January 17, 2020
US cable giant Charter Communications continues to highlight its interest in "owner's economics" in the mobile industry. Meaning, the company appears increasingly interested in purchasing CBRS or C-Band spectrum for its Spectrum Mobile-branded service.
Charter has made no secret of its extensive mobile tests, and Light Reading previously reported on the company's interest in building its own wireless network. But Charter's latest efforts -- the company recently asked the FCC for permission for new, large-scale CBRS tests in New York City, Los Angeles and Centennial, Colo. -- only reiterate its desire for owner's economics in mobile.
"Charter will deploy experimental fixed and mobile equipment in various configurations. Depending on the testing scenario, devices will be deployed on existing aerial cable strand, on existing buildings/poles or indoors," the company wrote of its tests in NYC and LA.
Charter's filings with the FCC don't provide much information about the tests. For example, they don't name Charter's vendors other than Federated Wireless, which provides the Spectrum Access System (SAS) Charter will need for operations in the 3.5GHz CBRS spectrum band. But the filings do indicate that Charter appears to be testing equipment from multiple vendors, likely to see which works the best for a possible commercial deployment.
The FCC recently opened the CBRS band to commercial unlicensed operations, and this summer the agency will auction a portion of the band for licensed uses. The analysts at Wall Street research firm Cowen recently predicted that cable companies including Charter would spend a combined $1.5 billion on CBRS spectrum licenses in their cable footprints.
And though Charter's interest in CBRS spectrum is relatively well documented, it appears the company is also considering pairing CBRS spectrum with C-Band spectrum. For example, in a separate filing with the FCC, Charter urged the agency to ensure that operations in the two bands could be coordinated. The FCC has pledged to conduct an auction of C-Band spectrum by the end of this year.
When questioned on the topic in October, Charter's CEO Tom Rutledge acknowledged the company has been testing both fixed and mobile services over CBRS spectrum alongside dual-SIM technology. Dual-SIM technology could potentially allow the company to direct mobile traffic over Verizon's network if necessary but to favor a Charter CBRS network where available.
"The question we're evaluating is should we be involved in that," Rutledge said of the FCC's upcoming CBRS spectrum auction, according to a Seeking Alpha transcript of his remarks. "We haven't determined that yet, but we're looking at it closely."
He added that 80% of all data on Charter's "mobile platforms" are being delivered through WiFi, a nod to Charter's extensive network of public and private WiFi hotspots.
While Charter has been relatively open about its mobile efforts, Comcast has been less so. Nonetheless, many expect Comcast to follow Charter further into the mobile industry, particularly considering the companies have already inked a partnership to share costs for back-end mobile operations.
For its part, Altice has highlighted the value of wading into mobile network ownership. The company's recently launched Altice Mobile service piggybacks on Sprint's network, but Altice has said that it is able to sell the service for just $20 per month to its Internet customers due to the fact that it has built thousands of small cells for Sprint's wireless network by leveraging its wired network for backhaul.
And what are the benefits of owner's economics in mobile? Charter's Spectrum Mobile service currently piggybacks on Verizon's 4G LTE network, and Charter pays Verizon based on how much data its Spectrum Mobile customers consume on Verizon's network. If Charter were to build its own wireless network, particularly in areas where it counts a lot of Spectrum Mobile customers, that could help reduce the amount of money Charter pays Verizon. According to the Wall Street analysts at Cowen, both Charter and Comcast (which also uses Verizon's network for its own Xfinity Mobile service) are expected to fork out a combined $700 million to Verizon in 2023 -- payments that could be reduced by owner's economics.
Further, those savings could be tied into the other benefits Charter and Comcast are likely seeing thanks to their entry into the mobile space. For example, a customer survey by Cowen found that that the percentage of customers willing to cut the cord is significantly lower among Xfinity Mobile subscribers than for non-Xfinity Mobile subscribers. "While there is admittedly sample bias at this early stage (that is, early subscribers to Xfinity Mobile are likely to embrace and trust the brand), we're seeing indication to validate management's claims of churn benefit," the analysts wrote in a recent note to investors.
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