Comcast Jumps Into Wireless With $45 Service Undercutting RivalsBy and
Cable giant joins crowded fray with low-priced unlimited data
Comcast sees wireless as way to keep customers from leaving
Comcast Corp. unveiled a wireless service that offers unlimited data on Verizon Communications Inc.’s network for less than nearly every other competitor and said the venture will be profitable once it reaches hundreds of thousands of subscribers.
While the pricing plans have some strings attached and are available only to Comcast’s internet and TV customers, the initial $45 unlimited offer is the lowest among the top U.S. wireless carriers and is likely to further escalate a price war that has ravaged the industry. Shares of the cable giant rose the most in more than two months.
Comcast, the largest U.S. cable operator, is seeking new sources of revenue as consumers ditch traditional TV packages and competitors like AT&T Inc. and Charter Communications Inc. get bigger through acquisitions. The Philadelphia-based company is using the new service, called Xfinity Mobile, to sell other products and entice its 29 million subscribers to stick around as more options become available to watch shows and movies online.
“The more products you add, the lower the churn,” said Greg Butz, president of Comcast Mobile, using the industry term for monthly subscriber defections.
Comcast says it expects to have 250 stores, about half of its total, retooled to sell wireless service and phones by the end of the year. The remaining stores will be updated in the following years, the company said.
The company has weighed entering the wireless business for several years. Even though mobile carriers are slugging it out today with profit-shrinking unlimited offers, Comcast’s new service wasn’t timed to any particular moment, executives said Thursday. The business will reach profitability once subscribers reach a “low-to-mid-single-digit” share of the 25 million broadband customers it has, Comcast Chief Financial Officer Mike Cavanagh said.
Comcast’s shares rose 2.2 percent to $38.15 at 1:51 p.m. in New York -- the biggest single-day jump since Jan 26. The stock is up 10 percent for the year. AT&T fell 1.5 percent and Verizon lost 1 percent after the Comcast announcement.
Comcast’s current high-speed internet customers can get the unlimited mobile voice and data plan for $65 a month. It costs $45 a month for those who already subscribe to Comcast’s premiere “double” or “triple” play packages, which include video and landline phone services. That’s a steep discount to the cheapest plans offered by Verizon and AT&T, the nation’s No. 1 and No. 2 wireless carriers.
Unlimited Plans by Carrier
|1st line||2nd line||3rd line||4th line|
|Comcast w/TV & internet*||$45||$90||$135||$180|
|* with autopay|
** taxes and fees included
*** starting Friday
Comcast’s service will employ both Wi-Fi and cellular networks, meaning connections will be made using Comcast’s 16 million Wi-Fi hotspots and Verizon’s cellular network as a backup. Comcast can resell Verizon’s wireless-network services as part of a deal the companies made in 2011.
Comcast will sell both Apple Inc.’s iPhone and Samsung and LG phones. For now, customers won’t be able to use their old devices on Xfinity Mobile.
Comcast enters the wireless market amid a four-year price war, which has depressed sales and led carriers to consider mergers and acquisitions. Every major wireless provider now lets users stream and download at will with no costly overage charges, a shift in the battle that shows no signs of abating.
The market may soon get even more crowded. Charter Communications Inc., which has the same resale agreement with Verizon, plans to launch a wireless service in 2018. The company is still working out purchase contracts with phone makers and determining whether its 700 stores nationwide can support an influx of consumers seeking wireless deals, Charter Chief Executive Officer Tom Rutledge said earlier this year.
The cable operators may ultimately 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, Philip Cusick, an analyst at JPMorgan Chase & Co., wrote in a January research note.
But unlike national carriers that have big marketing expenses and far flung operations to support, Comcast say it will cut costs by marketing only to existing subscribers.
For now, Comcast will target subscribers within its regional footprints, which include Philadelphia, Chicago and Boston -- a market that could mean 130 million wireless lines.
Comcast says its new service will compete not just on price but also by seamlessly switching between cellular and Wi-Fi and by giving customers more flexibility than other carriers, like letting family members choose different plans or switch between plans depending on which one saves more money. Customers will automatically be signed in to Comcast apps like Stream, a TV service that will come pre-loaded on phones.
“We’re taking the friction away from logging on to Wi-Fi and logging on to other apps,” said Sam Schwartz, chief business development officer for Comcast Cable.
The cable provider sees an opportunity to offer lower prices because most people use their phones on Wi-Fi at home or at work. Comcast says up to 80 percent of smartphone data in the U.S. travels over Wi-Fi, not cell networks, so Comcast won’t have to pay Verizon as much for the data.
Comcast’s entry into wireless comes at a crucial moment for the cable giant. AT&T has moved aggressively onto its 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.
Depending on its success in wireless, Comcast could get more ambitious and pursue an acquisition of a wireless carrier such as T-Mobile US Inc., according to some analysts. For now, Comcast says that selling wireless through Verizon’s network is the long-term strategy.
“We do think we have a sustainable model here,” Butz said.