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Altice USA's 'Full' MVNO Puts It in SIM City

Jeff Baumgartner
9/7/2018
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Keeping churn in check and controlling the user experience are among the big benefits that fueled Altice USA's decision to strike a "full" MVNO deal with Sprint, CEO Dexter Goei said Thursday at the Bank of America Merrill Lynch 2018 Media, Communications & Entertainment Conference.

And controlling that experience goes well beyond simple phone features such as call-forwarding and call-waiting but enables Altice USA to execute on a grander fixed and mobile services strategy, Goei said. He also said the approach holds a clear advantage over the "light" MVNO deals that fellow cable operators Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. have struck with Verizon Wireless . (See Altice & Sprint Ink MVNO Deal and Charter's Spectrum Mobile Goes Full Market .)

Altice USA's approach, which factors in the core network, will also enable it to work with various roaming partners without having to switch out the SIM (subscriber identification module). Still, Altice USA has expressed concerns that the proposed T-Mobile US Inc. -Sprint merger could have detrimental effects on the cableco's MVNO pact with Sprint Corp. (NYSE: S). (See Altice USA Urges FCC to Deny, Alter T-Mobile/Sprint Deal .)

It's Altice's experience that switching the SIM card leads to 30% to 40% churn of the customer base, Goei said, noting that Altice USA is in position to onboard all of the nation's four MNOs (mobile network operators) on to its network without having to make that exchange.

"We own the SIM," he said. "We are our core network that is tethered to our SIM card."

Altice USA is still planning to launch its mobile offering in Q1 2019, but Goei wouldn't discuss pricing and packaging or which devices will be supported out of the chute. (See Altice USA: 'Wait Till Next Year!' )

But he did touch on the network-related activity, as Altice USA is expanding and densifying its network by deploying Sprint's small cells and investing more heavily in its own WiFi network through external hotspots and those built into the Altice One, Altice USA's all-services gateway for video, voice and data. (See Altice USA Rolls Out Uber Set-Tops.)

The exec also offered a small update on Altice USA's work to deploy a fiber-to-the-home (FTTH) network in its Optimum footprint (the former Cablevision Systems service area), and in some of the systems that came way of the Suddenlink Communications acquisition.

Altice USA hopes to begin rolling out fiber-based CPE (customer premises equipment) by the first half of next year, when the company starts to "commercialize heavily" on its FTTH product, he said. That fiber-based device will be a headless gateway and use WiFi to distribute data and video services throughout the home.

"You'll no longer be tethered to the wall, and you're going to completely bypass the in-house coax infrastructure, which creates massive issues with service calls," Goei said, adding that in-house wiring is the root cause of about 40% of service-related issues.

Altice USA's decision to build a FTTH network is contrary to the view of many other US cable operators that are instead pushing fiber closer to the home (but not all the way yet). Instead of going FTTH, they are deploying DOCSIS 3.1, with an eye toward Full Duplex DOCSIS, an extension to D3.1 that will support multi-gigabit symmetrical services over HFC networks.

Part of Altice USA's rationale, Goei said, is that the leap to FTTH will produce significant opex and capex savings and deliver better network performance, as it positions Altice USA to be "10-Gig ready."

The company isn't revealing what it will spend on its FTTH upgrade (it's "cheaper than you think," Goei said, hinting that the costs will be less than €500 -- $579 -- per home passed). But Altice USA sees a payback in about two to two-and-a-half years just on the reduction on opex and capex related to the build, he said.

Despite pay-TV sub losses that are affecting most cable operators, video is still an "attractive" business, as gross margins are still in the 40% range, depending on the product, Goei said.

At the same time, Altice USA will continue to integrate OTT services, including new virtual MVPDs, onto its Altice One box. Part of the rationale is that weaving in services from virtual MVPDs will give the MSO another video option when a customer churns off the MSO's own pay-TV product while still providing them with broadband and other services.

"Hopefully we get incentivized to sell a vMVPD or other OTT application, which is going to replenish our gross margin and gross profit going forward," he said.

If providing more choice means letting a customer get a pay-TV service via an OTT-delivered service over the Altice One box, "we're fine with that," he said.

— Jeff Baumgartner, Senior Editor, Light Reading

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