wireless towerThe possibility that a cable wireless service would arise to offer competition to the nation’s four major wireless carriers appears less likely than it did before results of the 600 MHz auction were released last week, noted Moffett Nathanson Research in a research note today.

“The dream of a national facilities-based cable build is dead,” wrote telecom financial analyst Craig Moffett and associates.

Cable Wireless Service Options
Of the two dominant cable companies, Charter Communications was not expected to bid in the auction because at the time auction applications were made, Charter was waiting for approval of its Time Warner Cable acquisition. But Moffett Nathanson analysts had speculated that Comcast would buy spectrum nationwide and later create a joint venture with Charter to offer nationwide service. Instead, Comcast bought an average of 10 MHz of spectrum – half of the bandwidth the researchers had expected — across its cable TV footprint only.

That news came just a week or so after Comcast announced a “Wi-Fi first” offering targeted, initially at least, toward its own broadband customers in its own footprint. That offering will use Wi-Fi where feasible and will fall back on Verizon’s network where Wi-Fi is not available.

Comcast’s purchase of 10 MHz of spectrum in its own territory would appear to be just another element of that strategy – a way of minimizing but not eliminating reliance on Verizon. The researchers speculate, though, that Comcast may still have bigger plans, at least for its own broadband territory.

“[G]iven that the properties of 600 MHz serve to provide coverage rather than capacity, it is fully possible that 10 MHz of 600 MHz auction is sufficient to tide Comcast over until 5G,” the researchers wrote. They also note that instead of building a 5G network, Comcast might attempt to acquire T-Mobile or Sprint.

Charter, meanwhile, is “left with few options for wireless outside of [reselling] Verizon” and may be left “in a pickle that can only be remedied by buying a wireless operator,” Moffett Nathanson wrote.

The implicit assumption in Moffett Nathanson’s analysis is that Comcast and Charter believe they must be in the wireless business. Certainly, wireless is becoming increasingly important as more and more people shift video viewing to mobile devices. But as the researchers note, the investment community is still wary of cable company spending on wireless.

Clearly this will be an important development area over the next few years and, although it’s not one whose outcome I would care to predict, it’s an area we’ll be following closely.

What’s the Deal with Dish?
Meanwhile, the Moffett Nathanson researchers had virtually nothing positive to say about Dish Network’s decision to buy $6.2 billion of spectrum in the 600 MHz auction, considerably more than any other participant except T-Mobile.

“The bull case for many (most?) Dish investors has always been that Dish Network will sell its spectrum trove for a healthy gain,” the researchers wrote. “None of the other scenarios – build and operate or build and lease – are remotely as attractive. But how can one reconcile a view of Dish Network-as-seller with the fact that, by definition, they just outbid every possible buyer for precisely the same spectrum they would now hope to sell?”

As for the major wireless carriers, Moffett Nathanson applauded T-Mobile’s decision to get the low-band spectrum it needed at a good price, while arguing that Sprint’s decision not to participate in the auction has left the company in a weaker position in any discussions it may have with T-Mobile about a merger or acquisition.

The researchers noted that AT&T’s decision to buy only a small amount of spectrum and Verizon’s decision not to participate at all were likely motivated by a desire to focus on 5G – an observation that Telecompetitor also has made.