also seems to signal the possibility of other cable operators getting involved in mobile offerings, potentially creating a contiguous wireless footprint by stitching together their Wi-Fi coverage areas, Ruckus Wireless Senior Vice President Steve Martin said. Google’s Project-Fi, which ties together Wi-Fi networks with LTE from Sprint and T-Mobile, is a good example of how heterogeneous networks can be stitched together, Martin said. CableLabs didn't comment. Kyrio recently joined the CBRS Alliance (see 1609260056).

The cable industry has a big uphill climb to make wireless a success, Kagan said, pointing to the Comcast/Time Warner Cable/Bright House Networks joint venture SpectrumCo's sale of its wireless licenses to Verizon in 2012 (see 1209040038). "They didn't realize the marketing to the wireless customer is a completely different animal than marketing to a cable TV customer," Kagan said. "They thought they could just roll out a wireless option and customers would love it. They were wrong." He also said Comcast or Charter could be looking at buying Sprint or T-Mobile to avoid being largely a Verizon reseller.

Comcast has said it plans to roll out a wireless offering in mid-2017 as part of a multiproduct bundle (see 1610260048), with Charter expecting to follow by early 2018 (see 1611030041). In an earnings call last month, Comcast Cable CEO Neil Smit pointed to cable ISP examples of Rogers, Telenet and Virgin all having cut customer churn with mobile offerings and said that its 15 million Wi-Fi hot spots and MVNO would be the backbone of its service. "We are going to have to include handset procurement as part of it, but we built that in the model," Smit said. Any rollout likely won't be footprint wide but start as a trial in one or a limited number of markets, Mun said.

Motivating the push into mobile service is the growing competition from AT&T and Verizon and their increased investment in content, Ruckus' Martin told us. “It’s not good enough just to be the cable guy or the wireless guy.”

Possible models for cable-offered mobile service run the gamut from the cable operator being a reseller of MVNOs services to, at the other extreme, using its own Wi-Fi network and core infrastructure as a backend system, Mun said. Experts told us there would be big motivation by cable operators to divert traffic as quickly as possible to their Wi-Fi networks to reduce the variable costs paid to mobile operators. "If I was sitting in Comcast's shoes, you want to divert most consumer traffic to my home network," Mun said, adding that major cable operators are doing calculations now to determine where they need to build out their networks.

“I don’t expect us to be market leaders in the mobile space," Mediacom Senior Vice President-Government and Public Relations Tom Larsen emailed us. "We will watch how things play out for the larger operators. We are just now ramping up our community wi-fi efforts, and the companies with mobile strategies are much farther along with their wi-fi rollouts than Mediacom.”

Along with the cost savings that come from decreasing reliance on the Verizon MVNO, building out their own back ends could end up making the MVNO relationship two-way for cable operators since they could potentially offer some capacity to wireless operators, Martin said. Cable companies might be interested in buying spectrum in higher-density areas as a route to controlling quality and costs in the MVNO relationship, Martin said. There also is interest in spectrum sharing in the 3.5 GHz band as “another leg in the stool,” he said.