When Comcast a few weeks ago confirmed rumors that it would launch a wireless mobile virtual network operator (MVNO) service that would tap a years-old agreement with Verizon to resell Verizon wireless services, it raised the question of what those plans would mean for Verizon. It appeared Verizon had no choice but to honor the old agreements, calling into question that company’s enthusiasm about the impending Comcast offering. Nevertheless at least one financial analyst argues that Comcast Verizon MVNO plans – and potentially similar plans with Charter — could benefit all parties.
“An alliance between Verizon and the cable company would have much to recommend it,” wrote Craig Moffett and other analysts for Moffett Nathanson who focus on the telecom industry in a research note Friday. Depending how the deal is structured, Verizon potentially could minimize backhaul costs by using cable companies’ dense network infrastructure. And of course cable companies could avoid the expense of building out their own mobile networks.
The MVNO agreement that Comcast apparently plans to tap dates back several years to when Verizon acquired spectrum from the cable companies. Similar deals existed between Verizon and other major cablecos acquired by Charter and according to Moffett Nathanson researchers, Charter also is considering an MVNO using Verizon.
Another part of the years-old agreements was for Verizon and the cablecos to market one another’s services – something they did for a brief period only.
Comcast Verizon MVNO Plans
Today, cable companies are finding their lack of mobile services increasingly problematic as viewers increasingly are looking to be able to watch pay TV content on any screen at any time. Against that backdrop, Moffett Nathanson researchers argue that it would be better for Verizon for the cable companies to use its network than for the cable companies to build competitive wireless networks or for one of the cablecos to buy a wireless carrier such as T-Mobile.
It’s worth noting, though, that cable companies already have considerable WiFi network infrastructure and as Telecompetitor has previously noted, any cable company wireless offering is likely to be of the “WiFi First” variety that will rely on WiFi infrastructure as much as possible but fall back on cellular when WiFi isn’t viable. The Moffett Nathanson researchers also note that cable companies are likely to use what the researchers call a “hybrid” strategy – a reference to a strategy based on combined WiFi-cellular strategy.
The Moffett Nathanson researchers caution that a Comcast Verizon MVNO alliance – or a similar Verizon alliance with another cable company — would likely face regulatory challenges, particularly if any exclusivity is involved. Additionally, the parties to such an agreement would likely face ongoing trust issues with one another, the researchers argue.
Nevertheless, the researchers argue that “none of that means they wouldn’t – or shouldn’t – try.” Instead, the researchers argue that “[w]e would assume that an alliance is Plan A.”