After several fits and starts, backtracks and mobile partnerships that did not pan out in their original form, some of the largest US cable operators have finally shown that MVNO partnerships affixed to their high-margin broadband services can lead to success.

Thanks to an MVNO agreement with Verizon that stems from a big spectrum sale paired with a strategy to bundle mobile with home broadband, Comcast and Charter Communications now have 6.32 million mobile lines between them. At the same time, Comcast's mobile business recently turned the financial corner some four years after the MSO introduced Xfinity Mobile, achieving that financial milestone before it has even started to take advantage of the private CBRS spectrum acquired at auction.

Altice USA hasn't seen its mobile business accelerate to the same degree yet, but its decision to offer mobile services via its own core network has put it in position to strike an original deal with Sprint (now part of T-Mobile) while also securing a nationwide roaming pact with AT&T.

Will smaller operators go big on mobile?

While there have been rumors that Cox Communications might get back into the mobile game, there are still lingering questions about whether the nation's hundreds of smaller Tier 2/3 operators would have the size and scale necessary to take a true shot at mobile and use mobile to help drive their core broadband business.

CoBank, a bank focused on rural America touching areas such as agriculture, energy, water and communications, raised that question in a new report. Although CoBank acknowledges that there are some major financial and operational challenges facing smaller operators interested in entering the mobile market, it also outlines some possible remedies, including partnerships backed by multiple operators that could enable them to attack the market with a degree of scale.

"For most small rural operators, it's hard to believe that a postpaid MVNO makes sense," CoBank explains in its report, noting that postpaid mobile customers carry the highest value and therefore are pursued and defended the most aggressively. "For rural cable operators, lack of scale and the cost uncertainties associated with postpaid unlimited plans would make it very difficult for them to succeed in this market."

CoBank also reckons that pursuing an MVNO strategy is a major undertaking that threatens to divert resources away from operators' primary break-maker, the broadband network, and perhaps put them in position to lose share and momentum against new wireless ISPs and other broadband competitors.

Interest brewing

So, yeah, they'd face a steep uphill climb at the very least. But CoBank believes there is interest in that segment of the market and that there are ways smaller operators could try to pull it off.

There's no outward indication yet that any of the nation's small or midsized cable operators are about to pull the trigger on MVNO deals. But many are, of course, aware of the success that Comcast and Charter are having with their strategy, Jeff Johnston, lead communications economist with CoBank, tells Light Reading. "The sense I'm getting is there is growing interest in the [mobile] space" from small and midsized operators, he said.

Johnston notes that some Tier 2/3 operators could be weighing the idea as they face a strategic crossroads of sorts. Should they stay the course with a heavy focus on broadband, sell while the getting's good, or push forward to the next phase of their evolution and figure out a way to get into the mobile business, possibly by taking the MVNO path?

But CoBank also recognizes that the costs associated with an MVNO sets a high bar, particularly for cable operators that don't have much size and scale to bring to the negotiating table.

Possible remedies

Noting that wholesale costs represent an MVNO's largest expense line, CoBank suggests that smaller cable operators establish a "buying consortium of like-minded cable operators." By aggregating those costs, they could be able to negotiate lower wholesale rates than they could on their own.

"In a perfect world, they could all team together and [create] a buying consortium that had critical mass" and push for decent rates with T-Mobile, AT&T and Verizon, Johnston said.

"But I think you need a lot of flexibility in the core to be able to pull that off," Johnston added, citing the Altice USA example. "That would be an area I think could potentially add greater cost control and flexibility and presumably be able to provide the best coverage."

The good news there is that hundreds of smaller, independent cable operators already work with a consortium to help them get volume deals on programming and technology: the National Cable Television Cooperative (NCTC).

However, it's not clear yet if seeking out an MVNO deal, or multiple MVNO deals, is even on the radar at the NCTC at this time. In May, new NCTC CEO and longtime cable industry vet Lou Borrelli acknowledged that it's an idea that could be worth exploring.

"Having some kind of mobile option [for NCTC members], I think, is important," he said then.

I've asked the NCTC for an update on its plans or intentions involving mobile, and I'll provide an update here if there's anything new forthcoming.

But CoBank's report also explores other options, wondering if operators could likewise secure MVNO deals that, in turn, would provide mobile operators with access to fiber for backhaul and possibly factor in a cable operator's pole attachment rights.

"By making the agreement more of a quid pro quo, it could reduce backhaul costs and streamline the small cell site acquisition process for the MNO while lowering MVNO wholesale costs," CoBank notes.

The report also suggests that cable operators look into public-private partnerships that build regional wireless network using CBRS spectrum that is partly funded by public funds.

"Such partnerships could give a city its own network for 'smart city' capabilities, remote learning, etc. And it gives the cable operator a lower-cost option to their MNO partner," the report explains. "These networks could also generate new sources of revenue by leasing capacity back to the MNO, or any other operator needing coverage."

But the big question going forward is whether any or all of these operators can get organized well enough to even explore a process that would no doubt be complicated and require creativity to pull off. And there's still a big question as to whether any of them believe that the payoff, which would most likely take years to achieve, would be worth all that effort.

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— Jeff Baumgartner, Senior Editor, Light Reading