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Comcast's new mobile service may be WiFi-first, but that only applies to data usage at launch, not traditional voice calls.
April 6, 2017
Comcast is launching into mobile, and that's market-impacting news no matter how you slice it. But one of the cable company's big financial advantages over incumbent carriers is supposed to be that it can use its existing WiFi footprint in addition to a reseller agreement with Verizon for customer connectivity. And as it turns out, that WiFi advantage only applies initially to consumer data usage, not to the voice calls that anchor a traditional mobile service.
With the introduction of Xfinity Mobile today, Comcast Corp. (Nasdaq: CMCSA, CMCSK) is getting ready to activate a service that relies entirely on Verizon Communications Inc. (NYSE: VZ)'s network for phone calls, while also automatically connecting customers to Xfinity WiFi hotspots for online activity. Even with data usage, Comcast won't support seamless handoffs between its WiFi footprint and Verizon's cellular network. If a customer moves out of range of a Comcast hotspot, the user's Internet connection will drop until the mobile device re-establishes Verizon connectivity.
Comcast has clarified that both WiFi calling and seamless handoffs will be added to the Xfinity Mobile service. But neither function will be available at launch.
Diving into the details of the new offering, Comcast is partnering with Apple, LG and Samsung for mobile handsets and giving customers the option of paying for their phones upfront or signing up for monthly payments. Xfinity Mobile will be available with two different pricing models. Customers can choose either unlimited data, or per-gigabyte pricing at $12 per GB per month.
Importantly, Xfinity Mobile will only be available as part of a bundle with other Xfinity services, meaning that only consumers in the cable company's service area (and no business customers to start) will be able to buy the wireless offering. Comcast is also placing a clear priority on its highest-value customers in selling the new product. For subscribers with some of the top-tier X1 packages, an unlimited mobile data plan will only cost $45 per month, with no additional line access fees. That's significantly cheaper than most unlimited plans on the market, and Comcast estimates that about 25% of its customers fall into this category.
However, the cost for an unlimited plan goes up substantially for lower-tier Xfinity subscribers, rising to $65 per month per line.
Unlimited data also comes with a caveat. Comcast can throttle speeds after a customer uses 20 GBs in a month, not including an initial 100 megabytes of shared data bubdled with Xfinity Internet service.
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Other downsides include the fact that Comcast won't offer family plans, at least not right away, and users won't be able to bring their own devices to the Xfinity Mobile service at launch. Instead, they will be required to purchase a phone through Comcast.
On timing, Comcast executives have said they're rolling out service to employees now, but there's no date yet for commercial launch.
Next: Financial questions
The big question mark around Xfinity Mobile is whether Comcast will be able to reap the benefits of its WiFi footprint without suffering from the negatives inherent in using a best-effort network. On the one hand, Comcast believes it can use its WiFi assets to steer traffic away from Verizon's network and mitigate the costs of its mobile virtual network operator (MVNO) agreement.
On the other hand, if Comcast automatically connects users to WiFi hotspots where performance is poor, then users are likely to get frustrated and either churn away from the service, or turn off WiFi altogether, relying solely on cellular connectivity and Comcast's unlimited data plans. That's a viable option for consumers, but it's not ideal for Comcast.
Figure 2: Comcast diagram of the Xfinity Mobile service automatically connecting to different networks.
Further, WiFi quality and seamless handoffs are an issue for standard web browsing and messaging, but they're even more difficult to contend with when voice calls or streaming media enter the equation. If users are regularly mobile, rather than just using their mobile devices from a fixed location like home or the office, then Verizon's cellular network becomes the only legitimate option for connectivity. And that will cost Comcast money.
Comcast is not stupid. Company executives have spent years trying to figure out how to make a wireless offering profitable, and they've concluded that the way to do it today is not to rely too heavily on WiFi service. While Comcast regularly hypes its 16 million WiFi hotspots, the company also knows that its WiFi footprint will only deliver limited economic benefits in the immediate term. To that end, Comcast has designed Xfinity Mobile to make money in other ways.
In particular, Comcast has focused on lowering its promotional and sales costs by targeting existing Xfinity customers and leveraging bundled services to increase customer loyalty and decrease churn. The company believes its main cost savings over incumbent wireless carriers will come from greater efficiency, rather than the advantage of having a WiFi network.
"The efficiency that we gain is not just from our great MVNO. [It's] from our lower cost to acquire, which is a big component of a wireless provider's business model, and our lower cost to serve," says Greg Butz, president of Comcast Mobile. "WiFi is not factored into our business case. It's just upside from our standpoint."
The way Comcast has modeled the economics, the company says that over time, it can be cash flow positive per subscriber even with limited mobile market scale, and apparently even without relying on WiFi.
And that gets to one more point. Economics are why Comcast has decided that now is the right time to get into the mobile business.
"We're not market timers. We're running the company for the long, long term. We've been actually working towards this for a long time, so we're not trying to pick a moment in time as the opportune moment to get in," says Comcast CFO Mike Cavanagh. "What I would tell you is, we're ready."
— Mari Silbey, Senior Editor, Cable/Video, Light Reading
Senior Editor, Cable/Video
Mari Silbey is a senior editor covering broadband infrastructure, video delivery, smart cities and all things cable. Previously, she worked independently for nearly a decade, contributing to trade publications, authoring custom research reports and consulting for a variety of corporate and association clients. Among her storied (and sometimes dubious) achievements, Mari launched the corporate blog for Motorola's Home division way back in 2007, ran a content development program for Limelight Networks and did her best to entertain the video nerd masses as a long-time columnist for the media blog Zatz Not Funny. She is based in Washington, D.C.
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