Comcast (NasdaqGS: CMCSA. CMCSK), the Philadelphia, PA-based global media and technology company does not readily come to mind as a wireless service provider. Nonetheless, Comcast is in the wireless business. That said, it is not competing head-to-head with the Tier 1 carriers – AT&T Mobility, Verizon Wireless (VZW) and T-Mobile. Rather, its wireless service augments, and is strategic to, its core cable communications business.
Today, the company’s Cable Communications business unit offers wireless services, dubbed Xfinity Mobile, as a mobile virtual network operator (MVNO) offering services under an agreement to access Verizon’s public wireless network. Its MVNO services are offered in tandem with Cable Communications’ established base of roughly 19 million in-home and outdoor WiFi hotspots with seamless handoffs between the mobile network and hotspots.
Wireless services only are available as part of the bundled service offerings to residential customers that also subscribe to high-speed internet (HSI) service within Cable Communications’ cable distribution footprint. Still, wireless is a small part of Cable Communications’ total business. At year-end 2019, there were 2.1 million active wireless connections, or seven percent cable subscribers that contributed $1.1 billion, just two percent Cable Communications’ total revenues.
The MVNO relationship with Verizon developed in a roundabout way. In the mid-2000s, Comcast, Time Warner Cable and Bright House Networks formed a joint venture called SpectrumCo in which the partners would acquire spectrum. In 2006, SpectrumCo garnered a block of 137 licenses for $2.4 billion in the FCC AWS-1 (1.7/2.1 GHz) auction. The thinking at the time was that owning a large block of highly-prized mid-band spectrum would set up these cable operators to get into the wireless business, initially serving their own customer in competition with the big wireless carriers but longer term becoming a major wireless competitor.
After five years, the partners realized that getting into the wireless business involved a lot more that they originally understood. In December 2011, SpectrumCo agreed to sell 122 AWS licenses to VZW for $3.6 billion with $2.3 billion as Comcast’s share. VZW wanted the AWS spectrum to expand its 4G LTE network capacity as mobile data demand escalated. Furthermore, VZW agreed to allow Comcast to operate as a MVNO on its network.
Fast forward to early 2017. Comcast spends $1.7 billion in the TV broadcast auction for 10 MHz licenses of 600 MHz low-band spectrum covering 145 million POPs. What is notable is that these licenses are in partial economic areas (PEAs) that are all within Cable Communications’ existing operating footprint in major markets along the East coast, in the Midwest and upper West coast regions.
This spectrum purchase again raised speculation as to Comcast’s wireless intent. The company could build its own proprietary 600 MHz network within its operating territory. This way Cable Communications could offer its cable customers new 5G services while migrating existing wireless subscribers off the Verizon 4G LTE network. The advantage is that Comcast can utilize its existing hybrid fiber-cable (HFC) infrastructure for backhaul while reducing fees it pays to VZW.
The big downside, of course, is that Comcast would incur significant capital investment to build its own 5G radio access network (RAN) and Core functionality. With its own wireless infrastructure, though, Comcast can satisfy its objective of delivering a unique wireless experience to its customers even as it learns to operate a facilities-based wireless network. Or at a minimum, it can just hold on to the 600 MHz spectrum as an asset until it is required to meet FCC buildout milestones while it watches how 5G plays out with the established wireless carriers.
Either way, it should be interesting.
By John Celentano, Inside Towers Business Editor