Comcast (NASDAQ: CMCSA) is contemplating launching its own wireless service that would largely rely on Wi-Fi, according to a report from The Information. That would be a sharp reversal for Comcast less than two years after it finalized a $3.9 billion deal to sell to Verizon Wireless (NYSE:VZ) wireless spectrum it controlled along with other cable companies.
The report, which cited unnamed sources outside Comcast, said that it does not appear that the launch of a wireless service by Comcast is imminent, but the issue could take on more urgency as Comcast fights for regulatory approval of its merger with Time Warner Cable (NYSE: TWC). The MSOs could presumably argue that they would increase competition and benefit the public interest by launching their own wireless service.
A Comcast spokesman did not immediately respond to a request for comment.
According to the report, Comcast officials recently told people outside the company that it was considering a mobile phone service, which would rely on a combination of Wi-Fi and leased capacity on cellular networks. Comcast has deployed more than a million Wi-Fi hotspots and has also installed more than eight million wireless Internet routers in private homes that could serve as public hotspots, the report noted.
The FCC recently voted to make 100 MHz of spectrum in the 5 GHz band available for unlicensed Wi-Fi use, giving a major shot in the arm to carriers and MSOs looking to push more data traffic to Wi-Fi. Comcast applauded the move and had lobbied for it.
The new report comes less than a week after The Information also reported, according to unnamed sources, that Google (NASDAQ:GOOG) is weighing the possibility of launching its own wireless service in markets where it offers its Google Fiber high-speed Internet service. That report said that Google executives in recent months have discussed the idea of offering a "full-fledged wireless service" in those markets, possibly through a partnership with Sprint (NYSE:S) or Verizon Wireless.
Several Sprint MVNOs currently offer a model that Comcast could be considering, under which they offer a mainly Wi-Fi-based service but hop onto Sprint's cellular network when they are out of coverage. Scratch Wireless and TextNow do so, as does Republic Wireless, which leverages Devicescape's curated network of 19 million U.S. Wi-Fi hotspots for its service.
What could complicate a Comcast wireless service is its existing agreements with Verizon. When Comcast, along with Time Warner, Cox Communications and Bright House Networks, sold AWS spectrum to Verizon, the companies also got approval from regulators to serve as MVNOs of Verizon's wireless service. It's unclear how those agreements would affect any Comcast wireless venture.
Nevertheless, New Street Research analyst Jonathan Chaplin wrote in a research note that Wi-Fi-centric wireless carriers could launch services with roughly 35 percent lower capital costs than traditional wireless carriers, mainly due to savings on spectrum and capital expenditures. Furthermore, as cable MSOs transition all voice to IP networks, their total cash costs could be around 50 percent lower than traditional wireless carriers, he wrote, adding that cable companies "could earn attractive margins pricing wireless service at $25-30 (40-50% discount)."
Chaplin wrote that "it is just a matter of time until" cable companies enter the wireless market, "leveraging their existing fixed infrastructure in conjunction with Wi-Fi and an MVNO." New Street assumes that cable companies would charge wireless prices at a 25 percent discount to incumbent carriers, "taking a relatively modest 9% of the market over five years."
Of course, there have been numerous instances of cable companies trying to launch wireless plays, all of which have needed in failure or dissolution. The two most notable venture in the recent past were Comcast and Time Warner Cable's attempts to resell Clearwire's mobile WiMAX service, which started in 2008, and the Pivot joint venture between Comcast, Cox, Time Warner Cable and Advance/Newhouse with Sprint, which was formed in 2005. Neither panned out.
- see this The Information article (sub. req.)
Report: Google talked to Sprint, Verizon about offering its own wireless service
Comcast, NCTA cheer FCC 5 GHz Wi-Fi order
FCC opens up 100 MHz of spectrum in 5 GHz band for unlicensed Wi-Fi
Comcast EVP Watson: Wi-Fi lets cable operators 'play offense'
Cable companies agree to nationwide Wi-Fi roaming deal