Cable's Chance to Get Mobile Right
Cable has a rocky history in mobility. From failed partnerships to the release of spectrum that MSOs couldn't capitalize on, cable operators aren't a model of mobile success. However, a surge in WiFi innovation has renewed the industry's interest in mobility, with the added twist that US cable operators may once again be considering a mobile virtual network operator (MVNO) approach.
Evidence mounts for the cable MVNO
Liberty Global Inc. (Nasdaq: LBTY) CTO Balan Nair made a joke at the SCTE Cable-Tec Expo in New Orleans earlier this month that to know what's coming next at Liberty, all anyone has to do is look at Comcast's agenda and guess that Liberty will soon follow suit.
"Whatever you see Tony build," said Nair, referring to Comcast Corp. (Nasdaq: CMCSA, CMCSK) CTO Tony Werner, "I'm going to copy it."
The joke has a basis in truth because Nair has worked closely with Werner in the past and has often followed the same playbook, right down to collaborating on the RDK Management LLC joint venture, which has created a common IP video software stack for cable set-tops.
However, in the case of mobile, Nair may be paving a path for Comcast to follow. The UK-based cable operator has launched MVNO service in eight markets, and it reported 4.5 million subscribers as of the end of June. According to Nair, Liberty will have more than 8 million mobile subs by the end of the first quarter.
Nair has learned a lot from previous mobility attempts. Citing four different approaches to mobile service, Nair talked about the economic disadvantages of building out your own mobile network, and the operational difficulties operators face in trying to run a "light" MVNO model where someone else controls the SIM card. Nair's preference is for the other two mobile models: buying out an existing mobile service, or running a full MVNO where the cable operator builds out the core network and controls the SIM card, but rents radio access by leasing the mobile base stations.
With the MVNO approach, Nair also recognizes a huge potential role for WiFi. In fact, he said that Liberty is working on developing a WiFi-first device that would seamlessly hand off to a cellular network when WiFi access isn't available. Liberty is hoping to have that product ready in about a year. (See Liberty Global to Try WiFi First.)
And that brings the story back around to Comcast. Comcast has been exceedingly aggressive in building out its WiFi presence and boasts more than 11 million hotspots across the country. But the primary focus for this wireless network today is guest access to WiFi in people's homes, not on creating a new mobile service that Comcast can charge money for and package in a quad-play bundle. In order to launch a true mobile service, Comcast would need something more than its WiFi footprint. It would need access to a cellular network.
It's a reasonable assumption that if Comcast wants to offer a mobile service, it will follow the same strategy as Liberty Global and pursue an MVNO model. Not only do the two CTOs tend to be close in their thinking, but Comcast already has an MVNO option available to it. In 2012, Comcast, Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks jointly owned mobile spectrum assets, which they then sold to Verizon Communications Inc. (NYSE: VZ) in exchange for the ability to partner with the telco in an MVNO relationship.
Critically, Verizon now says that it's been told that the cable companies will execute on that agreement. Details on what that execution might look like are scarce, but the fact that Verizon CFO Fran Shammo mentioned the news in an earnings presentation suggests a move in the MVNO direction may not be far off. (See Verizon Tips Comcast Wireless Service.)
The US cable industry's interest in MVNOs is also supported by vendor buzz at the recent Cable-Tec Expo. At Light Reading's Winning with WiFi breakfast event at the show, Alcatel-Lucent (NYSE: ALU) Senior Director Jeffrey Valley said he thinks cable companies will look at creating a mobile service again specifically because of the MVNO option. In that model, Valley noted that customers can keep one IP address while moving back and forth between WiFi and LTE.
Jeff Templeton, director of sales engineering for NetScout Systems Inc. (Nasdaq: NTCT), agreed. He said he believes that consumers ideally don't want to have to manage two data services and would rather bundle them as one. He noted that launching an MVNO service also gives cable operators a chance to sell phones and to own the quad play.
Ericsson AB (Nasdaq: ERIC) Vice President Solomon Israel was perhaps the most explicit in a later conversation. He pointed out that both AT&T Inc. (NYSE: T) and Verizon have very clearly stated that their strategy is to combine media and mobility, and that cable companies want to compete on the same playing field. Israel said that Ericsson is starting to see MVNO conversations take place among the cable operators, and that there has even been some discussion about possibly trying to purchase spectrum again.
However, Israel also emphasized that mobility in the cable industry starts with WiFi. And that's where the combination of WiFi and cellular begins to make sense.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading