Marek’s Take: Mobile operators shouldn’t underestimate their cable competitors

Marek's take

Mobile operators are no longer just battling their wireless peers for customers. The two largest cable mobile virtual network operators (MVNOs) — Comcast’s Xfinity Mobile and Charter’s Spectrum Mobile — reported postpaid wireless net adds in the first quarter that surpassed both AT&T and Verizon’s postpaid net adds.  

Comcast and Charter together added 505,000 postpaid customers in the quarter. AT&T added just 87,000 postpaid customers and Verizon lost 68,000 postpaid customers. T-Mobile was the big winner of the top three wireless operators with its 452,000 postpaid net adds. Sprint, meanwhile, lost 348,000 postpaid customers in the quarter (T-Mobile completed its acquisition of Sprint on April 1).

Of course, those 505,000 postpaid cable customers are actually wholesale customers on Verizon’s network, which means Verizon ultimately makes money from these customers through its MVNO deal with Charter and Comcast.

Million-subscriber MVNOs

It’s also worth noting that the cable MVNOs have crossed the million-subscriber mark — Xfinity Mobile now has 2.3 million customers and Spectrum has 1.37 million customers. And when combined with Altice Mobile’s MVNO customers (110,000 at the end of first quarter), the cable players now have a total of about 3.78 million customers.

“These subscriber numbers are respectable,” said Mark Lowenstein, principal with Mobile Ecosystem and a FierceWireless contributor. “But Charter and Comcast are paying Verizon a reasonable fee for these customers,” he added.

And while that 3.78 million number is just a drop in the hat when compared to AT&T’s 169 million subscribers, Verizon’s 154 million customers or T-Mobile’s approximately 100 million (when combined with Sprint) customers, it appears that these MVNOs are starting to lure customers away from the big three wireless operators at an increasing rate.

One reason more customers flocked to the cable MVNOs in the first quarter is that they have increased their marketing. Before the COVID-19 pandemic started to hit the country in mid-March, Xfinity Mobile and Spectrum Mobile had launched more aggressive advertising campaigns. “We’re seeing some advertising spend,” said Lowenstein. “And we’re seeing them offer a wider selection of devices.”

The larger portfolio of devices is a big step up from when Xfinity Mobile first launched in 2017 with just a handful of smartphone models. In 2019 the company made it possible for customers to bring their own devices to the service and today it offers the latest iPhones as well as many different Android smartphones including the Samsung Galaxy S20 Plus and Galaxy S20 Ultra plus the Pixel 4 and Pixel 4 XL.

Similarly, Charter’s Spectrum Mobile now offers a large selection of devices — from the latest iPhones to Android smartphones.

“Now they have everything from flagship devices to mid-priced models,” Lowenstein said. “There is no longer a major device compromise if you want to get your wireless service from a cable company.”

But perhaps the biggest selling point of both Xfinity Mobile and Spectrum Mobile is still the price. At $45 per month for an unlimited data plan, it’s about $30 cheaper per month than a similar plan from Verizon for the same network experience. Of course, one downside is that Xfinity Mobile is available exclusively to Comcast’s Xfinity broadband subscribers and Spectrum Mobile is only available for Spectrum Internet customers.

It’s important to note that Altice Mobile is different from Spectrum Mobile and Xfinity Mobile because it’s an infrastructure-based MVNO. Sprint is the underlying network but Altice only uses Sprint’s radio access network and provides its own SIM, voice messaging, customer care and billing systems. The company launched its MVNO service last September and charges just $20 per month for service. Altice uses Sprint’s 4G network but also has an MVNO relationship with T-Mobile for its 5G network and has a roaming relationship with AT&T.   

Will the momentum continue?

Now that the cable MVNOs Spectrum Mobile and Xfinity Mobile have proven they have a viable wireless business model, the big question is whether they will step up their game and become less reliant upon their host operator (Verizon) for their network connectivity. 

The critical factor, however, is whether it’s more economical to build their own wireless network in high density traffic areas or continue to pay Verizon to use its network.

Charter CEO Tom Rutledge hinted during the company’s fourth quarter earnings call with investors earlier this year that it was planning to participate in the FCC’s upcoming CBRS auction this summer, which seems to indicate that that Charter may be looking to build its own wireless network and move its customers’ traffic off Verizon’s network in some areas, creating a type of hybrid network.

Likewise, Comcast has also indicated it’s evaluating its options and one path is securing spectrum from the upcoming CBRS and C-Band auctions later this year.

Lowenstein believes that the cable operators will have even more options in a couple of years. When Dish, for example, launches its 5G network, it might offer a more favorable wholesale deal than what Verizon currently offers. Or when T-Mobile completes its integration of Sprint’s network, it might offer a more compelling deal to the cable companies.

For now, however, the cable companies seem content with their existing MVNO play that is focused on luring valuable postpaid customers away from the traditional big-three wireless operators. This strategy allows them time to fine-tune their long-term wireless strategy and look for ways to become less reliant upon their host operator.