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Comcast's wireless future


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Comcast's wireless future

There is officially a new player in the U.S. wireless market: Comcast Corp.

The cable giant unveiled April 6 its Xfinity Mobile wireless service, which leverages both Comcast's network of Wi-Fi hotspots and its mobile virtual network operator agreement with Verizon Communications Inc.

According to Comcast executives speaking during a same-day conference call, the wireless service has been in limited employee trials, but is now being opened up to all employees at the company.

"This will be a much broader effort that starts today that sooner or [later] will be followed by our customer launch. So things are really starting to roll at this point," Comcast's senior vice president of investor relations, Jason Armstrong, said during the call.

SNL Image
Xfinity Mobile
Source: Comcast Corp.

The service, which comes with up to five lines when it is added to a customer's Xfinity Internet service, includes unlimited talk and text and the first 100 MB of shared 4G LTE data. Customers can then choose between data plans. One option charges by usage, costing $12 per gigabyte of cellular data across all lines on an account each month. A second option offers unlimited service for $65 per line on up to five lines, or $45 per line for customers with top X1 packages.

Comcast previously estimated that it has deployed X1 to approximately 50% of its residential video customers. And of that X1 base, Comcast Mobile President Greg Butz estimated roughly 25% is eligible for the $45 unlimited plan.

Kagan analyst Sharon Armbust noted in an interview that Xfinity Mobile is "aimed squarely at their X1 customer base and trying to give other customers another reason to upgrade to a higher tier." Kagan is an offering of S&P Global Market Intelligence.

Butz said X1 customers "have very high lifetime value economics to us. So if we can improve churn, if we can improve sell-in on these packages, it's a great deal for the customer, clearly, but it's [a] good business decision for us."

Similarly, Comcast Cable CEO David Watson noted that while the company hopes Xfinity Mobile will "open up the marketplace" in terms of attracting new Comcast subscribers, the main measurement of success for Xfinity Mobile will be whether it succeeds in lowering churn for existing customers.

Asked whether there was a specific range of churn benefits the company was targeting, Comcast CFO Michael Cavanagh said the company has not set "a target range."

In an interview, Mobilocity LLC principal analyst Gerry Purdy said Comcast was smart to focus initially on its existing customer base.

"They have a greenfield opportunity to bring people into their wireless plan who are already Comcast customers. That's the low-hanging fruit for them," said Purdy, who advises on emerging trends and behaviors in the mobile computing and wireless data markets.

Comcast currently counts 29 million customer relationships. Looking beyond that figure, Watson said the company estimates there are 130 million addressable mobile lines in Comcast's existing footprint. The executive called this "a good opportunity."

Over the longer term, Purdy believes Comcast will expand its mobile offering in several ways, both in terms of moving beyond its current footprint and potentially introducing a mobile video offering akin to AT&T Inc.'s DIRECTV Now.

"I think that the bigger issue is what does Comcast bring to the table?" he said, noting that Comcast's long-term advantage comes not from competing on price but from bundling in video.

"I think that in their heads, they are thinking we've got an awful lot of content," he said, pointing both to the company's nationwide digital streaming rights and the content it owns through its NBCUniversal Media LLC unit. While news reports recently suggested Comcast could be planning to launch a streaming bundle, sources close to the matter told S&P Global Market Intelligence in late March that the company is passively collecting digital rights and remains keenly focused on its core cable business.

Still, Purdy believes Comcast's ultimate ambitions lie beyond its initial rollout.

"What I'm suggesting is that this is a serious investment. They are obviously being cautious in that they are not rolling out everything all at once. I think they want to learn and get the logistics and infrastructure working but then they'll continue to leverage their Xfinity and NBCUniversal assets as time goes on," he said.

Within two years, Purdy believes Comcast will expand its wireless offering to new cities.

In the meantime, though, Alex Besen, founder and CEO of the mobile data consultancy The Besen Group, believes the company will face a number of hurdles in attracting subscribers.

First and foremost, Besen noted the majority of phones continue to be sold through carrier stores.

"That I think is a weak point," Besen said in an interview, noting that although he lives in a Comcast territory, he has never seen a Comcast store near his home.

According to Comcast, the company has roughly 500 retail stores across its footprint, and 80% of customers live within a 10- to 15-minute drive from a Comcast store. Additionally, it has spent the last couple of years converting its retail locations into Xfinity Stores, which are meant to be more enticing and customer-friendly.

Butz estimated that by the end of 2017, roughly half of Comcast's 500 stores will have been upgraded.

"We will finish the transformation of our Xfinity stores over the next few years," he said, noting the mobile offering will drive incremental traffic to these retail locations.

"The big win in here for us as well is when that customer walks into an Xfinity store, we're going to talk to them about the end-to-end relationship of the bundle," he said.

Yet the hurdle, according to Besen, will be getting customers in the front door.

"People in their mindset, they don't go to the cable retail store. They just call and then the technician comes to their home," he said.

Given that consumers are used to avoiding cable retail stores, Besen noted, "I think that's going to be a key challenge."