Cable and Wireless

Comcast’s Xfinity Mobile Will Be a Challenge to Incumbents and Itself

Last week, US telecommunication and media company Comcast officially unveiled its mobile service. The offering, called Xfinity Mobile in line with Comcast’s suite of Xfinity-branded consumer telecom services, will be pieced together using its network of 16 million Wi-Fi hot spots and Verizon’s cellular infrastructure. The company didn’t reveal an exact launch date for the service. Last year, we predicted that Comcast would launch a mobile network in the US (see CCS Insight Predictions for 2017 and Beyond).

The news of Comcast’s entry into the mobile business wasn’t unexpected: Comcast had spoken publicly about its intentions on several occasions (see Xfinity and Beyond).

Xfinity Mobile will be exclusively available to its Internet customers. The cost for unlimited mobile access will be $65 per month for subscribers of its fixed-line services and $45 per month for subscribers of the Xfinity X1 package, which is an enhanced Internet and video bundle. The mobile service fees are the same for each line regardless of the number of lines, that is, $65 for one, $130 for two and so on. Each account can have up to five lines.

Customers can also choose a pay-as-you-go plan at $12 per gigabyte. Such lines come with unlimited voice and texts and no monthly line-access charges. This essentially means that subscribers can get a free mobile telephony service if they manage their data consumption carefully.

We believe that all handsets using the service must be Xfinity builds of the models that Comcast will sell. They include the iPhone 7, iPhone 6s, iPhone SE and selected Samsung and LG phones. Customers can pay full price for the phones or choose a 24-month interest-free instalment plan. Customers have to take a device from Comcast and cannot bring their own.

Comcast is unlikely to subsidise devices, but is instead subsidising mobile service fees to make Xfinity Mobile a very competitive offering. The provider hopes this will help grow bundle adoption to prevent subscriber churn. Its offer of unlimited access for $45 for the first mobile line to subscribers of its Xfinity X1 bundle shows Comcast’s intention of retaining those households (see The Data Plan Conundrum). This compares with AT&T’s offer of $90 for the first line, $80 at Verizon, $70 at T-Mobile and $50 at Sprint. Given the trends of cord-cutting and cord-shaving as a rising number of households look to third-party video services, Comcast hopes subscribers do the maths and decide it’s worth sticking around for the mobile discount.

Comcast currently has almost 25 million Internet customers subscribing to at least one of its fixed-line services, representing 20 percent of all US households. More than 9 million of these are double-play subscribers and more than 10 million combine fixed voice, video and Internet services.

We believe that Comcast’s margins will be lower for its mobile service than other communications services. Neither Comcast nor Verizon have disclosed pricing details about the wholesale relationship, but the latter is charging Comcast for data consumed. This is a good reason why Comcast will exploit its expansive network of Wi-Fi hot spots to control the charges from Verizon. Comcast executives claim that 80 percent of wireless traffic currently goes via Wi-Fi, and that Wi-Fi won’t just be a strong complement to cellular, it will be the preferred option. Xfinity-provisioned handsets will connect automatically to Xfinity hot spots.

Comcast has about 16 million Wi-Fi hot spots in the US, which are available for free to its fixed-line subscribers. Most of these hot spots piggyback on routers of Comcast customers, creating a sort of crowd-sourced network primarily within residential areas.

Wi-Fi offloading is a risky variable in Comcast’s mobile service. It’s not entirely untested — Google is using a “Wi-Fi first” model for its Google Fi wireless subscription service — but still feels experimental. The experience of using a smartphone hopping quickly between Wi-Fi hot spots and from a Wi-Fi network to cellular tends to be jagged. Subscribers aren’t keen on taking chances with cellular connectivity and would be unlikely to port their existing cellular numbers into Xfinity Mobile if initial reviews are negative.

Services that rely primarily on a network of Wi-Fi hot spots have had little success on a small scale, not to mention on a massive scale. Google Fi, perhaps the best-known example, is still a niche in the US. Comcast does have the advantage of supporting the most popular smartphone models. Nonetheless, it faces many of the same technical and perception obstacles as other “Wi-Fi first” services.