Charter Is Preparing to Build a Wireless Network

Cable company Charter Communications is widely expected to begin construction on a wireless network in select locations in its cable footprint, a move that would reflect the company's desire to expand its reach into the mobile industry.

According to several sources outside of the company who are familiar with its plans, Charter is getting ready to build LTE coverage areas using 3.5GHz CBRS midband spectrum in locations where it counts a large number of customers using its Spectrum Mobile MVNO service. The company is planning to use eSIM technology to push customers' mobile traffic from Verizon's LTE network and onto Charter-owned cell towers, where they're available, in order to reduce the amount of money Charter pays to Verizon for wholesale access to Verizon's LTE network.

Charter is also expected to leverage its wireless efforts to expand its core business of selling Internet access to consumers and businesses. Specifically, the company is expected to use fixed wireless technology on the outskirts of its wired network footprint in order to reach additional customers with its Internet offerings. Selling Internet access through fixed wireless is often faster to deploy and less expensive to build than via a wired network.

In deploying fixed wireless, Charter would join a large and growing number of telecom and cable operators -- including Midco, C Spire, Windstream and AT&T -- that are using fixed wireless technology to expand the number of customers they can sell Internet services to.

Charter officials declined to comment on the situation to Light Reading.

However, Charter CFO Chris Winfrey did discuss the company's interest in midband spectrum and why it looks attractive to the MSO when he spoke Thursday at the Bank of America Merrill Lynch 2019 Media, Communications & Entertainment Conference in Beverly Hills, Calif.

Midband spectrum, Winfrey said, "is potentially attractive for network extensions, particularly in rural environments." Winfrey added that midband spectrum "could be a very big complement to our existing WiFi small cells as well as a mobility platform for high usage areas."

Winfrey also declared that Charter (and other cable operators) are particularly well-suited to make use of small cells that use midband spectrum, given the US cable industry's deployment of fiber as well as its access to power and rights-of-way throughout their footprints.

Assembling the wireless team
Charter has already amassed a deep bench of top executives with extensive experience in building wireless networks. The chief of Charter's mobile operation, Danny Bowman, comes from Samsung and Sprint, while Charter's Craig Cowden hails from Sprint, Justin Colwell and Muhammad Gill both come from AT&T, and Manish Jindal is from Ericsson. Almost all of Charter's mobile executives joined the company around 2016, when Charter acquired WiFi network construction company Clearview Networks. Craig Cowden joined Charter following its acquisition of Bright House Networks.

Charter would follow the lead of Altice USA in building a wireless network covering parts of its cable footprint. Altice USA has already deployed more than 20,000 LTE small cells in parts of Long Island and elsewhere that sit atop its wired cable network. The small cells help to reduce the amount of money Altice must pay Sprint for wholesale access to Sprint's network, and they are a big reason why Altice USA's own mobile offer, the recently launched Altice Mobile, is only $20 per month per line for its cable customers.

"We believe Comcast and Charter are looking at the Altice model, and if proven successful, could also look to migrate to an infrastructure-based strategy," wrote the analysts at Wall Street research firm Cowen in a recent report to investors. "Admittedly, the $20 price point could be difficult to replicate given Altice's uniquely small/dense Optimum footprint. Nonetheless, Comcast and Charter could look to core network ownership for improved network mgmt. and lower roaming partner costs."

The analysts added: "We believe one of the key roadblocks to Core/HLR/SIM management has been the device and SIM providers. Altice already had the scale and relationships with device/SIM providers in Europe/Dominican and leveraged these relationships for the US infrastructure build. Now that Comcast and Charter are scaling, they could contemplate this build."

Other analysts agreed. "The key impact of the Altice MVNO is that it may serve as a valuable template for other cable companies," wrote the Wall Street analysts at New Street Research in a recent note to investors. "We value the MVNO for Comcast and Charter at $5 and $98 per share, respectively. If Comcast and Charter can follow in Altice's wake and halve their MVNO costs, value creation from wireless could be twice as high."

Looking for owner's economics
The Cowen analysts estimated that Charter pays Verizon $3.09/GB for wholesale access to Verizon's LTE network, a price that declines 25% annually. Charter launched its Spectrum Mobile MVNO running on Verizon's network last year, and has so far accumulated 518,000 lines of service. The Cowen analysts expect Charter to reach 3.5 million mobile customers by 2023, representing around 6% penetration of its broadband Internet customer base.

Indeed, "owner's economics" have been an element in Charter and Comcast's mobile strategy from the beginning. The companies currently offload their mobile customers' traffic to the millions of public WiFi hotspots they own. However, according to figures from Tutela, Charter hasn't been able to push a meaningful amount of its mobile traffic off of Verizon's network and onto its public WiFi networks. Thus, an LTE network by Charter would essentially represent an expansion of an existing strategy.

Charter executives have made no secret of the company's interest in wireless technology. Charter's Cowden offered a detailed look at the cable company's 3.5GHz tests in 2017, and since then Charter has hinted at numerous other tests of wireless operations in a variety of spectrum bands. Further, earlier this year Charter's CEO said the company is "testing the possibility to broaden mobile capabilities of our network using a combination of dual SIM technology and unlicensed and potentially licensed spectrum." The FCC in the coming days is expected to open the CBRS 3.5GHz band to some unlicensed operations, and Apple is now supporting the band in its newest iPhones.

Charter's interest in building an LTE network in CBRS spectrum marks the most recent attempt by a cable company to build a wireless network. For example, Cox Communications operated its own wireless network for years until it decided to shutter that effort in 2011. And Comcast built LoRa wireless networks for IoT operations in a handful of cities until shifting its MachineQ strategy earlier this year.

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

Jeff Baumgartner, Senior Editor, Light Reading, contributed to this report.

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