Specifically, said Jonathan Chaplin of New Street Research, it’s a “matter of time” before the cable industry (presumably meaning either Comcast or TWC) moves more heavily into wireless, whether via an acquisition or some form of partnership with an existing player.
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It’s counter-intuitive in some ways, Chaplin said, given that the MVNO [mobile virtual network operator] market is highly saturated, dominated by the big four wireless companies, and increasingly driven by price competition.
But the incentive is a simple one – there’s just a lot of money to be made in wireless.
“The opportunities are much bigger in wireless than the ones the cable companies are chasing today,” he stated. “The EBITDA is two and a half times what it is in pay TV, broadband and wired voice.”
The way in which it happens, however, is far from clear. Either of the country’s two cable giants could face substantial regulatory hurdles if they try to purchase Sprint or T-Mobile outright, but a less direct move – one that sees the companies sell spectrum, backhaul services and more to the existing wireless players – is more plausible.
But this, according to Bernstein Research’s Paul de Sa, is almost beside the point, given that the U.S. cable industry is “dominant” in the wireless space already.
“It’s dominant by virtue of residential broadband share and in-home Wi-Fi, dominant by virtue of having made the effort to build out Wi-Fi in public areas, which the telcos have really not done so much,” he said.
And with the advent of 5G technology, much of which will depend on small cells that will have to be deployed in vastly higher volumes than present-day infrastructure, the cable industry’s success in rolling out public Wi-Fi networks will stand it in good stead, in terms of real estate, technology and experience.
That said, both de Sa and Chaplin noted that the existing wireless operators are unlikely to take the presence of new players in the market lying down. A cable company trying to offer a competing licensed wireless service could help provoke telcos into offering their own discrete video services, in an attempt to undercut the industry’s key pay TV segment. (AT&T’s already working towards this, after last year’s purchase of DirecTV.)
But the outlook is bright for the cable industry’s already solid position in the wireless space, and the possible roads forward are many.