Charter and Comcast said today that they will “work only together with respect to national mobile network operators, through potential commercial arrangements, including MVNOs and other material transactions in the wireless industry for a period of one year.” The news opens the door to a range of possibilities, including the strong likelihood that we’ll see a common Comcast-Charter Wi-Fi first mobile offering. But at the same time the deal complicates some other options, such as potential merger options.
The deal comes at a time when cable companies are finding it increasingly important to have a wireless offering as consumers increasingly seek to be able to have the same video experiences on mobile devices that they do on traditional television. According to today’s press release, the two cable companies will explore working together on “creating common operating platforms, technical standards development and harmonization, device forward and reverse logistics and emerging wireless technology platforms.”
Just a few weeks ago, Comcast launched a Wi-Fi first offering that will rely on the cable company’s extensive Wi-Fi infrastructure where possible and that will fall back on the Verizon network when Wi-Fi is not an option. Shortly afterward, the FCC revealed that Comcast had won some wireless spectrum in the recent 600 MHz auction – suggesting the company may attempt to minimize its reliance on Verizon, at least within its own territory.
Charter did not bid in that auction because it was in the middle of a major acquisition at the time applications were made. Some industry observers had expected Comcast to bid on a broader geographic basis in the auction with the goal of supporting a nationwide launch in conjunction with Charter, but if Comcast did bid more broadly, it apparently was only willing to bid to a certain level outside it’s own turf.
Although today’s press release is vague on details, it would seem highly likely that we’ll see a Charter Wi-Fi first wireless service similar to the one from Comcast. But where the companies go from there is unclear.
Despite the compelling drivers for cable companies to have wireless in their portfolio, the wireless market already is highly competitive and has reached a saturation point. That means cablecos entering the wireless business will have to take share from the existing players, which will be no easy feat. The four major companies already in the wireless market are struggling with current market conditions, and whether the business can support a fifth market entrant is questionable.
Recognizing this, some industry observers expect to see some major M&A activity involving cable and wireless. Verizon and Charter reportedly were exploring a merger earlier this year. And rumors that T-Mobile or Sprint will be someone’s merger partner also surface from time to time.
The likelihood of either Comcast or Charter being involved in a merger or acquisition with a wireless company would appear to be reduced as a result of today’s news, however, as a merger or acquisition would seem to fall into the category of a “material transaction” that the cablecos have agreed to venture into “only together.”
How all of this will play out is anyone’s guess, but it’s an area that could have a major impact on the video, broadband and wireless industries and that we’ll be following closely in weeks and months to come.