It's widely viewed that Comcast and Charter have less-than-stellar MVNO deals with Verizon. Their mobile-facing deals with Apple aren't much to phone home about either.
To provide critical access to the iPhone for their new mobile products, both Comcast and Charter were compelled to make deals with Apple that require the operators also to sell large numbers of other Apple devices, and not in financially favorable terms, CNBC reported, citing multiple unnamed sources said to be familiar with those agreements.
In the case of Comcast, the operator agreed to sell iPads at discounts and absorb the subsidized cost, while Charter's agreement skews toward the Apple TV box, according to CNBC. Comcast declined to comment on the CNBC report; Charter has been asked for comment.
But if the CNBC report holds true, it appears that the cable guys, In Seinfeldian terms, have "no hand" in this relationship:
Comcast's agreement requires the MSO to sell a certain number of subsidized iPads, believed to be "thousands," per the report.
CNBC said Charter isn't saddled with the same subsidized iPad sales requirement, but its version of the agreement has made Charter a key distributor and partner for the Apple TV, paving the way for the MSO to use the Apple TV as an option for a video customer's primary set-top box. According to CNBC, that deal has established Charter as the largest third-party seller of the Apple TV, which has struggled to gain ground against rival streaming platforms Roku and Amazon's Fire TV.
In January, Charter launched a version of its Spectrum TV app for Apple TV, and allows customers to get an Apple TV 4K device as part of their monthly subscription for $7.50 per month for 24 months toward an ultimate purchase of the box. Charter was also the first US cable operator to adopt Apple's new zero sign-on experience, a feature that allows Charter subs to access the MSO's app on Apple TV (in their place of residence, of course) without having to input their user names and passwords.
By comparison, Comcast and Apple have yet to hammer out a deal that would bring Comcast's Stream app to the Apple TV even as the cable operator has introduced or has plans to introduce apps for other platforms, including Roku TVs and players and smart TVs from LG Electronics and Samsung.
Started at zero
That Apple would be able to exert such leverage over Comcast and Charter with respect to mobile isn't terribly surprising. Their mobile products -- Xfinity Mobile and Spectrum Mobile -– entered the market with no subscribers and those businesses remain in the relative startup phases, so it follows that they would not be in position to demand the kind of deals that AT&T, Verizon and T-Mobile can get for the iPhone and attached sales requirements of iPads and other devices. With respect to mobile, it seems Comcast and Charter need Apple more than Apple needs Comcast and Charter.
But the cable ops are making some headway as they strive to achieve scale with mobile and remain confident that their mobile products are on track to achieve standalone profitability. Using simplified unlimited and by-the-Gig service plans targeted to broadband subs, Comcast and Charter now had 1.7 million mobile lines combined through Q1 2019 -- 1.4 million for Xfinity Mobile and 310,000 for Charter.
If that trend continues, they might be able to hammer out a more favorable deal with Apple. And, perhaps in a quid pro quo, it's possible that Comcast could secure a better deal with Apple for the iPhone if it greased the skids a bit with respect to its support (or lack thereof) of the Apple TV.
It's not clear how having a less-than-optimal deal for the iPhone will materially hinder those profitability plans (after all, both Comcast and Charter also support a variety of Android phones), but it does seem relevant to a broader debate that they'll likely be pressed to iron out a better MVNO deal with Verizon or seek out other options to improve the financial prospects of their mobile services.
In April, MoffettNathanson analyst Craig Moffett said their current MVNO deals aren't likely to be profitable without a new agreement entering play amid the early phases of the 5G era. Even as Charter and Comcast look to offload MVNO traffic with WiFi and possibly with CBRS spectrum, the path to profitability "looks cloudy," he said. Moffett suggested that the cable ops and Verizon might be better served with a new, more collaborative deal focused on network convergence and small cell deployments and access to backhaul capacity that is financially attractive to both sides.
T-Mobile and Sprint reportedly are considering divesting some of their combined spectrum to get their merger done, and Comcast and Charter were among those viewed as possible buyers. Charter didn't comment on that report, but Comcast stressed that it has no interest in acquiring any spectrum that might be divested by T-Mobile and Sprint.
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- Comcast, Charter MVNO Deals Are Bad for Everyone – Analyst
- Could Cable MSOs Buy Some of T-Mobile's Spectrum?
- Comcast's Mobile Sub Growth Slows, but Other Mobile Metrics Improve
— Jeff Baumgartner, Senior Editor, Light Reading