Two cable giants team up to challenge wireless leaders
After months of merger speculation, Comcast and Charter struck a one-year pact to cooperate in wireless — a move aimed at stemming cord-cutting and competing with Verizon and AT&T.
1 The Speculation Ends in a Deal
Various industry insiders have been speculating for months on the possibility of either mergers with or acquisitions by Comcast and Charter, the nation’s top two cable operators. Some suggested that Comcast would buy either Sprint or T-Mobile, others that Verizon might snap up Comcast or Charter.
The guessing game ended this week when the two cable giants announced a deal on Monday to cooperate in their Wireless businesses for one year. The partnership deal essentially means that neither will seek to acquire or be acquired by another company without checking with the other first. Telecom analyst Craig Moffett of MoffettNathanson termed this a “no-adultery clause,” meaning neither could “cheat” on one another with a separate Wireless carrier.
2 Why the Two Cable Giants Teamed Up
This move allows both firms to hang on to their traditional markets without worrying about competition from the other. It also strengthens their position with respect to the clout of such Wireless giants as Verizon and AT&T, both of which also offer Wireless, as well as TV, Internet, and home phone services. Each also touts the agreement as a way to improve their products and services, and to speed their entry into the mobile arena as the cable marketplace continues to decline.
According to CNN Money, today the companies can each buy data allotments in bulk from Verizon and resell them as Wireless plans under their own brands. “Each company has an interest in stemming the tide of cord cutting. One way to do that: Get a foothold in the booming world of Wireless, which is how many customers are consuming the majority of video and Internet,” reported CNN.
3 What the Companies Are Saying
Both of our companies have regional Wireless businesses using the same 4G LTE network, and by working together, our goal is to create even better experiences for our customers.
“Both of our companies have regional Wireless businesses using the same 4G LTE network, and by working together, our goal is to create even better experiences for our customers,” Brian L. Roberts, the Comcast chairman and chief executive, said in a press release.
The Associated Press reported, “The CableTV companies said that while they’ll offer Wireless services separately to customers, they will work together on behind-the-scenes matters like customer billing and device-ordering systems,” adding that the two claim the agreement will save money and help them compete with the national providers.
Tom Rutledge, chairman and CEO of Charter, said: “By working with the team at Comcast, we can not only speed Charter’s entry into the marketplace, it will also enable us to provide more competition and drive costs down for consumers at a similar national scale as current Wireless operators.”
Both services plan to launch their own Wireless plans soon, still leasing Verizon’s network. Comcast will introduce Xfinity Mobile within weeks, and Charter has plans for its own Wireless service next year.
4 What It Means for Your Bills
What does all of this mean for the average Billshark client? It’s difficult to predict at this point. Both firms confidently predict better service and lower bills for their respective customers, as they capitalize on economies of scale in such areas as customer billing and device-ordering systems.
History has shown, however, that too often monopolistic practices tend to lead to a decline in service and an increase in prices, especially as any savings are shunted toward executives and/or shareholders, rather than being passed on to the customer, as would be the case if competition was in play.
Billshark will continue to monitor this latest development to better assess its impact on you.
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Frequently Asked Questions
What did Comcast and Charter actually agree to?
The two cable giants announced a deal to cooperate in their wireless businesses for one year. The partnership essentially means that neither company will seek to acquire or be acquired by another company without checking with the other first. Telecom analyst Craig Moffett called it a “no-adultery clause,” meaning neither could pair up with a separate wireless carrier during that period.
Why are Comcast and Charter moving into wireless?
Both companies want to stem the tide of cord cutting by getting a foothold in the booming world of wireless, where many customers now consume the majority of video and internet. The agreement lets them hang on to their traditional markets, strengthen their position against giants like Verizon and AT&T, and speed their entry into the mobile arena as the cable marketplace declines.
Whose network will Comcast and Charter use for wireless?
Both companies buy data allotments in bulk from Verizon and resell them as wireless plans under their own brands, leasing Verizon’s network. Comcast planned to introduce Xfinity Mobile within weeks of the announcement, and Charter had plans to launch its own wireless service the following year, both running on the same 4G LTE network.
Will Comcast and Charter customers see lower bills?
It is difficult to predict. Both firms confidently predict better service and lower bills as they capitalize on economies of scale in areas like customer billing and device-ordering systems. However, history has shown that monopolistic practices often lead to a decline in service and higher prices, with savings shunted toward executives and shareholders rather than passed on to customers.
How will the companies work together behind the scenes?
While Comcast and Charter will offer wireless services separately to customers, the Associated Press reported they will work together on behind-the-scenes matters like customer billing and device-ordering systems. The two companies claim the agreement will save money and help them compete with the national providers at a similar scale to current wireless operators.
