Comcast (NASDAQ: CMCSA) and Verizon Communications (NYSE: VZ) are discussing whether and how they should renegotiate a contract dating from 2011 that lets Comcast operate as an MVNO of Verizon Wireless, according to a Wall Street Journal article. The wireless industry has shifted significantly since the deal was struck, and Comcast is exploring how much flexibility it would have to sell shared data plans.
The agreement stems from Verizon's 2011 purchase of AWS-1 spectrum from Comcast, Time Warner Cable (NYSE: TWC), Bright House Networks and Cox Communications. The FCC approved the deals in the summer of 2012 and permitted the MVNO agreements, but the cable companies have not launched wireless offerings related to the deal.
According to the WSJ, the contract did not contemplate shared data plans, which Verizon did not start offering until July 2012. Meanwhile, T-Mobile US (NYSE:TMUS) and Sprint (NYSE: S) have been aggressively cutting prices and pressuring Verizon and AT&T Mobility (NYSE: T). Verizon does not think Comcast will be able to effectively compete under those conditions, the report said.
The deal with Verizon spells out what Comcast would pay per-minute for wireless voice service and which types of voice plans it could offer, but its details on data plans are vague, the report added.
Comcast declined to comment. However, a person close to Comcast, who insisted on anonymity to discuss the company's thinking, told FierceWireless that Comcast thinks it has a "very attractive" agreement that gives it the flexibility it needs to compete in wireless. The agreement also covers future advances in wireless technologies.
Verizon Communications CFO Fran Shammo told the Journal in an interview last week that Comcast may want to renegotiate its deal. "That agreement is old now, it's stale," he said. Shammo said discussions between Verizon and Comcast over the contract are "ongoing."
"We're confident a mutually beneficial arrangement can be achieved," a Verizon spokesman told the WSJ.
Comcast could seek to launch a Wi-Fi-first network that leverages its roughly 10 million indoor and outdoor Wi-Fi hotspots and rides on Verizon's network when Wi-Fi isn't available. Several Sprint MVNOs, including Republic Wireless, FreedomPop and Scratch Wireless, offer such service.
It's unclear how aggressively Comcast would market a wireless service or if it would start as a small scale project, like Google's (NASDAQ: GOOG) Project Fi MVNO, which uses Wi-Fi hotspots for calling and data in addition to cellular connections from Sprint and T-Mobile.
Verizon would likely want to capture wholesale revenue from Comcast rather than see it partner with a rival. Analysts have speculated that Comcast might make a bid for T-Mobile.
Interestingly, according to the report, Comcast also has a wholesale deal with Sprint. However, the report said a person close to Sprint said the deal was made several years ago and has vague terms and might also have to be changed. In recent months, the report said, the companies have talked about how they could partner on wireless, and a person close to Comcast said the company views Sprint as a willing partner.
Comcast had formerly been an investor in Clearwire and a wholesale customer of its WiMAX network. Sprint purchased Clearwire in 2013. Comcast also sold products that rode on Sprints' 3G CDMA network. A Sprint spokesman confirmed to FierceWireless that Sprint has "wireless arrangements with Comcast tied to their original investment in Clearwire," but declined to comment beyond that.
In June, Liberty Media Chairman John Malone laid out the reasons he supports the proposed $56.7 billion merger of Charter Communications (NASDAQ: CHTR) and Time Warner Cable (NYSE: TWC), pointing specifically to the possibility of a Wi-Fi calling service as one outcome. Charter would get access to a Verizon MVNO deal if it is able to secure regulatory approval for and close the Time Warner deal, but the WSJ report said Charter thinks the agreement is more suited for the voice era.
- see this WSJ article (sub. req.)
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