The revised agreement between Verizon Wireless and its cable TV partners enables the foursome to become MVNOs immediately, potentially positioning them to offer hybrid voice services that employ Wi-Fi and cellular networks.
The U.S. Department of Justice last week approved Verizon Wireless' (NYSE:VZ) $3.9 billion purchase of nationwide AWS spectrum from cable operators Comcast, Time Warner Cable, Cox Communications and Bright House Networks. The DOJ also approved the cross-marketing deals between Verizon and the four cable companies with certain modifications and restrictions. The FCC still must approve the deal.
One of the conditions buried in the settlement between the DOJ, Verizon and the cable operators was a requirement that "the cable companies can elect to resell Verizon Wireless services using their own brand at any time as provided for under the amended agreements," according to a DOJ press release.
Though seemingly innocuous, this provision represents a major change to the original agreement among the carriers, which prevented the cable companies from becoming Verizon MVNOs for four years, according to Light Reading Cable.
Thanks to this change, cable operators could be poised to offer a low-cost, hybrid wireless service that uses their Wi-Fi networks for primary access, backed up by Verizon's cellular network in areas lacking Wi-Fi. The new MVNO arrangement "is potentially the missing piece in what is potentially a highly disruptive wireless offering," said Sanford C. Bernstein & Co. analyst Craig Moffett, who was quoted by Light Reading Cable.
Such a "cellular offloading" arrangement would be the exact opposite of the Wi-Fi offloading scenario being pursued by many mobile operators, which are increasingly trying to shift data traffic from their congested mobile networks to fixed Wi-Fi hotspots. These hotspots are either operated by the mobile operators themselves or outsourced to a partner or most any other third-party.
Of course, Wi-Fi lacks the density to offer anything close to blanket coverage, which Moffett acknowledges. "Such an offer could be extremely disruptive to the wireless industry, but only if the cable operators had sufficiently dense Wi-Fi networks...and a willing MVNO partner," he said.
The cable operators have been working to extend their Wi-Fi footprints through collaboration as well as individual initiatives. All four MSOs announced in May a nationwide Wi-Fi roaming deal under the brand CableWiFi that will give their subscribers free access to the 50,000 hotspots the companies collectively own. Also that month, Time Warner agreed to deploy Ruckus Wireless' Wi-Fi equipment within high-capacity indoor public venues, such a stadiums, as well as in select outdoor venues where Time Warner wants to make its branded services available.
The operators have also been chasing technological initiatives that would extend their service portfolios to mobile voice. Another May announcement came from Comcast, which announced its Voice 2go service for Xfinity Voice home phone customers. The service enables customers to make calls and send texts for free within a Wi-Fi network using their home phone number and Comcast's Xfinity Connect Mobile app for iOS and Android.
Further, early this year our sister publication FierceCable tracked down a patent filed by cable operator Cablevision Systems (not a party to the Verizon deal) that suggests the New York cable TV and broadband firm may pursue a Wi-Fi-based mobile phone service.
The concept of "Wi-Fi first, cellular second" is already being tried in the marketplace. For example, Republic Wireless, a Sprint Nextel (NYSE:S) MVNO, structures its service to route traffic over Wi-Fi and to only fall back on cellular if no Wi-Fi is available. At the end of July, Republic began accepting new customers to its still-in-beta $19 per month Hybrid Calling service.
On Aug. 17, Republic began inviting beta wave applicants from its Wave C group to sign up for service and also announced that the company now enables customers to port their numbers from other carriers.
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