The boundaries between the mobile operators and the cable providers are blurring in many countries, but nowhere more clearly than in the US, where Comcast has finally signaled serious intent to move into the mobile turf, while Verizon and AT&T are trialling 5G for fixed wireless, which will enable them to broaden their reach and put new pressure on their cable rivals.
Most service providers in all developed markets are chasing quad play platforms as a way to increase their market share and their share of consumers’ overall communications and media spend. This is one of the few ways to offset the trends towards price erosion and lower ARPU for each element of the multiplay, and to help justify the huge investments in infrastructure which mobile and fixed broadband require.
On both sides, consolidation has been going on for several years as operators seek economies of scale and try to add missing fixed or mobile infrastructure pieces to their platforms. In the US, telco and MNO consolidation has been a feature of the market for almost a decade, effectively reassembling AT&T, and the increasing strength of the big two players has forced a reaction from the next two – Sprint being acquired by Softbank and T-Mobile embarking in its disruptive ‘Uncarrier’ strategy. But neither of those MNOs have significant fixed-line or TV assets or partnerships, which limits their options – TMO looks likely to keep taking advantage of the low end of the consumer space with its agile pricing and promotions, at least until it is acquired itself; while Sprint would do best to pursue a wholesale-oriented model which could target the enterprise with planned small cell roll-out, and prepare for 5G and network-on-demand.
For Verizon and AT&T, though, the immediate threat to their consolidated fixed/mobile power comes from the major cablecos, which have been going through their own series of mergers in recent months. The cable operators have made initial and disruptive steps into wireless and quad play with aggressive build-out of WiFi hotspots and homespots, to create a dense alternative wireless network in some areas, achieving near-national coverage via the CableWiFi roaming alliance. This enables the cablecos to launch WiFi-first mobile or data services which minimize the fees payable to the MNOs (the MVNO agreements which most of the large cable carriers have with Verizon will be valuable for full wide area coverage, but most consumers can stay on WiFi for 90% of the time).
Despite these potential opportunities, the largest cableco, Comcast, has been cautious about harnessing its huge WiFi base, or its Verizon MVNO, so far. That looks like changing next year, though. The cableco has confirmed it will activate its MVNO agreement and launch wireless services in 2017, an action that might have been even more impactful in 2015, but is still likely to shake up the US cellular market dramatically.
Verizon will charge Comcast for usage of its cellular network, but Comcast’s crown jewels are its 15m WiFi hotspots across the country – so if it can ship off around 70% of data usage onto WiFi networks, which will cost it basically nothing. The major advantage here is that operators will see less churn because consumers use less data thanks to automatically connecting to WiFi everywhere. So far Comcast has just had a small fraction of revenues from charging non-subscribers to use the WiFi hotspots.
The prospect of nationwide roaming via hotspots and homespots is a thorn in the side for mobile operators, especially with the roaming initiatives of the CableWiFi Alliance and Wireless Broadband Alliance. The former, a venture between Comcast, Bright House Networks (Charter), Cox Communications, Cablevision’s Optimum (Altice) and Time Warner Cable (Charter), now has 500,000 hotspots. Through its recent M&A activity, newest member Charter is poised to roll out homespots on the basis of sharing them with the alliance – this has the potential to disrupt the wireless landscape in the US by creating a massive national network of quality-assured WiFi access points, which could be a low cost alternative to cellular for many applications.
The CableWiFi Alliance’s network roll-out will also be boosted by the Wireless Broadband Alliance which revealed agreements to allow movement between 23 operators of city networks, plus Cablelabs recently pledged to launch a roaming hub for up to nine US cable operators by the start of next year.
The disruptive arrival of Free Mobile in France in 2012 as a fourth mobile operator was well publicized, and much more recently was Reliance Jio’s aggressive move to shift the Indian market towards data-only mobile plans. If AT&T continues to charge over $100 a month for an unlimited mobile data package, then it will start to suffer. The only way AT&T will be able to stay competitive is by making the most of the content clout of DirecTV, and not counting DirecTV mobile over-the-top data into monthly caps.
T-Mobile’s customer base in the US is looking tough to catch, due to the disruptive Binge On offering, with some 100 OTT services now signed up. T-Mobile US has come out this week with claims that in Q3 so far it has won 400,000 postpaid phone customers from AT&T, 300,000 from Sprint and 250,000 from Verizon. Sprint, on the other hand, has had its network ridiculed, with Verizon’s latest advertisement firing shots at the smaller carrier, bragging that Sprint has four times less 4G coverage in the US than Verizon. So the big likely losers here will be AT&T and Sprint.
This is an abstract of a paid article from the wireless watch service. Learn More