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Fixed Wireless Access (FWA)

Bundles emerge as a critical weapon in the US cable-wireless war

Some of the nation's biggest wireless companies are in the midst of an increasingly contentious battle with some of the nation's biggest cable companies over new broadband customers. And service bundles – discounted mixtures of mobile services, video streaming, in-home connectivity and other goodies – have emerged as a primary weapon on both sides.

However, it's unclear how this new dynamic might sway customers from one provider to another. Further, there are growing questions about how those bundling deductions – and the resulting decline in providers' overall average revenues per user (ARPU) – might ultimately affect all of the companies involved.

Nonetheless, some executives believe now is the time to dangle bundles in front of customers in an attempt to entice them into a package of services from which they can't easily escape.

(Source: Westend61 GmbH/Alamy Stock Photo)
(Source: Westend61 GmbH/Alamy Stock Photo)

"I remember when we launched the triple play for wireline, data and video, the average phone bill in the New York metropolitan area was about $78 [per month]. We brought that down to $30 and ended up having the majority of the customers," outgoing Charter Communications CEO Tom Rutledge told CNBC. "I think we have the same opportunity in mobile."

Cable using wireless against wireless

Charter and Comcast have enjoyed significant successes with their mobile strategies. The two companies enjoy a "sweetheart" MVNO deal with Verizon, according to the financial analysts at Cowen, giving them the ability to sell mobile services working on Verizon's network for prices far below what Verizon itself charges.

The result has been impressive. According to the financial analysts at Evercore, Comcast and Charter combined to capture a 31% share of all postpaid wireless net customer additions in the third quarter of 2022 – ahead of the firm's expectations and up from the 25% they collectively gobbled up during 2021. Comcast and Charter combined now command more than 10 million mobile customers.

But Charter recently sought to add fuel to that fire, announcing its new SpectrumOne promotion that offers home broadband and mobile services for around $50 for the first year of service.

"Charter has always had special promotions, and this promotion is not aimed at adding broadband customers – instead, the company is giving away cellular for a year to hook new wireless customers who have been reluctant to trust the cable company for cellular service," wrote analyst Doug Dawson with CCG Consulting.

However, Charter also raised its home Internet prices by $5 per month, likely in an effort to offset its rock-bottom SpectrumOne pricing.

The analysts at MoffettNathanson summarized the situation in one headline: "The broadband story: subscribers versus ARPU?"

Wireless using wireless against cable

The story is similar on the wireless side of things. Both Verizon and T-Mobile are leveraging their vast midband 5G spectrum holdings to launch fixed wireless access (FWA) services into cable territory.

According to the Cowen analysts, the two companies gained a combined total of more than 800,000 new FWA customers in the third quarter of 2022 – more than the entire US broadband industry combined.

T-Mobile and Verizon are also employing bundling discounts to gain new customers – alongside price increases to prop up their finances.

For example, T-Mobile is offering two months of FWA service for free. And that's on top of a $20 per month discount to customers who also subscribe to its mobile services. Verizon is offering a similar bundling discount for customers who subscribe to both FWA and mobile.

Meanwhile, Verizon has already announced significant price increases to its mobile service plans, and T-Mobile has been hiking some of its one-time fees.

Looking back to look forward

As noted by Charter's Rutledge, bundling is by no means a new strategy. After all, Comcast, Charter and a wide range of other cable companies have long used various TV and video services to sweeten their home Internet offerings. In fact, Comcast and Charter appear keen to continue their pursuit of that space via their new Xumo-branded streaming video joint venture.

But the rise of direct-to-consumer video has largely obliterated the pay-TV revenue stream for most cable companies.

Similarly, T-Mobile, AT&T and Verizon have all worked to add streaming video options like Netflix and Disney+ to their mobile service plans. But they too have encountered significant problems in the space. For example, both AT&T and Verizon fully exited the media industry last year, while T-Mobile has mostly withdrawn from the TVision strategy that its previous CEO once touted as a product that would give customers "the opportunity to cut the cord with Big Cable forever."

Nonetheless, executives from AT&T, T-Mobile, Comcast, Charter and other players promise that they'll be able to successfully figure out profitable bundles this time.

"We have a distinct competitive advantage that goes beyond just fast and consistent speeds," Comcast CEO Brian Roberts explained during his company's recent quarterly conference call. "We provide a differentiated and superior experience within the home, which is the foundation of our ARPU growth. For example, we offer reliable Wi-Fi coverage in every room, device control and cybersecurity features and a world-class entertainment platform as well as other complementary solutions like Xfinity Mobile that increase the value and utility of our broadband product even more."

But other providers are taking a wait-and-see approach.

"We are experimenting with how we do those bundles and how we get feedback from customers, and are still very much in those initial stages as we look at our offerings," explained Teresa Elder, CEO of cable company WideOpenWest (WOW), during her company's recent quarterly conference call. WOW recently joined the mobile industry via a deal with Reach Mobile, and Elder is a longtime wireless veteran, having held leadership roles at the likes of Clearwire and Vodafone. "We plan to keep you posted as we go further."

How Elder and other executives navigate the new market for bundling remains to be seen. But it's possible they'll begin worrying more about their finances and less about their growth if the economy tightens any further.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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