What a Sprint Deal With Comcast and Charter Would Mean for the Wireless Industry
28 June 2017 - 4:25AM
Dow Jones News
By Ryan Knutson
In a potential deal with Sprint Corp., two big cable operators,
Comcast Corp. and Charter Communications Inc., are seeking the
ability to sell Sprint's wireless service under their own
brands.
Such reseller offerings allow a company to provide wireless
service without owning or operating a network. There are dozens of
companies in the U.S. that piggyback on others' networks. These
include TracFone and Straight Talk, which run on multiple carriers,
and Consumer Cellular, which uses AT&T Inc. and T-Mobile US
Inc.
These arrangements are becoming increasingly important as bigger
companies with more serious wireless ambitions consider offering
them.
The companies that act as mobile virtual-network operators, or
MVNOs, traditionally don't invest in network improvements because,
as resellers of cellular service, they don't own the
infrastructure.
The big four carriers dictate prices so there is a limit to how
low resellers can set their own fees. Some high-profile MVNOs
failed years ago, including earlier attempts by cable
companies.
In the U.S., MVNOs manage the wireless connections for 38
million devices. T-Mobile is the biggest provider of connections to
resellers with 12 million, followed by Sprint with 5 million,
according to UBS.
For wireless carriers, MVNO agreements offer an additional
source of revenue but the decision to enter into one can be tricky.
Providing lines to an MVNO is highly profitable because the
wireless carriers don't have to pay for marketing or acquisition
costs. But an MVNO's customers don't bring in as much revenue as
customers who sign up directly.
A carrier could even find itself losing its own subscribers to a
popular MVNO using its own network.
In 2015, Google launched an MVNO called Project Fi. Unlike other
MVNOs, Project Fi loads special software on its phones that allows
devices to bounce between Sprint and T-Mobile networks, depending
on which carrier has the faster connection. The goal is to
encourage the carriers to build fast networks.
When Sprint decided to sign on with Google, it didn't take the
decision lightly. But the fear was that if Sprint didn't do the
deal, one of the other three carriers would, The Wall Street
Journal has reported.
Earlier this year, Comcast launched an MVNO that uses Verizon
Communications Inc.'s network, and Charter says it plans to launch
a similar MVNO soon.
Verizon agreed to enter into MVNO deals with the cable operators
in 2011 as part of a $3.6 billion agreement to buy access to
wireless airwaves the firms owned.
Comcast and Charter already play a major role in the U.S.
wireless industry thanks to their ubiquitous Wi-Fi networks, which
many people have in their homes via their cable broadband internet
connections. They could gain an edge on telecom rivals by marketing
"quad play" service with an MVNO on top of phone, TV and
broadband.
Write to Ryan Knutson at ryan.knutson@wsj.com
(END) Dow Jones Newswires
June 27, 2017 14:10 ET (18:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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