Wires will increasingly become crucial for mobile network operators as they densify their networks and move into the 5G era, MoffettNathanson analysts wrote. And that will provide a path for cable operators to successfully enter the wireless market.
Some of the biggest cable operators in the U.S. have made no secret about their intentions to expand into wireless. A Charter executive said yesterday that the company will likely need to build its own wireless network to fully leverage its MVNO agreement with Verizon, for instance. And Comcast CEO Brian Roberts last week disclosed plans to use its MVNO pact with Verizon as well as its network of 15 million Wi-Fi hotspots to create a new revenue stream.
Those strategies will be pursued as wireless carriers turn to smaller transmitters to densify their networks. Those sites will need a wired backhaul connection to the network – as least in most cases – so as network density increases, wireless networks will increasingly look like wired networks.
The cable industry claims the densest wired networks in the nation, so cable operators have something of an advantage. Meanwhile, users are increasingly turning to mobile devices to access fixed-line networks, further blurring the lines between the two markets.
“The distinction between wired and wireless networks will disappear; in ten years, we won’t talk about ‘wireless’ and ‘cable’ networks… there will simply be ‘the network,’” MoffettNathanson analysts wrote in a research note to subscribers. “Cable is in the network business, and, ipso facto, Cable will be in the wireless business whether they like it or not. Becoming a full-fledged wireless network operator is not a choice… it is a necessity.
"Cable's infrastructure will ultimately win in wireless," the analysts continued. "Just as it has already won in broadband."
Of course, having the most wires doesn’t mean that cable operators are guaranteed to succeed in a wireless market they have precious little experience in. They must prove they can bring added value to a space that is already relatively competitive, and leveraging their MVNO agreements to provide fully mobile services will require them to embrace complex new business models.
If MoffettNathanson is right, though, the looming question is how many players can the wireless market support? The firm said entering the market via a merger or acquisition doesn’t appear to be part of the strategy of any cable operator, and such a move might be blocked by federal regulators anyway. So Comcast and Charter pose real threats to established wireless carriers as they prepare to step on the field.
“When the cable operators do arrive in wireless as real players, however, it won’t be good news for incumbents,” MoffettNathanson analysts wrote. “The industry is already too crowded, and if networks really do begin to take on the economic character of wired networks, we know from experience that the sustainable number of networks will necessarily fall. As we have articulated in this report, we believe Cable will be one of the winners. That leaves four wireless operators vying for what might only be one, or perhaps at most two, additional spots to fill.”
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