& cplSiteName &

Comcast, Charter MVNO Deals Are Bad for Everyone – Analyst

Jeff Baumgartner
4/16/2019
50%
50%

The MVNO deals Comcast and Charter Communications have with Verizon Wireless aren't likely to be profitable until new agreements can be made amid the early phases of the 5G era, according to a top industry analyst.

"It should be clear by this point that the current [MVNO] deal is a money loser for the cable operators; it's not profitable and it likely never will be," Craig Moffett, an analyst with MoffettNathanson, surmised in a report on the topic of network convergence.

Comcast and Charter have combined to add some 1.3 million mobile lines so far, and have been bundling mobile services with broadband in their own cable service footprints. Both MSOs have taken on losses during the relatively early phases of their mobile service initiatives, but have expressed confidence that they'll be able to scale up mobile to the point that it achieves stand-alone economics. Comcast and Charter have not said not long that might take.

Moffett said cable operators would be "marginally profitable" on pay-per-gigabyte customers, which has been their focus (rather than the unlimited mobile plans), "but the numbers there are, by definition, small... Churn reduction arguments are nice, but they're really just tie-breakers."

Moffett noted that when Comcast and Charter pursued the MVNO path, it was assumed that they'd be able to offload traffic onto their own small cell networks (usually on WiFi). Cable operators are also looking at the CBRS spectrum as a potential offload option.

Cable operators may eventually get enough traffic offloaded to aid the economics of their MVNO deals, but the "path looks cloudy," Moffett wrote, calling cable's metro, out-of-home WiFi network "a bust" as expansion has grounded to a halt. Indeed, Cable WiFi (the roaming consortium made up of Comcast, Charter, Cox Communications and Altice USA) has been stuck on a combined 500,000 nationwide WiFi hotspots for at least two years.

Build or buy?
Moffett sees a couple of possible paths forward -- buy or build -- though neither is "all that compelling."

The buy option won't be a realistic one if Sprint and T-Mobile get their deal done. Moffett is extremely skeptical that Comcast and Charter would be interested in buying the merged company, in part because it would "require a huge post-acquisition capital injection just to maintain the status quo."

A greenfield network could be a better option given the attractive cost structure cable would have for deploying small cells in multiple markets, but that scenario would result in a network with limited reach. He also doesn't see them buying mid-band spectrum from Dish Network and using it build a network.

Deeper collaboration could hold the key
Moffett suggests that the better path is a collaborative, network-convergence angle that's share similarities to Altice USA's "full," infrastructure-based MVNO deal with Sprint, which includes fiber and small cell buildout provisions. In February, Altice USA said some 19,000 AirStrand small cells with Sprint have been deployed. Sprint is paying nothing to Altice save for construction cost for the small cell itself with no follow-on leasing or backhaul fees, while Altice USA gets to use them for free, Moffett said.

In an ex parte filed on April 12 to the FCC related to the proposed Sprint/T-Mobile merger, Altice USA said it deployed those 19,000 small cells in the New York metro area in nine months. The cable operator suggested that it would've taken Sprint five years to do on its own without access to a local workforce, access to rights of way and fixed network assets.

"It's a rather elegant solution," the analyst said. "Sprint gets a huge cost and time-to-market advantage versus Verizon, AT&T, and, if the deal is rejected, T-Mobile."

The Altice USA/Sprint example involves a small footprint, but Moffett believes that if another major carrier, like Verizon, did something similar with Comcast and Charter on a larger scale, that could be a winner for both sides.

Verizon would get some network densification for its 5G network, and the MSOs, in turn, could lock down a more economically-attractive MVNO deal that, "with enough small cells built on their cable infrastructure, could make money…," Moffett wrote.

While that might seem like a good idea on paper, all of those parties would still need to agree that their current network convergence strategies are in much need of assistance, he points out. "Verizon would also have to concede that their preferred fiber infrastructure, with 1,700 strands of fiber in each sheath, is a nice-to-have… but that Cable’s much more modest infrastructure (typically just two or four strands of fiber) is, well, good enough."

Seeing Comcast, Charter and Verizon getting chummy to that degree might seem far-fetched, but Moffett said there's some precedent here. He refers to to the multi-faceted AWS spectrum deal that was carved out in 2011 -- that deal led to the current cable operator MVNO arrangements with Verizon Wireless and included some wired/wireless technology joint venture activity that didn't really go anywhere.

"The main takeaway here is that convergence doesn't have to mean a mutually assured destruction Armageddon," Moffett wrote. "The route to convergence may now be through strategic partnership."

Related posts:

— Jeff Baumgartner, Senior Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
jbtombes
50%
50%
jbtombes,
User Rank: Light Sabre
4/22/2019 | 5:08:57 PM
Over-engineering, chums
1700 strands vs. 2-4. That's classic telco over-engineering. As for chumminess, whenever I see Verizon mentioned, I ask myself, which Verizon? Cable + VZ wireless makes sense.
More Blogs from The Bauminator
Continuing a growing trend, WOW has become the latest cable operator to combine its broadband service with a skinny bundle OTT-TV offering.
Industry sources say it's extremely unlikely that Charter would do a full syndication deal for X1, but that Charter could be interested in adopting some specific features and capabilities of Comcast's video platform.
As the pay-TV sector continues to struggle, programmer sets launch of several free, ad-supported streaming channels from BET, Comedy Central, Spike and MTV on the now Viacom-owned Pluto TV ad-based OTT service.
Netflix is akin to a 'Blockbuster store in the cloud' while Disney+ will cater to families and fans of The Mouse's well-branded, highly recognized fare, analyst says.
Featured Video
Flash Poll
Upcoming Live Events
September 17-19, 2019, Dallas, Texas
October 1, 2019, New Orleans, Louisiana
October 2-22, 2019, Los Angeles, CA
October 10, 2019, New York, New York
November 5, 2019, London, England
November 7, 2019, London, UK
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
All Upcoming Live Events
Partner Perspectives - content from our sponsors
Transform Beyond Borders to Lead the Innovation
By Ben Zhou, CEO, Whale Cloud
Reject Limits. Build the Future.
By David Wang, Huawei
China Telecom & Huawei Jointly Complete the World's First End-to-End 5G SA Voice & Video Call
By Jay Liu, Senior Marketing Manager, Cloud Core Product Line, Huawei Technologies
All Partner Perspectives