Cable Guys Skiing Uphill

For US cable operators, wireless success isn’t easy

In 2017, Comcast launched its Xfinity Mobile service by taking advantage of an agreement with Verizon to use its wireless network. Comcast became a start-up mobile virtual network operator (MVNO), but one that already had more than 25 million households to sell wireless services to. But despite a very competitive offer, Comcast has been picking up new mobile subscribers at a slower pace than expected.

During the first quarter of 2019, Comcast reported that it added 170,000 mobile subscriptions, bringing its total after two years to 1.4 million. The gain was the lowest since the service became widely available. Comcast reported wireless revenue of $225 million for the quarter, which comes to about $57 per line — that’s not average revenue per user, but rather includes monthly smartphone payments. Comcast lost more than $100 million during the quarter providing cellular services and has reported significant losses since the launch of Xfinity Mobile.

Charter Communications, which launched its Spectrum Mobile service as an MVNO through a resale agreement with Verizon in the second half of 2018, won 176,000 wireless subscribers during the first quarter of 2019. The offering now has a total of 310,000 mobile lines. Revenue from the wireless business reached $140 million and costs hit $260 million. As it is for Comcast, providing cellular services is a loss leader.

Together, Comcast and Charter have less than 1% of the US post-paid phone market. The intention of expanding bundles to include mobile connectivity aims to prevent churn from fixed-line services, as a growing number of consumers cut the cord altogether. Furthermore, wireless service providers are beginning to offer home broadband services through 5G. It’s a two-way encroachment.

Altice USA, which provides cable services to about 5 million households through its Optimum and Suddenlink Communications brands, will soon introduce mobile services through a deal with Sprint. If Comcast and Charter are pulling in something in the neighbourhood of 200,000 subscribers per quarter, given its smaller size, Altice will probably have to settle for fewer.

Altice says that it will be different from a typical “light MVNO” that competes mainly on price, with narrow margins. The operator has described its infrastructure-based MVNO as an arrangement in which it relies “critically, but minimally” on mobile network infrastructure. Altice plans to use its own core infrastructure, giving it more control over its wireless service.

It’s true that the nature of Altice’s wireless plans differs from that of the arrangements involving Verizon, Comcast and Charter. Under the terms of the Altice deal, Sprint will add small cells on Altice’s network. Sprint will pay nothing to Altice other than construction costs. In turn, Altice gets to use those small cells at no cost. Sprint has already deployed about 19,000 small cells on Altice’s network in the greater New York area.

Altice is the fourth-largest cable provider in the US, with its customers residing in the New York City region, as well as in some Midwestern and Southern states. Altice is more geographically concentrated that its larger rivals.

Altice will provide cellular services using a close partnership with Sprint. The companies hope that this will be a win-win situation, but the effort still faces many of the same challenges as that of Comcast and Charter. The operators are up against well-entrenched competitors in AT&T, T-Mobile and Verizon, which report low post-paid churn and boast a significant retail presence in the country. It will take something special to pull in loyal customers. So far, the track record has been spotty.