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Frenemies: Cablecos and MNOs

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I hear a lot of talk about Cable companies, (Cablecos), competing with Mobile Network Operators, (MNOs). This makes the Cablecos Mobile Virtual Network Operators, (MVNOs). I think what most people in the industry know is that they are working together. It’s a partnership that makes them frenemies. But who needs whom?

The One-sided Love Affair:

Cablecos rely on the carriers’ networks for their mobile plans. Comcast and Charter rely on Verizon for their mobile network.

What I don’t see is where the MNOs need the Cablecos which makes it a one-sided love affair. Sure, Cablecos added a lot of mobile subscribers in a short period of time, but let’s face it, they’re not new subscribers, are they? We didn’t just see millions of people pop up without mobile service, did we? Of course not. They came from the MNOs. I would find it hard to believe that someone who had cable and internet one day realized they needed a smartphone. Possible, but not likely. 

People migrate to Cablecos for mobile service because it’s cheaper and they offer another bundle. That’s right, yet another bundle all in one bill. One thing Cablecos do well is marketing to their locked-in subscribers. Can you go a day without an email, commercial, or billboard pushing their mobile plans? Comcast has shoved their mobile plans down my throat. It appears to be working because they’ve added tons of mobile subs.  

Is it true growth? Subscriber penetration in the States is pretty high. I don’t know what else the carriers can do to increase subs for mobility. We see Cablecos stealing mobile customers, I’m sorry, shifting customers away from the MNOs. This may not be bad for the MNOs! Why? Because they aren’t losing so much as they are shifting and possibly gaining. They are losing some revenue when a customer goes with any MVNO, but it’s not all bad. I believe they have a strategy. 

Let’s look at Verizon. I would bet they lose customers to Comcast and Charter, meaning less revenue for Verizon but they still get money from their MVNO Cablecos. It’s not totally lost revenue, just a small decline when Cableco takes its margin away from Verizon. Verizon’s dream would be that Cablecos are stealing subs away from AT&T and T-Mobile. Lose 2 to gain 4, something like that. It’s a strategy that seems to be working. However, the MNOs still have tons of stores everywhere which means they didn’t learn a thing from the MVNOs. Some people love the stores, but they are a huge cost. That’s another article.

Now, we see Cablecos shifting customers away from the MNOs, hence the one-sided love affair. What can the MNOs do? Don’t cry or pout for the MNOs, they have a plan. 

It’s to be the frenemy of the MNO by stealing fixed customers away by creating something new, like fixed wireless access, FWA. This is a new market, more or less, for MNOs. 

Truth be told the MNOs offered this for years, but now they’re creating new services with more bandwidth than ever. They are finally able to compete with other fixed broadband ISPs, like Cablecos. 

Oh, a note to all of you smaller wireless ISPs in major markets, make a choice. One – you can retreat to the poorer neighborhoods or out to the poorer coverage areas. Wherever the MNOs will limit investment into their network. Two – you can lower your costs to $10 or $15 a month and hope for the best. Three – just wait until they come and steal your customers, making them work for it before you quit. I know you think your customers are loyal but don’t get hurt if they bail. 

Back to the point.

Why do you think MNOs are relying on FWA? Where else will growth come from? They intend to steal customers away from Cablecos. They also want to get the very mobile younger generation to literally cut the cord and use their FWA bricks instead of an attached cable box. The ones that want to cut the cord may be able to do it with a brick. 

Remember when I said the love affair was one-sided? This is what I meant. MNOs need to increase subs for this 5G network where they spent billions on spectrum, equipment, and deployment. 

Wait, but why?

OK, I mentioned mobile subs going to Cablecos. This makes sense because in spite of how they treated their customers over the last 10 years, the MNOs didn’t do much better. They have a lot in common in that respect, am I right?

Think about it, how often do you get your mobile or cable bill to see charges that outrage you? With MNOs, it’s usually overages. With Cablecos it’s usually some new fee or a subscription you thought was free. Either one can set you off when you get the bill. 

Don’t deny it, you know there was a time you went nuts looking at the bill!!

How many times have you called either one to complain and all they do is make you sign up for more crap? How many times do they say there’s nothing they can do, but they have something new or a new bundle that you don’t want but you sign up for it because you think it’s a better deal? I can’t believe it’s just me. I mean they can convince you that your plan is the best and cheapest bundle, which deep down, I feel they’re full of crap. 

My point is, Cablecos and MNOs have treated their customers with little respect in the past. Sure, the customer service rep is sweet and nice and oh-so-helpful but is really selling you on a new bundle. 

This is why we had a rise in MVNOs, (Mint and Visible), along with streaming choices, (Netflix and Amazon). They did what they said they were going to do.

How little respect did MNOs give their subs? So little that they are losing their subs to MVNOs that literally use the MNOs network. It may be cheaper and they won’t hit you with data usage overages. Not yet anyway. Most MVNOs have packages that make sense, not what MNO corporations sat around in a conference room for the last 6 months with a team of CFOs and Legal to build a contract that you will never read but hate all the same. You know I’m right about this!!

Now, imagine the same scenario, but with Cablecos and streaming service providers. Cablecos piss you off because of all the hidden fees. Do you think Amazon and Netflix passed them because they were a pain in the ass? No!! Spoiler alert, they treat their customers way better, have a lower barrier of pain to make changes, and they don’t screw you over when you call them for help. Also, they let you package things the way you want. I don’t have to sign up for an Alaskan sports network if I want to watch my local sports network for some freaking high fee. 

Sure, when you call the MNOs and Cablecos for customer service they’re nice, but then their directive is to get you to pay more whereas MVNOs and streaming providers are looking for ways to have flat fees and a simple shopping cart. That means letting you look online, compare, and then make your own decision. 

Simple versus complex. Plans made by normal people versus corporate boardrooms. Flat fees or complex contracts with crappy loopholes. 

OK, now that we understand why the ground has shifted and that the MNOs and Cablecos do own their respective networks, their playgrounds are not what they once were.

FYI- MNOs own Cablecos mobile networks, will this be a problem in the future?

Cableco Shift

Meanwhile, Cablecos are constantly improving their networks as they shift from being entertainment providers to Internet Service Providers, and ISPs. While you may think this is hurting them, I believe in the big picture it will offload so many costs and problems.

Did you ever lose a network because of some stupid argument over costs between a network and a provider? This used to be headline news when a network would go off a cable network or satellite network right before a big football game. 

Back to business. 

Cablecos are in a solid position to hold on to their customers for a very long time since they are wired to them. The local governments paved the way for these companies to have monopolies for years. Up until the last 10 years or so, no other companies could get in to build anything new in Cablecos territories. Comcast has a pretty solid hold in many areas.

However, now Cablecos have to constantly upgrade their bandwidth thanks to the competition. They are being pressured into competing with the competition just to hold on. And their new competition is their own Frenemy, the MNO. 

What about the wired competition? Unfortunately, today it is so expensive to run beside these companies. We all know that Verizon, AT&T, and Google all tried to compete as local ISPs, but it was so expensive to move into a market and hope to get a 30% share. Competition is almost as fierce as the legalities of moving in. 

  • Who owns the right to the poles? Yes, this is a thing. 
  • What agreements are in place with the local governments? More legal battles.
  • Can large Cableco lower their prices in one city to drive out the competition? Of course, they can.

But now you have the MNOs, offering wireless speeds in the gigabit range using FWA, and have become a competitor without all the legal hassles. Stealing customers like Casanova stole the ladies’ hearts. 

MNOs can offer internet access to anyone within coverage. Frenemies, competing yet they are also working together. I see this as very favorable to the MNOs. I guess something good came out of those boardrooms after all.

What can the Cablecos do?

I think they won’t admit it but they know they need to do something. 

I believe most MNO/MVNO agreements are a package deal, a huge package of minutes for a flat monthly/annual fee. Let’s keep it high-level here. Probably commitments on subs as well, connectivity, and cores. 

Cablecos have different motivations than normal MVNOs. Some MVNOs are built to be sold like Mint and Ultra. Some serve specific niches like Kajeet and Consumer Cellular. 

