While Verizon Eyes Cable, Comcast Is Well on Way Into Wirelessby
IPhone-friendly service seen attractive to Comcast subscribers
Cable giant restricted from using Verizon brand in offering
Comcast Chief Executive Officer Brian Roberts said Thursday his company’s planned wireless service will support the most popular smartphones. That makes it likely that Comcast subscribers will be able to make calls and surf the web using an iPhone or a Samsung Galaxy, a perk that would give the largest U.S. cable company an advantage over other newer entrants in the wireless market.
For instance, subscribers to Republic Wireless, a Wi-Fi based cellphone service, can’t use iPhones because Apple Inc. won’t allow it, the company’s CEO has said. That has limited Republic’s appeal among Apple fans, said Mark Lowenstein, a wireless industry consultant.
Roberts’s comments on a conference call with analysts shed some light on Comcast’s secretive effort to expand beyond residential TV, internet and phone service and battle rivals such as AT&T Inc. and Verizon head-on in the mobile-phone business. For its part, Verizon is mulling a combination with another cable company, Charter Communications Inc. Verizon Chief Executive Officer Lowell McAdam approached Liberty Media Corp. CEO Greg Maffei about a possible deal with Charter, where Maffei sits on the board, according to people familiar with the matter. Verizon’s approach was first reported by the Wall Street Journal.
Up till now, Comcast had said little about its wireless plans beyond announcing last fall that it will offer the service -- using a combination of its Wi-Fi hot spots and Verizon Communications Inc.’s wireless network -- by the middle of this year. Roberts said Comcast will offer wireless as part of its multi-product bundle as a way to keep consumers from leaving.
Comcast has a deal with Verizon that goes back to 2011 and allows the Philadelphia-based cable company to sell wireless service using the mobile-phone giant’s network. As part of that deal, Comcast is barred from using Verizon’s name on its service, according to people familiar with the matter. Comcast may use its Xfinity retail stores to help sell wireless service, the people said.
“The goal of the business is to have better bundling with some of our customers who want to save some of their bills and get a world-class product and take a bundle and have lower churn,” Roberts said Thursday.
Like other wireless providers, Comcast plans to purchase phones as part of its wireless service and collect payments for them from customers over time, which the company said will cut into cash flow.
Comcast is dedicating 150 employees to the project. They’re led by Greg Butz, a veteran Comcast executive who helped create the Xfinity stores, where customers can buy services and pay bills.
This isn’t the first time the cable industry has tried to connect the growing legions of smartphone owners, and other initiatives, such as a 2007 partnership between several cable providers and Sprint Corp., have faltered. But this is a particularly crucial moment for Comcast and Charter, which is also planning to get into the wireless business. AT&T has moved aggressively onto their turf, offering low-cost TV packages that can be watched on-the-go and don’t count toward monthly data limits. And advances in wireless 5G technology could make surfing the web on phones as fast and reliable as high-speed internet connections at home -- a service that has been a major growth area for Comcast.
A new source of growth could help Comcast, which has successfully battled to reverse declines in its cable-TV business. The company posted fourth-quarter earnings Thursday that beat analysts’ estimates as it continued to add video subscribers despite facing pressure from low-cost online TV services like Netflix.
Gaining a piece of the wireless market won’t be easy for Comcast. For one, it must ensure the product works seamlessly, and there are technical challenges to ensuring phone calls don’t get dropped as people move between Wi-Fi hotspots or between Wi-Fi and cellular networks.
Also, Comcast could have trouble turning a profit in the wireless business. It will cost Comcast $20 to $30 a month per customer to provide cellular data from Verizon’s service, according to Philip Cusick, an analyst at JPMorgan Chase & Co. At the same time, Comcast is entering a crowded wireless market, so it will need to charge $20 or less a month to steal customers from competitors, said industry consultant Chetan Sharma. It could take three years or longer for Comcast’s wireless service to become profitable, Cusick estimates.
“The price of the offer has to significantly wow the customer,” Sharma said. “That will be the key determining factor.”
For now, Comcast’s wireless service will “have the flavor of experimentation,” said Craig Moffett, an analyst at MoffettNathanson LLC. Depending on its success, Comcast could get more ambitious and pursue an acquisition of a wireless carrier such as T-Mobile US Inc., according to Bloomberg Intelligence.
A Comcast spokesman declined to comment.
“Comcast has to do something and they have to do it fast because there may not be many options left in the marketplace within a year or two years,” Sharma said. In 2017, “they’ll have to make a serious choice of where they want to take Comcast in the future.”