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Charter Evaluating CBRS Spectrum Auction

Jeff Baumgartner
10/25/2019

Already deep into mobile and fixed wireless trials using unlicensed parts of the 3.5GHz CBRS band, Charter Communications is now mulling whether to bid for licensed CBRS spectrum when the FCC auctions it off next year.

"The question we're evaluating is, should we be involved in that [auction]?" Tom Rutledge, Charter's chairman and CEO, said Friday on the company's Q3 2019 earnings call. "We haven't determined that yet. But we're looking at it closely."

Tom Rutledge
CBRS is 'a pretty valuable piece of spectrum,' Rutledge said.
CBRS is 'a pretty valuable piece of spectrum,' Rutledge said.

The FCC announced last month that it would open the bidding on 70MHz of CBRS spectrum on June 25, 2020, a move that could provide Charter and others access to a licensed slice of valuable midband capacity. While some carriers eye sizing up CBRS band to help deliver 5G services, that band could likewise be important to cable operators as they seek ways to offload a portion of their mobile traffic and reduce their MVNO-related costs.

"CBRS does work very well," Rutledge said, referring to some trials and pilots that Charter has underway. "It's a pretty valuable piece of spectrum."

While CBRS could help Charter offload mobile traffic in high-density areas, the operator is also testing the band as a fixed wireless technology with non-paying customers in a rural section of North Carolina. Speaking at a Light Reading-hosted session during Cable-Tec Expo in New Orleans earlier this month, Charter SVP of wireless Technology Craig Cowden noted that using CBRS for fixed wireless could help to extend the reach of the HFC network and deliver a bundle of data, voice and video services.

On the mobile side, Charter is testing that capability in parts of New York and Los Angeles using dual-SIM smartphones that can hand off traffic between the macro cell network and CBRS-powered small cells.

"We're quite optimistic about the capability of that strategy and we're quite optimistic about the ability to make select investments in areas where traffic dictates in such a way to move services that we pay rent for onto our own platform," Rutledge said, noting that the opportunity already exists today for Charter with WiFi.

Any such offload opportunities could improve the economics of Spectrum Mobile, a relatively new service from Charter that relies on an MVNO deal with Verizon.

Update: Much remains to be done if Charter is to get a big benefit from traffic offload from CBRS or other means, but the work could be well worth the effort, according to Craig Moffett, analyst with MoffettNathanson.

"If they can offload anything close to half the cost of monthly service onto their own network, it would be a game changer," Moffett wrote in a research note issued Friday. "In essence, they would be bifurcating the network into two buckets."

Charter, he explained, would be poised to take the high return on invested capital (ROIC) in high density parts for themselves, and leave the low ROIC, low density parts to Verizon. "[B]ut they'd be paying Verizon a wholesale price that is undoubtedly based on the average ROIC of the network," Moffett added.

Spectrum Mobile subs accelerate
Spectrum Mobile's sub growth accelerated in Q3 2019, as Charter added 276,000 mobile lines, up from 208,000 adds in the year-ago quarter. Charter ended Q3 with 794,000 mobile lines, with customers mixed between Spectrum Mobile's unlimited and by-the-Gig plans.

Q3 Mobile revenues were $192 million, an increase of $175 million year-over-year, Charter said.

"We're pleased with the trajectory of Spectrum Mobile," said Chris Winfrey, Charter's CFO, noting that the EBIDTA loss per line is lowering even as customers are being added at an accelerated rate.

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— Jeff Baumgartner, Senior Editor, Light Reading

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