Cablevision (NYSE: CVC) is launching a Wi-Fi-only mobile service to offer customers an alternative to traditional cellular wireless plans, banking on its network of 1.1 million Wi-Fi hotspots to attract customers.
The service, called Freewheel, will cost $9.95 per month for Cablevision's Optimum Online customers and $29.95 per month for non-customers. The service will be available for purchase nationwide starting next month at Freewheel.com.
When the service launches it will only be available with one smartphone, Motorola's Moto G, which will sell at a heavily discounted price of $99.95. According to GigaOM, the phone will come preloaded with apps that automatically authenticate with any of the company's Wi-Fi hotspots. According to the Wall Street Journal, the Freewheel service could later be made available on other devices through an app.
Cablevision's Freewheel launch represents the boldest step yet by an MSO to directly challenge wireless carriers in the mobile services market. Most cable companies have talked about using Wi-Fi as a complement to cellular service. "We're riding the wave, and Wi-Fi is the clear winner as the technology," Cablevision COO Kristin Dolan told the Journal.
Cablevision, which serves customers in the Tri-State area around New York City, is going to launch a regional marketing campaign for the service, according to the New York Times. However, the service will be available nationwide. The company envisions the service appealing to customers who spend most of their day at home or work with Wi-Fi, as well as those who are worried about cellular data overage charges, live in areas with poor cellular reception or want a low-cost option for their kids.
"The big picture for us is the fundamental transformation in how people use their devices," Dolan told the Times. "It has been a migration in the past decade from voice to data."
There are clear limitations to Freewheel. Customers may face poor Wi-Fi reception outside of Cablevision's network footprint, and may have to connect to other, non-Cablevision hotspots. And, of course, they won't get service if they can't get onto a Wi-Fi network. Freewheel's service for non-Cablevision customers is also more expensive than some comparable Wi-Fi-first plans--which include cellular service--from other providers, including Sprint (NYSE: S) MVNO Republic Wireless.
Nevertheless, Cablevision clearly thinks it can provide a differentiated service. The company has been hinting for some time that it would look to Wi-Fi to as a way to disrupt the mobile data market and would be aggressive in developing new products that use those strengths.
"We've been saying for quite some time that Wi-Fi is a differentiator for the business (and) now with the addition of the smart routers and the expansion of our footprint and how we reach our customers and the robustness of the network … you're going to see new products, something that we haven't seen for a while," Cablevision CEO James Dolan said in May.
Indeed, Cablevision has been developing Wi-Fi-based mobile phone service technology for years, according to a patent obtained by FierceCable in February 2012.
Freewheel's launch also comes after reports that Google (NASDAQ: GOOG) is in discussions with Sprint and T-Mobile US (NYSE:TMUS) to launch an MVNO service on their networks aimed at getting wireless carriers to cut prices and improve their service. The Information said inside Google the service is codenamed "Nova," and that it will likely launch this year. According to the Journal, which also reported last week on Google's plans, the service could be rolled out in the first half of this year and would likely be offered nationwide. Google, Sprint and T-Mobile have declined to comment on the reports.
Taken together, the developments indicate that the Tier 1 U.S. wireless carriers could face intensifying competition from non-traditional competitors. While this may cause headaches for carriers, the upstarts also have disadvantages in breaking into a market in which the four Tier 1 carriers accounted for about 95.3 percent of the nation's mobile wireless service revenue in 2013. New entrants need to conduct marketing to expand their brands into the mobile realm and also handle customer service for services they have not traditionally offered. And, of course, the Tier 1 carriers have an advantage in that they own nationwide wireless networks covering most Americans.
MoffettNathanson analyst Craig Moffett said in a recent report that, although he did not expect the start of a Wi-Fi-first wireless offering until 2017 because of the coverage gaps, the disruption caused by such plans could be substantial.
"The time is coming when Wi-Fi will shift from being a 'secondary' network to being a primary one; instead of thinking of Wi-Fi as an alternative to cellular where Wi-Fi is available, we will instead begin to think of cellular as a backup network only when Wi-Fi is not," he said. "That shift may sound subtle, but it will usher in a period of profound disruption."
- see this release
- see these two separate WSJ articles (sub. req.)
- see this GigaOM article
- see this NYT article
Reports: Google wants to become MVNO of Sprint, T-Mobile to spur lower prices and better networks
Carriers, MSOs embrace Wi-Fi for calling and hotspots
The top 5 reasons cable operators are making big bets on Wi-Fi
Cablevision tops 1 million Wi-Fi hotspots, upping ante in challenge to cellular
Cablevision will use Wi-Fi to disrupt wireless data market