Less than two weeks after the conclusion of the FCC's mandated quiet period, Comcast and Charter have forged an alliance to pursue collaborative technology development in the wireless space. Additionally, the two companies have agreed not to sign any independent agreements with US national mobile carriers for a full year, precluding the possibility of a potential merger between one of the cable operators and one of the big four wireless companies. If Comcast and Charter were to seek further dealings with a carrier during the next 12 months, they would have to do so together.
The partnership between Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. carries numerous implications for the cable and wireless industries. It's not clear yet if the two cable operators are considering co-marketing services together, although both companies are relying on the same national mobile footprint via MVNO agreements with Verizon Communications Inc. (NYSE: VZ). However, they have pledged to join forces to take advantage of their combined scale in product and technology development, which should make them more competitive against the existing mobile carriers. This collaboration includes the potential for working together in "creating common operating platforms; technical standards development and harmonization; device forward and reverse logistics; and emerging wireless technology platforms."
In many ways, the partnership sounds almost like a CableLabs association. Members in CableLabs coordinate on technology development and work to create an ecosystem of cable technology that everyone in the industry can take advantage of. In the case of this new deal, only Comcast and Charter invest resources and reap the rewards, but those two companies are also the two operators with the largest presence (and influence) in CableLabs in the US. The deal potentially leaves other cable operators on the outs, but then again, it's not clear that other US cable operators are interested yet in a pursuing a mobile agenda.
There's another interesting dynamic here as well. As much as Comcast and Charter are part of the fraternally minded cable industry, the two companies also often act as foils for each other where technology development is concerned. They developed their own video ecosystems, with Comcast focused on X1, and Charter pursuing its World Box set-top strategy. Comcast has also always been part of the Cable WiFi alliance, while Charter is only involved now through its acquisition of Time Warner Cable and Bright House Networks. Legacy Charter never joined the Cable WiFi group.
The fact that Comcast and Charter are coming together now in mobile suggests that the advantages in scale they can offer each other are just too large to ignore.
From a mobile carrier perspective, the big four operators may now find themselves fretting over a new and stronger wireless competitor. However, a cable partnership was also not wholly unexpected as consolidation continues throughout the broadband, video and wireless industries. The deal between Comcast and Charter also appears to put off the possibility of a merger or acquisition that could have further shaken up the existing mobile landscape. That is, such an M&A deal is off the table for the next year unless the two cable companies go in on a transaction together.
The one thing the new Comcast/Charter deal doesn't solve is either company's lack of spectrum. Comcast recently acquired $1.7 billion worth of spectrum in the 600MHz auction, but that's not enough to create a nationwide network. (See Comcast Wins Spectrum – What's Next?.)
Comcast and Charter may be kicking the spectrum can down the road, or they may be preparing for further coordinated efforts extending from today's wireless deal.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading