XCellAir sees collaboration as the future for cable and Wi-Fi
The cable industry has seen some huge acquisitions over the years. Charter’s purchase of Time Warner Cable and Bright House last year was worth over $65 billion, but this was just one of a series of consolidations in the market. Liberty Global paying $13 billion for a majority stake in Dutch cable provider Ziggo in 2014, and Vodafone buying Spanish cable company Ono for $10 billion are further examples of consolidation. The acquisition of TWC was long-coming, with several deals mooted before Charter won out.
There has also been talk of further acquisitions, with Verizon rumored to be interested in buying Charter, Charter rumored to be interested in buying Cox Communications, Altice USA could be buying any number of smaller regional cable companies, and Comcast joining forces with Charter to acquire T-Mobile.
But acquisition can only go so far, even if the FTC is said to be more relaxed than previously. Comcast and Charter’s decision to collaborate on each other’s mobile offering, rather than going it alone, points to a different working model that we think will be much more likely in the future.
This collaboration is borne out of the increasing need to offer better wireless services to customers. Together, Comcast and Charter will be able to better manage and roll out different types of networks, as well as benefit from economies of scale.
The model has precedence – it’s similar to the network sharing we’ve seen with many mobile providers. As well as ‘passive sharing’, which essentially means that the mobile operator’s network equipment shares the same space, and network roaming, where consumers abroad can use a local network, there is also sharing of both RAN and Core networks. With RAN sharing, each of the access networks is incorporated into a single network, which is then split at the point of connection to the core. The result is that consumers of both networks get better access, as they are connecting to a ‘super network’ made up of both RANs. Everyone wins: the consumers and both networks service providers.
This sort of collaboration makes sense for other networks, too. Charter and Comcast’s announcement in May is that they are cooperating on their mobile service. Both are cable operators with designs on the mobile market to increase their stickiness and revenue per customer. Their move into mobile will see them develop shared hardware and software backbones including billing systems and network management software. While the companies are rivals, in this space they are both newcomers, making a deal sensible. Without a collaborative approach, it would take much longer and a more significant outlay in capital to deliver a service reasonably competitive with an established mobile network provider.
Beyond the business aspects, network sharing makes sense when there are limits to spectrum, as with Wi-Fi bands. Even with careful management, there is a limit to the number of access points in one area before interference becomes an issue. Those who want to offer a good Wi-Fi service will need to have good Wi-Fi management as a rule, and potentially sharing agreements in order to reach the most congested areas without saturating the airwaves with competing networks in the same location. In the case of MSOs such as Comcast and Charter, their initial foray into mobile services includes a heavy reliance on their own Wi-Fi footprints with a fall back to cellular service from their MVNO partner, Verizon. Keeping customers on their Wi-Fi network not only saves on MVNO fees, but gives them a closer connection to the customer, analytics on usage and a better understanding of where they may want to expand their overall wireless footprint. To do this is more than just coverage, but requires reliable performance and improvements in mobility across Wi-Fi APs.
There are risks to such a deal, however. In Comcast and Charter’s case both companies have said that the deal will increase their competitive viability and in fact promote competition and consumer choice, though that could be questioned by some. They are adding competition to the mobile market where today choice is generally limited. This claim hasn’t been tested, but collaboration between rivals being seen as anti-competitive is the major risk for perceived competitors working together on services. Nevertheless, with the cable industry becoming increasingly consolidated, we expect the big players to look to collaboration rather than spending billions on acquisition to provide their customers with a better service.
