The cable companies—Comcast, Charter Communications, Altice Mobile—continue to gain wireless subscribers, per their second-quarter results. Should wireless carriers be worried?
Cable’s interest in wireless is nothing new, but given the changes afoot in wireless—consolidation from the T-Mobile/Sprint merger, COVID-19 impacts, the recession, Dish Network’s entry, the evolution to 5G—it’s worth taking stock. That applies to both cable expanding in wireless and wireless challenging cable on its home turf.
Comcast added 126,000 Xfinity Mobile subscribers in the second quarter, now serving a total of 2.39 million wireless subscribers. Charter Communications, through Spectrum Mobile, added 325,000 subscribers in the quarter, for a total of 1.69 million wireless subscribers. Altice Mobile gained 34,000 customers, ending with 140,000 lines in service since its commercial launch in September.
The national carriers should be very concerned about this growth from the cable companies, according to Jeff Moore, principal of Wave7 Research. The cable companies have an enormous base of customers whom they’re already billing, and marketing to them is easy.
In addition, he notes that the cable companies are heavily emphasizing bring your own (BYO), with reps recently telling Wave7 that close to half of their new customers are bringing a device, while the other half are buying a phone. “We believe most of the switchers are good, credit-worthy customers,” he said.
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One major point of differentiation is mixing and matching limited and unlimited plans. Spectrum Mobile and Xfinity Mobile have touted this heavily, as exemplified in this ad, which is not currently running but explains what they’re pitching. Verizon also has heavily touted mixing and matching, but without the possibility of including plans with limited data, according to Moore.
Interestingly, Spectrum Mobile has aired TV ads saying: “We’re Growing Faster,” claiming that it’s growing faster than Verizon, AT&T and T-Mobile, he said. It also claims to offer the “fastest overall speeds,” the “most reliable service,” and savings up to 40%. The first two claims are interesting since Charter uses Verizon’s network in an MVNO arrangement.
As Moore noted previously, the number of national carrier doors has decreased significantly since late 2019, while the number of cable company stores has been rising and continues to rise. “This makes for a rapid shift in the ratio of national carrier stores to cable company stores, although the number of cable company stores is still a small fraction of the number of national carrier stores,” he said.
In terms of consumers switching service providers, it’s difficult to know for sure who’s going where. Based on testimony during the Sprint/T-Mobile trial last year, analysts at LightShed Partners said they believed that 45% of Comcast’s net additions were coming from Verizon and 25% from AT&T. But in the latest quarter, Verizon reported 173,000 wireless postpaid phone net additions while AT&T recorded net postpaid phone subscriber losses of 151,000. T-Mobile reports its results on Thursday.
Why worry?
Unless cable companies get a lot more aggressive and successful in wooing wireless customers, the big wireless carriers have nothing to worry about, according to Iain Gillott, founder and president of iGR. AT&T and Verizon are serving over 100 million customers each compared to cable’s collective single-digit millions.
“The cable guys have been ‘coming here’ for years,” he said, with little progress to show for it. Plenty of other MVNOs offer great deals, including TracFone, and they’re all running on the same networks. At the end of the day, “the big carriers aren’t going to worry” until it’s tens of millions of customers at stake.
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However, as carriers like Verizon and T-Mobile increasingly make plans to jump-start the fixed wireless access (FWA) market as a replacement for cable, the question becomes: Is wireless a bigger threat to cable than cable is to wireless? “Absolutely,” Gillott said. If a viable fixed wireless alternative for broadband were offered in his neighborhood, “I’d be gone in a heartbeat.” No doubt, so would a lot of others frustrated with cable’s infamous wait times and poor customer service.
During Verizon’s second-quarter earnings conference call, Verizon CEO Hans Vestberg reiterated the company’s plans to compete in the FWA space with a better CPE later this year and an installation process that is done in a “totally different way” than traditional installs. T-Mobile has promised more than once to shake up cable.
Gillott said LTE has conditioned people to watch TV/video and conduct Skype, FaceTime and Zoom calls on their wireless phones, so it stands to reason that consumers are fine with using their wireless connection for desktops and laptops. Incidentally, the cable industry already lost the battle for video subs while Disney+ has acquired millions of subscribers since it launched late last year.
Before COVID-19, wireless carriers and cable company executives were routinely asked by Wall Street analysts about their relationships with one another. Their answers typically are along the lines of: We’re happy with them (whichever side you ask) and glad to be working together. Nothing to see here, folks. Uh huh.
Asked about the competition between cable and wireless, Roger Entner, founder of Recon Analytics, said: “It’s a multi-dimensional problem.” In a way, cable is a misnomer because they’ve transitioned from cable TV providers to internet providers and they’ve become indifferent to video, whereas some wireless providers are anything but indifferent.
For cable, the goal of Comcast in wireless is to reduce churn, not make money, he said. For Charter, the goal in wireless is to make money and profit. For Altice, “the jury is still out there.”
The bottom line, according to Entner, is each operator, whether wireless or cable, has its own motivation. That makes it difficult to make generalities. The big questions for wireless, during and after the pandemic, are how and when the operators will take significant share from cable.—Monica @malleven33
Editor's Corners are opinion columns written by a member of the Fierce editorial team. They are edited for balance and accuracy.