Cable Conversion Is Increasing Competition In Wireless Space
Over the last year, more than 100 million consumers have gained access to a new option for a mobile service provider, as Comcast and Charter (and soon Altice) are now providing competitive mobile phone and broadband options. Any analysis of competition in the wireless industry must reflect these new entrants and new service offerings available to consumers.
In the near future, consumers will be gaining even more connectivity options as 5G will continue to move mobile broadband closer to becoming a possible full substitute for fixed broadband service. Cable operators will also be able to leverage their millions of miles of existing low-latency fiber and coaxial cable networks, along with 5G and WiFi hotspots to be even stronger competitors for mobile services.
Assuming that national policy allows for the rapid and efficient deployment of 5G, these advances will play a key role in helping to reduce the digital divide between rural and urban communities. 5G deployment will also enhance the price competition between mobile and fixed broadband services, further benefiting consumers.
So how have cable operators all of a sudden started offering mobile services? Comcast and Charter just activated what is called a Mobile Virtual Network Operator (MVNO) agreement with Verizon. This allows the cable operators to offer guaranteed wireless service with a national footprint (on Verizon’s network), while also being able to rely on their existing fixed broadband network and millions of WiFi hotspots (through a Cable Consortium) to offload a majority of mobile data traffic and -- for many wireless communications -- bypass the cellular network altogether. These companies combine fixed wireless (via WiFi hotspots) with wireless services (via MVNO agreements).
In this sense, cable operators with MVNO agreements are quite different from previous MVNOs, such as TracFone or Straight Talk, that also resell services from traditional wireless companies, but rely entirely on the facilities and networks provided by the traditional wireless companies (Mobile Network Operators or MNOs). Instead, cable operators offering mobile services are more of a hybrid between MVNOs and traditional wireless companies, and more accurately represent a new class of wireless providers: Hybrid Mobile Network operators (HMNOs).
The CableCos’ combination of a significant customer base, an MVNO agreement allowing access to a high-quality network, and their own fixed broadband networks has enabled rapid wireless growth. In just a year of operation, Comcast’s mobile service has attracted 781,000 customers. In the second quarter of 2018, Comcast gained more subscribers than Verizon or AT&T. Charter only started offering service this summer and Altice plans to begin in 2019. While these cable operators are new providers, with their hybrid mobile networks, they are immediately able to scale mobile wireless services to a national level and have the added ability to offer triple or even quadruple bundles of fixed broadband, video, fixed telephony, and now mobile wireless services/fixed broadband. The impact of the entrance of cable operators is already significant and will continue to grow as further deployment of WiFi hotspots and 5G networks occurs.
Previous regulatory analysis of competition in mobile services has intentionally ignored the role of Mobile Virtual Network operators, despite their competitive significance, because MVNOs traditionally did not own their own facilities. The recent entry of cable operators through MVNO agreements, but really acting as Hybrid Mobile Network operators, offers a fundamentally new breed of competition within mobile services. Hundreds of millions of consumers have just gained an additional high quality, cost effective mobile service option. This is good for consumers as it imposes significant price and quality discipline in the industry.
It also means that it would be a mistake to not consider this significant new competition in the wireless industry. These developments, as well as the introduction of 5G, are leading to greater and greater substitution and convergence between fixed and wireless networks and the fixed and wireless industries. Simply put, the technological walls that once existed between fixed and mobile are dissolving.
Changes in communications services have been astounding in the last decade. It is important that regulators and policymakers recognize these changes and move away from previous policy stances that are now relics of the past.
In a world in which wireless companies, cable operators, MVNOs, satellite companies and 5G providers are directly competing, it is anachronistic to view these markets as independent of one another. Any analysis of the wireless market must include the competitive effects and price discipline that hybrid HMNOs are bringing – and will increasingly bring – to the market.