Comcast will finally join the wireless market next year, CEO Brian Roberts said this morning, leveraging its network of 15 million Wi-Fi hotspots and a 5-year-old MVNO agreement with Verizon to create a new revenue stream.
Roberts told attendees at an investors’ conference that the company will market mobile services within its existing footprint, The Wall Street Journal reported, rather than launching a nationwide offering. But with most of Comcast’s 28 million customers buying bundles of TV, Internet and landline phone services, Roberts said the MSO has a notable market to upsell even more products to.
“We believe there will be a big payback with reduced churn, more stickiness and better satisfaction,” Roberts said, speaking at the Goldman Sachs Communicopia Conference. “It [the launch] may be a little sooner, but it won’t be at the beginning of the year."
At least one analyst agrees that Comcast could make a major splash in mobile. "We believe this will mark a turning point for the US communications landscape," wrote the analysts at New Street Research in a note issued shortly after Roberts made his comments. "We estimate compelling wireless margins for Comcast while using the MVNO (despite what others might claim); however, we expect the company to seek greater control over the product and the customer experience and better economics still through a deeper partnership with or an acquisition of a Wireless carrier in due course."
The New Street analysts also noted that a Comcast mobile service could steer as much as 75 percent of customers' data usage onto Wi-Fi. "It would result in 30% less cellular data consumption and would be transformative to margins," the analysts wrote. "Assuming Cable ARPU of just $35 / month, with 75% of data traffic carried on WiFi, we estimate they would generate EBITDA of $14 / sub. Based on European case studies, we think Cable can penetrate at least 20% of their base with Wireless within 5 years. Under our base case WiFi + MVNO economics, this would generate $2.1BN in annual EBITDA for Comcast and boost equity value by 9%."
Comcast has long been eager to join the mobile market. A year ago it executed its MVNO deal with Verizon, saying it would launch some kind of wireless service sometime in 2016. And in July it made a series of executive moves to prepare to launch wireless services, including promoting Greg Butz to head up a new Comcast Mobile division. The division now employs around 150 workers, Roberts said.
Comcast is also registered to bid in the FCC’s ongoing incentive auction of 600 MHz airwaves by the FCC.
Indeed, Comcast is one of several major cable operators eyeing the wireless market. But it’s unclear how much opportunity exists for new entrants: A wide range of big-name MVNOs have come and gone including ESPN Mobile and Disney Mobile. And the market has only become more competitive in the last two years, driving down prices and making it more challenging for any potential newcomer.
"The Verizon and Comcast relationship hasn't really garnered any lasting impression," Bill Ho of 556 Ventures told FierceWireless via email in June, adding that he's "not bullish" on the viability of a cable MVNO. "The bottom line with cable companies operating their own MVNOs is that they need to provide a tangible and large value proposition on why they need to switch from their current provider."
Comcast isn't the first cable operator to play in the wireless industry. Cablevision launched its Freewheel service last year, which offered a Motorola smartphone that could only access public Wi-Fi hotspots and not a cellular network. The company shuttered the offering shortly after Europe's Altice took over Cablevision operations.
And in 2005, four cable operators including Comcast inked a $200 million joint venture with Sprint called Pivot that allowed cable participants to offer Sprint wireless service in their respective markets. The joint venture ended service in 2008.