As an industry analyst with history in both mobile and cable industries, I listened with a keen interest to the Comcast announcement of its soon-to-be-launched mobile service. There were no big surprises, as major facets of the mobile service were widely expected. Comcast will leverage its Wi-Fi footprint to offload mobile traffic to lower the variable cost model of MVNO economics, offer key iconic smartphones, limit the scope to its cable footprint to bundle services and derive churn reduction savings, etc. For me, a key highlight was the pricing plan as it reveals so much about market strategy and product positioning.
Based on its pricing plan and competitive pricings of the mobile carriers today, Comcast appears to be positioning its Xfinity Mobile service for young millennials moving out of parents’ basements and newly married couples moving to their first homes. Based on the “$ per GB” chart of the “unlimited” plans (using artificial data allowances after which speeds are lowered as data cap limits), it is clear that Comcast’s “$45 per line” plan for its “best package” customers, who bundle X1 and Internet services, is priced lower than AT&T and Verizon, and priced somewhat competitively with T-Mobile and Sprint, for one-line and two-line family plans.
It is not competitive against typical family plans with four or more lines, most of which are already captured by the mobile carriers with aggressive pricing to reduce churn.
So, the questions are: What does Comcast intend to accomplish with its mobile service offering, and where does it go from here? Based on pricing, it does not appear that Comcast is really looking to disrupt the mobile industry.
The mobile carriers have captured most of “sticky” family and business accounts, and it will be a tall order for Comcast to remove those customers away from the mobile carriers. Consumer inertia is very high especially at the “high end” segment, so it will take meaningful price discounts or other promotions to extract consumers from their current plans to sign up—which goes against Comcast’s stated goal of acquiring customers at lower acquisition costs than the mobile carriers.
I believe Comcast is conservatively going after a specific, incremental market opportunity: Young millennials and young families who are moving to new homes. According to U.S. Census data, about 800,000 new households are formed each month. Cable churn will likely happen during household moves, so these are good opportunities to capture incremental mobile revenue opportunities and strengthen service bundles for future churn when the fixed mobile convergence competition really heats up.
Comcast’s announced mobile plan is a patient “cable-first” wireless play that strengths its core product portfolio, and appears to be a first step to build mobile relationships with its customers. For a broader wireless entry, and a higher level of competition that comes along with that, Comcast will likely need a facilities-based strategy and “owner” economics that it provides.
Spectrum will, of course, play a big role, and Comcast will surely leverage a portfolio of spectrum bands at its disposal, including 600 MHz, unlicensed and shared spectrum bands. Mobile Experts expects an increasing role for LTE-U and 3.5 GHz CBRS as operators look to leverage fixed and mobile footprints as outlined in our new Small Cells study. Comcast’s full wireless strategy will take many years to play out as it continues to expand its fiber-coaxial capacity and number of radios dotting its footprint.
Kyung Mun is a Senior Analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provides market analysis on the mobile infrastructure and mobile handset markets. Over the course of his 20+ years in wireless and cable industries in a dynamic range of roles from engineering to product management and technology strategy, he has contributed to the advancement of mobile communication, while working at leading companies in the mobile value chain including Motorola, Texas Instruments, Alcatel-Lucent, and a few startups in between. He holds undergraduate and graduate degrees in electrical engineering from the University of Texas at Austin and Georgia Tech, and studied finance and strategy at Southern Methodist University.