Like most MVNOs, Cablecos need profitability and growth to survive. Unlike most MVNOs, they have an existing subscriber base and don’t need the wireless sector to survive. 

However, Charter and Comcast are trying to build a sustainable business. This time they are relying on Verizon’s partnership to build their business and revenue. 

I believe their plan was to offload to Wi-Fi as much as possible. That makes sense because all of their customers offload to their home Wi-Fi. Both have hotspots all over their respective regions.  So, they will reduce MNO minutes by offloading to the nearest Wi-Fi hotspot.

Did I mention the CBRS PAL spectrum they bought? Charter and Comcast collectively spent over $900M for CBRS PAL licenses. I would assume to offload from Verizon’s network. So, what does that tell you? It tells me that their mobile business is taking off as an MVNO and Verizon is getting a huge piece of the pie. Big enough that Charter and Comcast are willing to pay a lot of money for “air” before investing anything in equipment. 

One more thing, Charter and Comcast won’t build national systems, they are simply building small cells in their respective regions. I would think they intend to build CBRS radios like their Wi-Fi radios, strand mount and in-building models like they have today. Why pay tower and rooftop rent if you don’t have to, let Verizon pay for that.

I also know that Charter and Comcast will work together to cut their costs to Verizon. Remember that Cablecos don’t compete with each other as MNOs do. So, I would think that when they do build, they will allow each other to roam onto their CBRS networks along with every other Cableco. 

However, I have been reading that Charter is in no hurry to build their network. I find this interesting because they literally spent over $450M on CBRS PAL spectrum. So they spent that much money and they’re in no hurry for payback. How crazy is that?

Could it be a bargaining chip to use with Verizon? Remember that Verizon is falling behind the competition in performance and coverage, specifically T-Mobile (TMO). TMO is spectrum rich and could be the #1 carrier very soon. Would that surprise anyone? TMO’s leadership has done a great job and continues to improve the network and expand the customer base while Verizon seems to be floundering, especially when it comes to bandwidth. These Cableco deals could help save them and additional CBRS spectrum couldn’t hurt. 

The other thought with Charter and Comcast using the PAL licenses could be for indoor private networks. They already have tons of small and medium business customers, the CBRS spectrum could sweeten the deal for special customer needs. They could offer Private 5G (P5G) services along with their Wi-Fi and mobile packages. (More packages!) 

BEAD Funding for Cablecos 

Some Cablecos wanted to score RDOF funding, which I believe Charter is getting some. Now I would imagine that they would get a huge chunk of BEAD funding. In fact, I would think that BEAD will go to the MNOs and Cablecos. Why? They have solid relationships with the state and local governments. The states will be the ones deciding how to distribute the money. 

Whatever you think about that, I believe that they have a shot of reaching a lot of unconnected people. It’s all about what the upfront investment could be. Does it make sense in these areas? There’s a cost to maintain the network which may stop them from building in remote areas, unless the payback makes sense. Even if it has “free” funding up front. 

The funding by state can be found here and a random sample is listed below.

  • Texas $3,312,616,455.45
  • California $1,864,136,508.93
  • Missouri $1,736,302,708.39
  • Michigan $1,559,362,479.29
  • North Carolina $1,532,999,481.15
  • Virginia $1,481,489,572.87
  • Alabama $1,401,221,901.77
  • Louisiana $1,355,554,552.94
  • Georgia $1,307,214,371.30
  • Pennsylvania $1,161,778,272.41

Yes, it is a lot of money flowing from the feds to the states to ISPs. Can we get in on that? I hope so! I think we’re all counting on doing a piece of the ISP deployment.  

One more thing, the equipment has to be American-made. That’s why Nokia is expanding manufacturing in Wisconsin. Eat your heart out Ericsson and Samsung!! Oh, Wisconsin is also getting just over $1B dollars of BEAD. Sweet!!

To be honest, who knows how much money the Cablecos will get, but if they take it, they will have to build in remote areas. I know CenturyLink has done a good job of this, but we’ll have to wait and see if the rest do well. I wonder if Frontier will be a player. I guess we’ll see. 

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