Comcast drops mobile bomb – Could rob 10m subs

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Comcast has been preparing Xfinity Mobile for the past two years

It is a marketing tsunami set to take 8 to 10 million lines

It claims its mobile deals are 13% below rival charges

Comcast has been preparing its Xfinity Mobile announcement for the past two years, so its launch has hardly been a shock – and in its early days, it looks unlikely to trouble the major mobile operators too deeply. However, to dismiss it as just the latest in the US’s long and mainly unsuccessful history of MVNOs would be to ignore its potential to disrupt the telecoms landscape. Indeed, Wireless Watch’s sister service, Faultline, which analyzes the digital video markets in depth, believes Comcast will, over time, unleash a “marketing tsunami” which could take 8m to 10m lines from incumbent MNOs in just a few years.

Pricing is competitive but not the defining feature of the offering, whose disruptive potential lies more in its flexibility, convenience and ease of use. There are no service fees for up to five phones per home, with unlimited free calls and texts. Only data costs money and it comes in two flavors – unlimited at $45 per month for an existing customer of Xfinity X1 (Comcast’s premium service, which accounts for 25% of its base); or $65 for a regular subscriber. This ticks the number one box for any quad play bundle – adding stickiness to the existing services. For now at least, Comcast will not target non-subscribers.

For those who do not need unlimited data, there are deals for $12 per GB, and if they find they would be better off on an unlimited plan, there is a no-quibble, one-touch switchover option during any given month. The unlimited plans are throttled above 20GB.

The pricing and flexibility adds another player to the current mobile price wars, which have seen the US operators return to the unlimited plans they rejected a few years ago. Comcast is undercutting many of the MNO deals, claiming its deals are between 13% and 44% below rivals’ charges.

But more disruptively, it is also a WiFi-first provider, which means it can take on the low cost WiFi-driven MVNOs like Republic Wireless, but with all the brand recognition and customer service resources of a cableco to sweeten the deal for higher value users. The network is automatically WiFi-first – no configuration or rooting around in settings required; the handset just diverts to Xfinity WiFi wherever it can. Comcast is now up to 16m Xfinity WiFi hotspots and homespots, and it suggests that 80% of all its wireless data will go over WiFi. However, there is currently no support for WiFi Calling.

There are limitations to this, some imposed by the restrictions of being an MVNO. For instance, Comcast will not support seamless hand-off of voice or data between WiFi and the cellular network, which is supported by its MVNO arrangement with Verizon. This feature – which is supported on Google’s Fi MVNO service and some other WiFi-first offerings – is promised in future, but at launch, if a customer moves out of range of an Comcast or partner hotspot, the internet connection will drop until the mobile device re-establishes Verizon connectivity.

On the handset side, the company is offering iPhones, or Samsung or LG Android smartphones, either paid-for upfront or over 24 months in interest-free instalments.

Comcast is a master at selling such services on the web and Xfinity Mobile will be in every bundle offering, and never more than one click away from the website. Purchasing options are genuinely child’s play, as demonstrated during the launch – and support can be delivered over text, an industry first with the support number pre-loaded on the phone.

If the US experience is anything like that in France, where Free managed to get 12m subscribers from 5m existing customer homes over four years, then Comcast’s scale could attract multiple tens of millions of customers over the same timeframe from its 20m-plus homes. It says the service will be profitable at mid-single digit percentages – say 5% of homes take a mobile plan (which would be 1m phones), then Comcast will be making money.

Faultline analysts wrote: “If fewer than 100,000 sign up per month we would be shocked, and we would guess more like three times that number, totaling a 1m a quarter, with the bulk of them coming from AT&T, Sprint and Verizon. There are 130m individuals living in Comcast homes, and the cost of sale for Comcast will be almost nothing – existing mailshots, campaigns and promotions which cost Comcast $3.3bn a year will simply expand to have a mobile element and Xfinity retail stores will grow to put almost everyone within a 15-minute drive of hands-on help.” There are currently 500 Comcast stores, compared to 4,000 for T-Mobile, for instance.

“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,” said Greg Butz, president of Comcast Mobile. “WiFi is not factored into our business case. It’s just upside from our standpoint.” He claims that the service can be cashflow positive per-subscriber even without WiFi, and without looking beyond the Comcast footprint.

Cost efficiency for Comcast, and service flexibility for users, as well as the well-tested convenience of a quad play bundles, are the real danger points for established MNOs – not the pricing per se.

“Relative to peers, the $45/line offering is competitive with AT&T and Verizon for both single and multiline plans ($180 for four lines), though, not surprisingly, above both Sprint and T-Mobile,” analyst Mike McCormack of Jefferies wrote in a research note. “The $65/line plans appear less competitive when moving beyond two lines. For consumers with limited data usage, there is also a metered pricing option for $12/GB with the option to switch to unlimited without penalty. Unlike peers, families can mix and match between unlimited and metered pricing.”

Comcast hasn’t yet given a firm date for commercial launch, just saying it will offer the new service “soon”, initially to its existing footprint, but later on a wider basis. For now, it is offering the service, which has been in test with small numbers of its employees, to any of its workers, presumably to test customer reaction and usability, and identify any scaling problems ahead of full public availability.

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Caroline has been analyzing and reporting in the hi-tech industries since 1986 and has a huge wealth of experience of technology trends and how they impact on business models. She started her career as a journalist, specializing in enterprise and carrier networks and in silicon technologies. She spent much of her journalistic career at VNU Business Publishing, then Europe’s largest producer of technology publications and information services . She was publishing director for the launch of VNU’s pan-European online content services, and then European editorial director. She then made the move from publishing into technology market analysis and consulting, and in 2002 co-founded Rethink Technology Research with Peter White. Rethink specializes in trends and business models for wireless, converged and quad play operators round the world and the technologies that support them. Caroline’s role is to head up the wireless side of the business, leading the creation of research, newsletters and consulting services focused on mobile platforms and operator models. In this role, she has become a highly recognized authority on 4G systems such as LTE and WiMAX, and a prolific speaker at industry events. Consulting and research clients come from major mobile operators, the wireless supply chain and financial institutions.

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