Converged Service Offerings Reshape Market Competition

(Jun 25 2012) 4G , LTE , Mobile Broadband , Offload , Wi-Fi

1. Converged Service Offerings Reshape Market Competition

   In a series of announcements made Friday of last week, US cable operator Comcast indicated that it will begin offering Verizon Wireless services to its cable subscribers in ten more states including Alabama, Arkansas, Indiana, Georgia Kentucky, Louisiana, Michigan, Mississippi, South Carolina and Tennessee.   Verizon Wireless and Comcast have already commenced co-marketing of their bundled cable and mobile services in several major markets outside the Verizon service territory including Atlanta, Chicago, Colorado, Kansas City, Minneapolis-St. Paul, Portland, Ore., Salt Lake City, San Francisco and Seattle.   

   "Together with Verizon Wireless, we're delivering more value for more consumers by providing an entertainment and communications solution that aligns with their lifestyles,” explained Comcast Regional Vice President of Marketing Kerry McKelvey.  The key message here has to be the acknowledgement of alignment with consumer lifestyles - something that both the cable and wireless industries have long been criticized for ignoring. "Because mobility is a top priority for the consumer, we have developed an offering that provides a terrific wireless, entertainment and communications experience in one spot,” said Jonathan LeCompte, president, Verizon Wireless Georgia-Alabama Region. 

   The co-marketing offers are aimed at attracting customers of both companies.  Based on the package chosen, customers of both Comcast and Verizon Wireless could qualify for a variety of offers and incentives, including Visa® prepaid cards valued up to $300, a complimentary 12-month subscription to Xfinity® Streampix™, and Comcast HD DVR at no additional cost for six months, and/or a complimentary 12-month upgrade to Blast!, the Xfinity Internet service that provides download speeds of up to 30 Mbps with PowerBoost®.

   Verizon Wireless also extended its teaming agreement with Time Warner Cable to offer similar  wireless, voice, Internet and video entertainment packages in several additional markets in four states including Wisconsin, Ohio, North and South Carolina.  Earlier this year, Time Warner Cable and Verizon Wireless kicked off their joint marketing initiative in four major metros - Raleigh, Kansas City, Cincinnati and Columbus. Both companies expect to launch these packages and services in additional Time Warner Cable communities in the coming months.

   This bundling of service offerings and co-marketing isn’t the first sign of collaboration for Verizon Wireless and cable operators.  Late last year the operator engaged with SpectrumCo, a joint venture formed by Comcast, Time Warner Cable and Bright House Networks, and Cox TMI Wireless in a deal for 152 AWS-1 (1700 and 2100 MHz) licenses.  The deal has been valued at $3.6 billion and would give Verizon an average of 20 MHz covering a 284 million POP.  Not surprisingly, at the time of announcement there was opposition from Verizon’s competitors, T-Mobile and Sprint.

   In its original form the deal would advance Verizon Wireless from its current 16% share of licensed spectrum in the US to 20%.   At the time of the announcement T-Mobile deemed the sale as a “clear threat to competition,” and urged the FCC to block the deal citing that the arrangement would effectively squelch growth options for small carriers. 

   Likewise, Sprint voiced their concern in a letter to the regulator.  “Given Verizon’s industry-leading spectrum holdings, the Commission should carefully evaluate the competitive implications of the proposed spectrum transaction and assure that any required divestitures include spectrum of comparable readiness and utility for competitive wireless broadband communications services.”

   Until today it seemed that the deal between Verizon Wireless and SpectrumCo was going to be subject to some very significant challenges.  That may have changed.

   Verizon Wireless and T-Mobile are now proposing a spectrum swap that will see the latter receive AWS spectrum will that will be complementary to its existing allocations giving it an even greater coverage footprint existing markets.  In total 218 markets, primarily in the East, are involved in the spectrum swap.  If approved the deal would ultimately have T-Mobile receiving the most spectrum and providing an offsetting cash payment to Verizon.  No financial details of the deal are available at this time.

   With T-Mobile now as a potential ally, rather than opponent, the original Verizon and SpectrumCo deal may be edging a little closer to reality.  Verizon had also announced earlier that it would divest some of its current 700 MHz holdings if the SpectrumCo deal is approved.  Approval for the deals would go a long way to facilitating further LTE rollout plans for both operators.

   “This is good for T-Mobile and good for consumers because it will enable T-Mobile to compete even more vigorously with other wireless carriers,” said T-Mobile CEO and President Philipp Humm.  “We anticipate FCC approval later this summer, in time for us to incorporate this new spectrum into our network modernization and the rollout of LTE services next year.”

   Although directly targeting AT&T, collaboration between Verizon Wireless and its cable partners may have the largest impact on Dish Network and Sprint, which failed to benefit from its previous cable partnerships. Like the proposed AT&T acquisition of T-Mobile USA, Sprint is not taking this challenge lightly.  In an electronic filing to the FCC last week, Sprint requested that the regulator intervene on a number of issues that it sees arising from the deal.   Sprint says that the intervention it has requested will protect the operator against a “loss of effective competition”.

   Essentially Sprint has asked the FCC to ensure that cable operators be prohibited from discriminating or impeding wireless carriers, such as Sprint, from accessing Wi-Fi networks operated by the cablecos.   It further asks the regulator to ensure that such access will be provided "at non discretionary rates and terms."

   But that’s not all.  Sprint also has asked the FCC to allow wireless carriers unrestricted, and again, non-discriminatory access to cableco plant for the purpose of attaching microcells and providing backhaul services for same.  Unfettered access to cable facilities, especially in denser urban markets, is sure to be a key architecture consideration for Sprint in its Network Vision roll-out plans.  Consumer and labor groups such as Public Knowledge and the Communications Workers of America also oppose these new Verizon Wireless-Cable partnerships, citing the threat of job loss and higher consumer prices.

   The emergence of competitors as collaborators and the resulting “co-opetition” is just one indicator of the potential of 4G mobile broadband as a disruptor to existing business models.  As operators begin to tear down the “walled gardens” of earlier networks they are opening up new opportunities for monetization of both legacy and future investments in technology.  At 4G World delegates gain insights and perspectives into this reshaping of the industry, its technologies and regulation, from experts and thought leaders from around the globe.

   By: Andy Mitchell, Editor, 4G Trends

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