Major Changes Coming to the Cable-Wireless Relationship

Cable’s third, but still nascent foray into the wireless business will undergo major change over the next couple of years, driven by M&A, the rollout of 5G, and new competition in broadband from fixed wireless. Three ‘events’ are cause to revisit cable’s prospects in mobile sector: the announcement, on May 20, that New T-Mobile would continue the MVNO relationship that Sprint has with Altice (if the Sprint deal goes through), plus extend ‘fair terms’ for 5G; rumors about Altice launching its MVNO service at significantly discounted prices; and the impending rollout of 5G, and, over time, fixed wireless services by Verizon and, potentially, New T-Mobile.

Question #1 is whether the cable MVNO effort has been successful to date. In a nutshell, ‘sorta’. Xfinity Mobile, which launched about two years ago, claims 1.4 million subscribers, which is about 5% of their base of broadband customers. Spectrum Mobile (Charter’s offering) launched nearly a year ago and has 340,000 subscribers, which is about 1.5% of its broadband base. Those are real numbers, but they aren’t moving the revenue needle at their parent companies, nor has  cable taken measurable share from wireless. Those signing up for cable MVNO services are trending toward the price-conscious, in that the majority of subs are choosing the ‘pay per GB’ plan.

So, the three largest cable companies are in wireless, but they’re not all in. None has invested in deploying their own infrastructure, nor have they acquired spectrum in recent auctions. I don’t think they’re in wireless because they see huge potential profits in that business (Verizon’s wholesale terms make that very tough). They’re in it because they need to keep a toe in, given larger industry dynamics, and because of some modest retention benefits to their broadband base.

But there are three major developments on the horizon that will force a change in cable’s wireless strategy. The first change depends on what happens with the T-Mobile-Sprint deal. If it goes through, as I still believe it will, decent terms will have to be extended to Altice, including 5G. This will be part of any concessions offered. So, Altice will be able to offer a price-competitive wireless service, bolstered by its growing network of Wi-Fi hotspots. Altice’s infrastructure will prove to be an even more critical asset to New T-Mobile, as they race to build out 5G services leveraging both the 600 MHz spectrum and Sprint’s 2.5 GHz network. New T-Mobile will be a major player in 5G, and has promised it would offer residential broadband service to 50% of homes at prices below today’s typical broadband.

Second, the 5G rollout that will occur steadily over the next couple of years will alter the equation for cable. It is not clear whether the Verizon MVNO contract with Comcast and Charter includes 5G. If, as we believe, it does not, their mobile offerings would start to be at a disadvantage, especially once a compelling array of 5G phones (such as a 2020 iPhone) becomes available and as 5G coverage hits some critical mass.

The third potential game-changer is fixed wireless. As Verizon rolls out fixed wireless to more cities beginning later this year, it will start competing more directly with cable companies in the broadband business. This dynamic does not auger well for the MVNO relationship, considering especially the fact that a major motivation for cable’s wireless initiative is to boost retention of its broadband customers. It gets sticky for New T-Mobile over time, as well. Yes, they must extend fair MVNO terms to Altice for the foreseeable future, yet their planed home broadband might be competing directly with Altice in a handful of markets.

The implications are that cable will be forced to revisit its wireless strategy in the not too distant future. If they want to get to the next level of growth, cable will have to reduce its dependency on a purely wholesale relationship for their mobile offering. Fortunately, some viable options are presenting themselves, and at just the right time. Rather than a choice of one option or another, it’s more of a ‘cocktail’, consisting of the following:

  • CBRS. This is the 3.5 GHz shared spectrum service that will be launching later this year. This could be a lower-cost, lower-risk way for cable to reduce its dependency on wholesale arrangements and complement its Wi-Fi offerings. MulteFire is another option on the menu, but is more of a wildcard.
  • Mid-Band Spectrum. If cable companies were to ever bid on spectrum, the 3.7-4.2 band that the FCC will likely auction is the best ‘fit’ for cable. It would also fit well with any planned CBRS initiatives
  • Wi-Fi and small cells. These worlds are converging (see my recent Wi-Fi roadmap piece). Wi-Fi 6 (802.11ax) improves Wi-Fi speed, range, and reduces interference. It also helps address the ‘Wi-Fi Purgatory’ issue, which in my view has been a major damper on the Cable Wi-Fi experience. One could also see cable companies complementing their Wi-Fi networks with strategic deployments of small cells, as Charter has indicated it might do.
  • DISH. As always, DISH remains a wildcard. If it ends up deploying some form of wholesale 4G/5G network, that could be a game changer as far as MVNO relationships are concerned. But as with most things in the cable/telco/mobile/internet landscape, it’s complicated, since cable remains DISH’s principal competitor on the pay TV side, which could certainly affect its appetite to host cable companies as wholesale customers.

The current state of affairs in mobile and broadband is in a sort of equilibrium that will not last beyond 2019, as cable dipping its toes further into cellular, and cellular starts to dip its toes into broadband (cable). Over time, we all realize that fixed and mobile networks will converge, and that the customer, circa 2022-2025, might well not have separate fixed and mobile subscriptions (they’ll be having to spend that extra money on their 20-odd streaming TV services).

But for wireless to be anything more than a rounding error in the cable companies’ business, they’ll have to make a more substantial physical investment than they’ve been willing to undertake to date.

Published by

Mark Lowenstein

Mark Lowenstein is Managing Director of Mobile Ecosystem, an advisory services firm focused on mobile and digital media. He founded and led the Yankee Group's global wireless practices and was also VP, Market Strategy at Verizon Wireless. You can follow him on Twitter at @marklowenstein and sign up for his free Lens on Wireless newsletter here.

1,093 thoughts on “Major Changes Coming to the Cable-Wireless Relationship”

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