Comcast, Charter make mobile strides with no-frills plans – study

After dabbling in the mobile arena and then making hasty exits without much to show for it in relative days of yore, it appears the US cable industry has finally figured out a mobile strategy that works with respect to both subscriber growth and a profitable financial model.

US cable's general gameplan since re-entering the mobile mix is to craft MVNO deals that enable them to bundle relatively simple unlimited and by-the-Gig and unlimited mobile packages with their high-margin home broadband services.

Though cable operators eventually might be forced to expand into device subsidies and perks that go beyond the issuance of simple gift cards, their focus on the entry-level and value mobile marketplace has served them well.

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At the end of the second quarter of 2022, Altice USA, Charter Communications and Comcast added a record 703,000 mobile lines, for a total of 8.4 million – still less than 3% of the US wireless market.

MoffettNathanson estimates that US cable pulled in 43.9% of net mobile adds in the quarter. Broadening that mobile base will become more important as cable operators are pressed to retain broadband customers as quarterly subscriber growth in that key category lags.

Making hay with value and entry-level mobile plans

Navi's Q2 2022 Wireless Plan Scoring Report illustrates how Charter and Comcast have been faring in the entry-level and value portion of the mobile market. And they've fared well, despite the fact that those operators require mobile customers to bundle in home broadband, and access to those bundles is currently limited to the operators' cable service footprints.

Navi, which issues value scores based on factors such as nuances in data plans, loyalty programs, video streaming quality, pricing and perks, found that Charter's Spectrum Mobile dominated the entry-level category with an aggressive price point paired with competitive data and hotspot features.

Charter's Unlimited Plus plan outpaced T-Mobile's Essentials plan, UScellular's Unlimited Everyday plan, AT&T's Unlimited Starter package and Verizon's 5G Start offering.

Charter also led the way in the value category. Charter's Unlimited tier was followed by T-Mobile's Base Essentials plan, Comcast's Unlimited plan, AT&T's Value Plus plan, Verizon's Welcome Unlimited plan and UScellular's Unlimited Basic tier.

The chart below shows how all of the studied postpaid plans, by category, stacked up with respect to Navi's Plan Value Score, which provides a price-adjusted view of the feature richness of each plan. T-Mobile topped the premium and mid-level categories.

As mentioned above, Charter's Spectrum Mobile led the way in the entry-level and value categories.

Figure 2: Click here for a larger version of this image.
(Source: Navi Q2 2022 Wireless Plan Scoring Report. Used with permission)

Despite some limitations on market reach, US cable is "making a dent" with their bundling approach and focus on an entry-level and value end of the market that's taken on greater weight amid recent inflationary pressures, Patricio Paucar, Navi's chief product officer, said.

To amplify the effects of inflation, Navi's data shows that the overall market share of entry-level and value plans stood at nearly half of the current sample, up from just over a third since the advent of the category.

"The low cost market is where you will see more traction with people that are looking to right-size their expenditures," Paucar said.

Meanwhile, cable's bundling those entry-level and value plans with home broadband fits financially, as it provides plenty of margin headroom overall.

"When somebody like T-Mobile is fighting on a standalone basis, they don't have that bundle opportunity, even though they are trying to make inroads with 5G broadband … but that's a different story," Paucar explained.

US cable's success in this segment appears to be causing incumbent mobile carriers to adjust and react. T-Mobile's Essentials plan is effectively being used as a "stopgap to the momentum that the cable MVNOs are picking up in the market," Paucar points out.

Staying the course... but for how long?

It's unclear if the likes of Comcast and Charter will shift gears by subsidizing phones or venturing deeper into the land of mobile discounts and promotional offerings.

That may eventually come to pass, but for now Paucar expects Charter and Comcast to stick to their knitting by keeping their mobile plans and strategies relatively simple, ensuring that the hurdles to sales/adoption remain low.

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"Their main goal is to retain the revenue they make on the home broadband product, so they can make more than enough margin on those products. They don't have to worry about trying to extract a lot of margin out of mobile product," said Paucar, who views brand awareness among the mobile challenges faced by US cable.

"I think once they get to a place where they feel they're not doing that, I have no doubt they'll begin to explore ways to expand and extract more value out of the mobile product itself. But I think there's so much room to still go that I don't see them doing that anytime soon."

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— Jeff Baumgartner, Senior Editor, Light Reading