- The National Content & Technology Cooperative is helping its cable operator members to offer MVNO services
- But analysts from S&P Global threw cold water on NCTC’s initiative
- NCTC tossed back rebuttals to S&P
S&P Global telecom analysts, led by Chris Mooney, put out a report this week, suggesting, among other things, that small cable operators who get into the wireless business don’t have a very good chance of success.
The big cable operators Comcast and Charter Communications offer mobile virtual network operator (MVNO) services that ride on Verizon’s wireless network, and they’ve been having good success in gaining subscribers. As of their most recent earnings, Charter had 8.3 million wireless subs, and Comcast had 6.9 million.
But the S&P analysts said these big cable companies are much better positioned than smaller cable operators to benefit from MVNO offerings. Specifically, they called out members of the National Content & Technology Cooperative (NCTC).
Last year, NCTC said that many of its small cable operator members planned to offer MVNO services. NCTC has arranged for its members to use AT&T’s network through a wholesale agreement. And NCTC has contracted with Reach Next, an MVNO enabler to provide a turn-key approach to offering mobile.
But the S&P analysts threw cold water on NCTC’s initiative. It said these smaller cable operators don’t have a couple of key advantages that the big operators have.
First, Charter and Comcast have highly favorable wholesale agreements with Verizon due to a spectrum sale that dates back to 2011.
Also, Charter and Comcast have huge Wi-Fi footprints that allow them to offload a lot of their mobile traffic. And for purposes of their MVNOs, they share each others’ Wi-Fi footprints. This saves them significant wholesale payments to Verizon.
“We do not believe that smaller cable operators have the scale or negotiating leverage to develop wireless service with such strength,” wrote the S&P analysts.
NCTC claps back
Jared Baumann, VP of Technology Innovation at NCTC, had some rebuttals.
In terms of Charter and Comcast having highly favorable wholesale agreements with Verizon, he said that NCTC has a highly favorable wholesale agreement with AT&T.
“While Comcast and Charter are obviously large cable companies, the NCTC represents about 42 million broadband subscribers,” said Baumann. “We feel like AT&T treated us very well, and we were able to negotiate terms that were favorable to both AT&T and the NCTC membership. It’s really only the combined power of the membership that we’re able to get those kinds of deals in place.”
He added that AT&T “provided us with an excellent rate.”
In terms of the advantage that Comcast and Charter have with their combined Wi-Fi footprints, Baumann said, “That’s a great strength of Comcast and Charter.” And he said that NCTC members are also starting to look at how they might leverage their Wi-Fi networks.
“We’re starting to work with some of our vendor partners and work on solutions across the membership to do something similar to Comcast and Charter,” he said.
Currently, about 20 NCTC members either have launched, or are in the process of launching MVNO offers, according to Baumann. “Of those 20 members, that represents about 1.5 million broadband subscribers,” he said. “We do expect over the next few months to have that number change to north of 2 million subscribers.”
The only NCTC member that Baumann would name specifically was Breezeline because he said the company had publicly announced its MVNO offering.
Breezeline has about 660,000 broadband customers.
Cable versus wireless’ FWA
The S&P analysts also looked at the increased competition that the cable industry is facing from wireless carriers who are offering fixed wireless access (FWA).
The S&P analysts wrote that the wireless carriers are winning in that competition.
“Cable operators’ value lost from customers using alternative fixed wireless access service is greater than the earnings contributions from new mobile wireless subscribers,” wrote the analysts. “We believe the net impact of this value transfer is negative for the cable industry as a whole for the next 2-3 years.”
The analysts said 50% of FWA customers come from markets without fiber-to-the-home and with cable as traditionally the only real choice, so it’s assumed these FWA customers would otherwise be cable customers.
