This article is the second in a three-part series examining the outcome of the landmark CBRS auction (105). Throughout the series, there will be a focus on the winnings and ambitions of wireless carriers, cable MSOs and utility providers.
Cable operators featured at the forefront of the CBRS auction, with significant winnings secured by Charter, Comcast and Cox. While anticipated, this result is indicative of the inflection point that the wireless industry finds itself at. For the first time, there is competition for spectrum beyond the traditional players such as mobile carriers.
The allure of prime mid-band real estate among cable operators has been driven by the pursuit of diversification, which is a multi-year strategy that requires careful execution. Thus far, the strategy has materialised itself in the form of MVNO brands, generating an additional recurring revenue stream and boosting subscriber retention rates through convergence bundling.
Moving forward, and armed with spectrum in the CBRS band, cable operators will seek to reduce their wholesale MVNO costs by offloading traffic onto their own wireless infrastructure where it makes commercial sense to do so. In addition, they will leverage the spectrum to wirelessly extend their cable footprint, extending broadband access to underserved premises with favorable economics.
The preface to Auction 105
In 2017, Comcast became the first in what would become a flurry of cable operators to enter the wireless market. It debuted Xfinity Mobile, a Verizon-hosted MVNO that offered a significant monthly discount to existing Xfinity broadband customers and encouraged bringing your own (BYO) device.
Since its launch, Xfinity Mobile has enjoyed steady growth. In Q2, for example, it added a further 126,000 subscribers to bring its base to 2.39 million subscribers. While this represents somewhat of a waning of momentum, it is a trend that has beset much of the wireless industry in the challenging macroeconomic environment presented by the coronavirus pandemic.
From the get-go, Comcast sought to leverage its nationwide network of Xfinity-branded Wi-Fi hotspots to push its wireless subscriber traffic off of the Verizon network as much as possible. The benefits of this strategy were two-fold: a reduction in wholesale MVNO costs and network experience enhancement.
Charter’s foray into the wireless market in 2018 with Spectrum Mobile was not dissimilar to that of Comcast. In fact, the two companies united in the “Mobile Operating Platform Partnership” to co-design and co-develop the backend systems for their Verizon-hosted MVNOs.
Still in its infancy, Spectrum Mobile gained 325,000 subscribers in the last quarter alone, pushing its base to 1.69 million subscribers. Like Comcast, Charter has exploited its network of Spectrum-branded Wi-Fi hotspots to enable mobile data offloading (MDO).
But, as the cable operator’s have progressively grown their wireless businesses, operational expenses have also increased and squeezed their profit margin. The primary driver behind this is the nature of their wholesale agreements with Verizon, which are understood to be based on the volume of data traffic generated by subscribers.
It was obvious to Comcast and Charter that mobile data offloading alone wouldn’t be a sustainable cost mitigation strategy in the long run, especially as consumers indulged in unlimited tariffs. Their quest to find a solution was the preface to their participation in Auction 105.
Quantifying Auction 105 Participation and Future Plans
Charter forked out the largest sum of money among cable operators for access to spectrum in the CBRS band, bidding more than $464 million for 210 PAL licenses. This was closely followed by Comcast, which won 830 licenses at a price exceeding $458 million. It is notable that the latter secured more licenses and across a larger geographical spread.
Perhaps most intriguingly, however, was Cox’s participation in the auction. The cable operator shelled out more than $212 million for 470 licenses. Unlike Charter and Comcast, it does not operate an MVNO service. In recent months, it has sought to dampen rumours about a possible entry into the wireless market, despite inking a deal earlier this year to support Sprint’s (now new T-Mobile) small cell build-out with backhaul infrastructure.
Each of the cable operators entered the auction with the ambition of winning prime mid-band spectrum and, in the case of Charter and Comcast, using this to become infrastructure-based MVNOs. In effect, the spectrum equips them with the necessary tools to rollout their own localised coverage and capacity where it makes commercial sense to do so.
By virtue of the above, this enables them to maximise the amount of time that their subscribers spend on natively-owned infrastructure, whether it is via their CBRS network or Wi-Fi hotspots. Beyond the obvious benefit of reducing wholesale traffic costs and long-term dependency on Verizon, it affords the cable operators enhanced control over the network experience.
At a stadium venue, for example, cable operators could dynamically shape traffic flows more easily between W-Fi, DAS, the mobile network and their own CBRS capacity. This strategy may be especially advantageous for existing access networks that are overloaded or suffer from poor quality of service (QoS).
The opportunity to leverage CBRS as means to wirelessly extend the cable footprint has also been touted by industry players. Charter, in particular, has repeatedly expressed a desire to provide a fixed wireless access (FWA) service and, thereby, expand its addressable subscriber base beyond suburban and exurban areas.
Charter even outlined these plans publicly some time ago, alluding to its intentions to provide a 25/3 Mbps broadband service in the CBRS band, as well as offering lower data rate tiers for more expansive coverage. In terms of tackling the digital divide that continues to plague the US, this kind of cost-effective solution could be transformative for communities.
Conclusion: Cable Operators put their money where their mouth is
In and of itself, the participation of cable operators in the CBRS auction is indicative of the sea-change taking place across the wireless industry. The stars have finally aligned to enable Charter and Comcast to execute on their pursuit of becoming infrastructure-based MVNOs, as well as providing a fixed wireless access service.
The exploitation of technologies such as small cells and dual-SIM capability will be instrumental in making these visions a reality. And with the opportunity to drive down operational expenses through offloading, enhance the network experience and generate new revenue streams, it is no wonder that cable operators have put their money where their mouth is.