Over the past few years, Comcast has been replacing its cable customers’ old routers with new routers which double as public Wi-Fi hotspots. The company has installed more than 10 million of these dual-mode routers across the country to date. By combining Wi-Fi and cellular technology, Comcast is effectively turning houses into cell sites, challenging the dominance of majors wireless carriers such as Verizon and AT&T.
Comcast becomes an MVNO
As consumers discontinue their use of traditional TV packages and competitors like AT&T and Verizon grow bigger through acquisitions, Comcast is looking to compete by creating new sources of revenue. Comcast, having decided to invoke a three-year-old agreement that would allow it to offer a service using Verizon’s network, is attempting to become the first successful cable MVNO. Comcast’s new hotspots give consumers access to Verizon’s 4G LTE network, while raising awareness for the Comcast brand.
Comcast’s decision to offer mobile hotspots with access to Verizon’s network is likely the first of many actions Comcast will take in an attempt to become more competitive. Having entered the MVNO arena, Comcast will likely take part in the 2016 U.S. wireless auction for airwaves, and increases the odds that Comcast will try to acquire another mobile operator.
How this affects Comcast
With its vast network of mobile hotspots, Comcast clearly has the advantage over other cable giants. If a Comcast user uses Verizon’s cellular network for 20 percent of their usage needs, while relying on Wi-Fi connectivity for the rest, the cable company would pay Verizon about $4.50 per subscriber per month, and enjoy a 55 percent gross margin. Without Wi-Fi, Comcast’s network costs would be $21.50 per user a month, with a gross margin of only 2 percent.
How this affects the wireless industry
By offering this new service, Comcast is joining the ranks of more than 230 MVNOs, according the mobile researcher The Besen Group. Operating a successful MVNO can be difficult, especially since operators must pay for access to carrier networks while also spending on marketing to attract customers. Most MVNOs manage to build their customers bases by offering affordable rates or by targeting specific markets, such as senior users, business users, or other underserved demographics.
Comcast’s new mobile offering aims to compete with other established wireless carriers by offering low prices. The average price per customer for the major carriers is roughly $45, while other WiFi-based services such as Republic Wireless cost about $17 monthly. Google’s Project Fi is priced $20 per month, with mobile data priced at $10 per gigabyte. Given these aggressive prices, it is clear that the MVNO market is extremely competitive, and Comcast will have to strategically position itself in order to be a successful MVNO.
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