Charter Communications CEO Thomas Rutledge hinted that the company may add more licensed spectrum to its portfolio but didn’t provide any specifics about whether that spectrum will be acquired in an upcoming auction or purchased from another entity.
Speaking during the Morgan Stanley Technology, Media & Telecom conference earlier this week Rutledge said that the company’s Spectrum Mobile mobile virtual network operator (MVNO) running on Verizon’s network is a superior product because when used with the company’s Wi-Fi network, its network of Citizens Broadband Radio Spectrum (CBRS) radios, and any network using “future licensed spectrum we might come across,” Spectrum Mobile customers will get better capacity and faster download speeds.
“I think we can make our mobile product superior to what is sold by a mobile-only company by how it interacts with our Wi-Fi network and CBRS to get more throughput,” he said.
In 2020 Charter spent $464 million to acquire priority access licenses (PALs) of CBRS spectrum in the FCC’s 3.5 GHz spectrum auction and Comcast, which also has an MVNO riding on Verizon’s network purchased $458 million worth of PAL licenses on CBRS spectrum.
Rutledge didn’t speak about Charter’s MVNO agreement with Verizon, but earlier in the week, Comcast CEO Brian Roberts told Morgan Stanley investors that Comcast and Verizon had recently updated their agreement to include solidifying Comcast’s ability to offload some traffic in heavy-use areas to its CBRS spectrum.
Rutledge provided some insight into how Charter determines where to deploy its CBRS radios. He said that Charter puts the radios in high traffic areas where it can offload traffic from Verizon’s network to the CBRS network, reducing the amount of money it pays to Verizon for its MVNO traffic. “The savings on the MVNO bill are greater than the cost of deploying the radio,” Rutledge said.
And the company also uses those CBRS radios as “product enhancers” because when it has extra capacity, it makes it available to customers to give them speed and capacity boosts.
Rutledge also said that he believes Spectrum Mobile could become a major wireless competitor with millions of customers. At the end of 2021 Spectrum Mobile had slightly more than 3.5 million wireless customers.
Although the service is only available to existing Spectrum Internet customers in Charter’s regional footprint, Rutledge said he doesn’t believe that not having a nationwide footprint is a detriment to the MVNO. “We have 120 million mobile customers in our footprint. That is the range of our opportunity.”
And he compared his company’s entrance into the wireless market with the voice-over-IP telephony services that the cable operators launched more than 15 years ago. “When we did voice-over-IP we priced it low and packaged it,” he said. Today, he noted that Charter and Comcast are two of the biggest companies in terms of number of voice/telephony customers. “Mobile presents a similar opportunity,” he said.
“We have 120 million mobile customers in our footprint," said Rutledge. "That is the range of our opportunity.”
When asked if Charter is using its Spectrum Mobile MVNO to generate a profit, Rutledge said that while the MVNO is profitable as a standalone business, Charter is using it to drive customer relationships that are valuable. However, longer term he believes that as they add more mobile subscribers and offload more traffic to the company’s Wi-Fi network and CBRS network, it will become even more profitable because marketing and operating costs will decrease.
Interestingly, Rutledge downplayed the threat of Verizon and T-Mobile’s fixed wireless access (FWA) broadband services and compared it to existing DSL services. “I think we are superior,” he said, adding that he believes FWA will have “some impact” but that cable is better and more competitively packaged.